Bioanalytics service providers and CROs – market outlook

New modalities a potential low CAPEX growth driver for CROs

In an Interview with Third Bridge Forum, the specialist told us infectious disease, precision medicine, new modalities in cell and gene therapy (C&GT) as well as oligonucleotides are key demand drivers for CROs. We were told new modalities require less investment on new technology and platforms, making them “relatively inexpensive” to set up. However, new modalities require specialist and “highly sought after” talent, which could be difficult to recruit given CROs’ “struggle” to match large pharma salaries, according to the specialist. 

We heard that lead times for biologics, oligonucleotides and C&GT projects are currently at 14 weeks – almost double what they were 3-4 years ago – and can take approximately 6-8 months for complex modalities. The specialist said some customers are prepared to pay “double” for faster lead times but that CROs risk losing clients if they switch resources to fulfil these requirements. 

As lead times increase, the specialist told us that there has been more outsourcing to APAC countries like Australia and New Zealand. We heard both offer an “advantageous environment” for early-stage clinical work given they do not require an Investigational New Drug Application to be published when conducting clinical research. Strict policies in China related to the movement of samples have made it a less attractive outsourcing option, we were told, with 75-90% of projects by foreign CROs in China likely to service the Chinese market. 

Meanwhile, we heard that the majority of bioanalytical CRO volumes are clinical samples and are therefore less exposed to a currently depressed biopharma R&D environment. The specialist said customer purchasing criteria for CROs are: fit for purpose, quality or reputation, lead times and pricing. A one-stop-shop CRO solution is also more attractive for clients than modalities, according to the specialist. While the current macroeconomic situation is unlikely to affect bioanalytical CRO volumes, they said CROs will struggle to pass on wage inflations to current contracts. 

There has been significant consolidation in the CRO industry, which the specialist expects to continue. They foresee tier 2 CROs growing “significantly”, calling it the most “dynamic” part of the industry. Tier 2 contains a mixture of “bigger fish and smaller fish”, the specialist told us, and while the former can act predatory, they also “generally” do not interfere with smaller players. 

Click here to access all the human insights in Third Bridge Forum’s “Bioanalytics Service Providers & CROs – Competitive Landscape & Market Outlook” Interview.