Interview Synopsis

CRO Industry – Q2 2022 update

  • Public Equity
  • Healthcare
  • North America

Big and public contract research organisations (CROs) are likely to be spared from the current biotech “bloodbath”, according to a former executive at Pharmaceutical Product Development Inc.

Major CROs likely to escape biotech “bloodbath”

In an interview with Third Bridge Forum, the specialist said the biotech investment boom witnessed during the COVID-19 pandemic was never “going to go on forever” and had now started to slow. They told us that this slowdown is likely to affect private CROs such as Premier, Clinipace and public CRO Medpace, but that major CROs will be less affected because they have other revenue streams. 

Despite the slowdown, the specialist is bullish that the CRO industry will continue to accelerate as it did during the pandemic. They suggested that it could grow by 10-15% over the next 3-4 years and that as more biotech and pharma companies look to outsource their research, the industry could be worth “north” of USD 90bn by 2028.

The specialist highlighted Syneos as an “interesting” CRO to be acquired. They said Syneos’ advantages are its ability to integrate the whole value chain of a pharma customer as well as a new leadership team, and highlighted two CROs that could acquire it. The specialist also picked out Iqvia as a CRO with “very high growth” and a technology and analytical solution that could “reinvent” the CRO industry. By contrast, they said Lab Corp has struggled since it acquired Covance, partly because they have operated “separately’.

Over the next 12-18 months, the specialist said the CRO industry faces resourcing, supply chain issues and inflationary challenges. CROs are already struggling with recruitment problems and wage inflations, according to the specialist, and they estimate wages could rise by between 10-15%. However, we were told that, as of yet, no inflationary price increases have been passed on to sponsors.

And in the next 5-10 years, the specialist expects the CRO industry to change towards outcome-based contracts, which currently make up 10% of all contracts signed. They also speculated that CROs will evolve into a “one-stop shop” for technological solutions, but stressed that the market is “not there yet”.  

To access all the human insights in Third Bridge Forum’s CRO Industry – Q2 2022 Update & Competitive Dynamics Interview, click here to view the full transcript.

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The information used in compiling this document has been obtained by Third Bridge from experts participating in Forum Interviews. Third Bridge does not warrant the accuracy of the information and has not independently verified it. It should not be regarded as a trade recommendation or form the basis of any investment decision.

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