Specialist
Founder & consultant at a CRO consultancy
Agenda
- Trends and Developments in the CRO (contract research organisation) market, highlighting Iqvia (NYSE: IQV), PPD (NASDAQ: PPD), Icon (NASDAQ: ICLR), Syneos Health (NASDAQ: SYNH), and Medpace (NASDAQ: MEDP)
- Purchasing criteria for pharmaceutical and biotech customers and differentiators for large market CRO services, highlighting expertise in a particular therapeutic area, global geographic reach and pre-clinical and clinical capabilities
- CROs’ DCT (decentralised clinical trial) capabilities, discussing remote technology and data collection
- M&A in the CRO sector – Icon’s July 2021 acquisition of PRA and projected strategic M&A opportunities as CRO industry grows
- Industry contracting models, discussing product-based services vs outcome-based models, plus 12-18-month CRO market outlook and increased adaptation of emerging technologies
Questions
1.
Could you highlight 2-3 key trends and developments you’ve been monitoring over the past 12-18 months affecting the CRO [contract research organisation] industry, perhaps discussing the increased adaptability in the clinical trial process, as well as share of large molecules in pharma drug pipelines?
2.
Can you lay out the clinical CRO competitive landscape, highlighting players such as Iqvia, Syneos, Icon, Medpace and PPD [Pharmaceutical Product Development], which are obviously the five leading ones? Could you differentiate them on the basis of expertise in a given therapeutic area as well as global reach? Which CRO has the deepest bench?
3.
You said there’s a fear that service offerings among large CROs are becoming increasingly undifferentiated. Can you elaborate on that? Are CROs starting to hit the same nail on the head? How are they trying to differentiate themselves and remain competitive?
4.
How would you assess players’ movements into the clinical and pre-clinical realm respectively? What’s the value add of either from a profitability angle? Would you predict Charles River to enter into the clinical space?
5.
What’s your opinion on Labcorp’s decision to divest Covance’s clinical trial business? This has been a long time coming, given the market disappointment as well, so what are your performance expectations for Covance now that it will be a separate functioning entity? Would you expect other companies to potentially divest?
6.
You indicated the increased entrance of possible players into the CRO market, perhaps GE as well as Danaher. What barriers to entry exist for players to enter the market and what is the likelihood of them potentially acquiring and disrupting the already-established CRO players? What’s your 2-3 year outlook in terms of companies trying to enter?
7.
How would you assess the strong demand for safety assessment as well as toxicology services in the growth of pre-clinical CROs, such as Charles River and Inotiv? What is your outlook for this sector and are there any limitations there?
8.
Do you have any additional commentary around the demand for safety assessment and toxicology services?
9.
Looking at the therapeutic indications, oncology is a big one, and is predicted to be the fastest-growing therapeutic area over the next five years. Of course, however, it comes with a cost. Which therapeutic indications are the biggest growth drivers for CROs, and perhaps looking at ancillary major revenue drivers – such as rare diseases, CNS [central nervous system] and C> [cell and gene therapy] – what is the cost-benefit analysis?
10.
To what extent has the CRO market adapted to the varying levels of technology adoptions needed for the DCT [decentralised clinical trial] process, as well as to conduct virtual as well as hybrid trials – perhaps looking at remote trial monitoring, wearable technology, recruitment and home health offerings? Which CRO is better positioned to take on the DCT space?
11.
Can you speak to the cost CROs are pricing DCT capabilities at relative to pure-play DCT players such as Science 37, Medable and Lightship? You said they haven’t started to lower the costs yet, but you expect them to perhaps do so over the next couple of years, so is cost a limiting factor when trying to sign on customers?
12.
What cross-selling opportunities would you highlight within the CRO sector? Technology seems to be a strong area of interest. What are your expectations around M&A and partnership activity, given it is extremely rampant at the moment, such as with Icon-PRA as well as Parexel being taken up by a PE company, and Thermo-PPD? What are the growth opportunities there?
13.
How would you assess the partnerships between a pure DCT and larger CRO player in terms of synergies? Would you expect them to partner? I’ve heard mixed reviews in terms of these partnerships, given that they could potentially steal some revenue from larger CRO players.
14.
How would you differentiate players based on their FSP [functional service provider] models? Is Icon ahead of the competition after its July 2021 acquisition of PRA? How have the company’s win rates changed after the acquisition, in terms of gaining market share with larger customers and new customer acquisitions?
15.
Some note the biggest differentiator for the larger CRO players is the partnership agreements with clients, which you alluded to as well. Can you elaborate on how these arrangements work and drive revenue generation for CROs from a discount as well as a profit perspective? Who has seen the most success in customer retention?
16.
What level of margin improvement do you see into 2023? I know sometimes CROs sign fixed price contracts with a delayed start from contract sign date and then labour pricing can move, so how do you expect CRO players to manage these contracts? Are there changing orders or contingency causes that can protect margins? How do you think about the degree of change?
17.
Do you see any large-scale cancellations or budget prioritisations taking place across large pharma as well as small- and mid-cap biopharma? How would that impact the pace of a backlog brand?
18.
To what extent has the shortage in personnel impacted the CRO market? I’ve heard it seems to be a bigger issue for the larger players than the small-to-mid-sized CROs. Would you agree with that? Have the smaller players been more effective in finding creative ways to attract and retain talent?
19.
Would you like to highlight any other labour dynamics?
20.
Which CROs have been able to reliably deliver products and services on time and the performance they promised? Are they more over-extended in general? Where do the struggles lie and what is the track record of CRO success with the FDA?
21.
How should we be thinking about the CRO industry book-to-bill trends over the next 12 months in terms of expected RFPs [requests for proposal] as well as order flow growth? Within this context, which CRO do you anticipate to gain vs lose share, and why?
22.
What is your 12-18-month outlook for the CRO industry and outsourcing rates, given the reduced biotech funding environment? Is the industry at risk of companies’ decisions to conduct trials in-house rather than outsourcing?
23.
Would you like to highlight anything else around the CRO industry? What should investors be aware of?
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