Specialist
Former Commercial Offcier at Quotient Sciences Ltd
Agenda
- Key developments and trends in the pre-clinical CRO (contract research organisation) industry
- Competitive positioning of key players – Covance (NYSE: LH) vs Charles River (NYSE: CRL)
- Expected pace of consolidation and likely acquisition targets
- Increasing focus on CGT (cell and gene therapy) RFPs (requests for proposal)
- Pricing and labour dynamics, margin trends and outlook for Q4 2021 and beyond
Questions
1.
What recent developments have been shifting the CRO [contract research organisation] industry since our last Forum Interview [see Pre-clinical CROs – Market Update & 2021 Outlook – 25 March 2021]?
2.
What is your updated overview for R&D outsourcing on the pre-clinical side? How do you expect this proportion of outsource work to trend? Has there been any significant impact since our March 2021 Interview or do you expect any significant impact over the next couple of years?
3.
Our Q1 2021 Interview largely focused on Charles River’s strategy to enter manufacturing. How has this progressed? How is the company integrating the Cognate acquisition or subsequent ones? Have there been any success indicators or red flags?
4.
Charles River has been more active in M&A than Covance, entering new verticals and being slightly more innovative. How should Covance respond to its peer’s advances? Where does it stand competitively?
5.
What do you make of the suggestion that Labcorp would benefit from divesting Covance? Would it make sense?
6.
How might Covance under Labcorp fare in the market against a more potentially innovative Charles River? Is it too late to try differentiating itself the way Charles River has done via more complex acquisitions? What path would you suggest for Covance?
7.
Biotech funding has been very strong and you were quite bullish in this potentially trickling down to players such as Charles River. How sustainable is this funding or demand environment? If industry-wide demand were to revert to a longer-term mean growth rate in 2022, would Charles River, for example, be able to meet its expectations for the year?
8.
What are some of your broader expectations for the conversion between contract research and contract manufacturing on the clinical front, thinking of Thermo Fisher and PPD? Last time you were quite bullish, particularly on pre-clinical research and manufacturing as a combination. Has your assessment changed? Are you slightly more critical or favourable towards the combination?
9.
What are your expectations for international players such as Wuxi, which has a relative lack of presence in North America? Have any other industry players stood out?
10.
Can you elaborate on Covance and Charles River’s M&A strategies and which potential targets come to mind? What would make sense for either company to acquire? How concentrated is the industry?
11.
How strong do you think Charles River’s competitive positioning is vs larger, more established CDMOs [contract development and manufacturing organisations] such as Lonza and Catalent? How are you assessing Charles River’s respective manufacturing assets despite not having the scale?
12.
How do you estimate where Charles River will fit in, particularly as plenty of CGT [cell and gene therapy] supply is coming online recently? What’s your take on the mid-to-long-term supply and demand balance? Is there any sort of risk of overbuilding on supply for Charles River?
13.
How have contract negotiations shifted in recent months, particularly given some of the pandemic disruption? What normalisation is occurring?
14.
To what extent is the price increase informed by the labour dynamics in the industry? What’s feeding into potential pricing increases?
15.
You previously mentioned how smaller biotech firms are looking for more of a right-sized player, but some of those options are currently quite limited given the market consolidation. What is your updated overview on this, particularly with your earlier pricing commentary?
16.
When thinking of pricing and bundling, Covance has pre-clinical and clinical, Charles River now has preclinical and manufacturing, whereas PPD is now under Thermo Fisher. How might bundling play out given all these combinations and where supply-demand dynamics stand?
17.
What rough percentage of customers prefer to use the same CRO for pre-clinical and clinical work? What are the implications for Covance? Is a CRO offering both pre-clinical and clinical services a competitive advantage in this regard?
18.
Thermo Fisher has a very clear goal of being an end-to-end provider and there’s a clear intent to enter the pre-clinical sector. How might that play out and how might it impact Charles River and Covance?
19.
How are margins trending? Can you break down any notably high- or low-margin categories?
20.
Is there anything important to conclude with? What’s your broader 12-18-month outlook for the industry?
