Contract Research Firms Retrench to Focus on Growth.

Health/Medical Writers

PALO ALTO, Calif.--(BUSINESS WIRE)--Sept. 16, 2003

CRO revenues have been growing strongly as a result of drug developers' need to reduce R&D costs while shortening product evaluation times. However, as demand for more efficient pre-clinical and clinical testing services has risen, so too have pressures on CROs. Heightened regulatory scrutiny and consolidation within the pharmaceutical industry as well as internal challenges such as shrinking supplies of appropriately trained personnel and a diminishing group of attractive acquisition candidates are mitigating future growth despite CROs' attempts to improve efficiency.

New analysis from Frost & Sullivan (http://www.frost.com), "World Contract Research Organizations Markets," reveals that this industry generated revenues totaling $7.78 billion in 2002. Total market revenues are expected to reach $14.37 billion in 2007.

"The contract research market is undergoing significant change as the top players consolidate and firms focus on core strengths. The heady growth rates of the past will likely diminish as pharmaceutical spending flattens and competition among CROs intensifies," says Frost & Sullivan Pharmaceutical & Biotechnology Industry Manager Ajit Baid.

CROs continue to follow their pharmaceutical and biotech clients as they extend their global reach. This positions them to capture a greater share of client business and gives them access to low-cost clinical testing in areas such as Eastern Europe and China.

"Many are using alliances and acquisitions of local providers as a means to quickly access local expertise and relationships, and others are deepening their service offerings through acquisition of specialized providers and experts in various therapeutic areas," states Baid.

CROs are also continuing to upgrade their technical capabilities through the acquisition of time-saving technologies such as voice-response data collection systems and Web-based clinical trial platforms. Such enhancements position CROs as cutting-edge service providers who can deliver technological advantages not readily available to clients on their own.

"To prevent migration of business in an industry that relies on repeat business, CROs should implement ongoing self-evaluation programs that will quantifiably measure client satisfaction," notes Baid.

Better relationships with sponsors have also been aided by a spate of mergers and acquisitions. These activities are likely to continue strongly in the short and medium term, but when the industry runs out of acquisition targets, companies will have to grow more organically.

"This long-term plan will require robust sales and marketing capabilities -- competencies that many CROs have taken for granted as they have relied upon reputation, repeat business and acquisitions to drive growth," observes Baid.

Many will have to build their sales and marketing departments from scratch, while others may have to refine theirs if they wish to lead market growth.

"World Contract Research Organizations Markets" is part of the Pharmaceuticals Monitor Service, which includes market insights on U.S. Parkinson's Disease Therapies Markets and U.S. Emerging Transdermal Drug Delivery Technologies Markets. Interviews are available to the press.

Frost & Sullivan, an international growth consultancy, has been supporting clients' expansion for more than four decades. Our market expertise covers a broad spectrum of industries, while our portfolio of advisory competencies include custom strategic consulting, market intelligence and management training. Our mission is to forge partnerships with our clients' management teams to deliver market insights and to create value and drive growth through innovative approaches. Frost & Sullivan's network of consultants, industry experts, corporate trainers and support staff, spans the globe with offices in every major country.

"World Contract Research Organizations Markets"

Report: A547