Strategic Partnerships and the Future of Small and Mid-Sized CROs

More and more sponsors and contract research organizations (CROs) are forming strategic partnerships, or multi-year, highly integrated relationships. Such engagements can improve clinical trial efficiency by aligning incentives, improving communications, and stream lining processes. Some notable partnerships include Eli Lily and Parexel, Sanofi and Covance, and Bristol-Meyers Squibb and ICON. Despite widespread enthusiasm, there is some concern that these types of relationships are tilting an already uneven playing field further in favor of large CROs. Indeed, the vast majority of strategic partnerships are formed between Big Pharma and top CROs, as smaller CROs rarely posses the breadth and resources necessary for such an intensive commitment. In turn, some small and mid-sized organizations find themselves being shut out of business that used to be open to competition.

With new mergers being announced every week, the clinical research outsourcing industry is becoming ever more consolidated and difficult to compete in. And with the added pressure of strategic outsourcing, some are questioning whether smaller CROs can survive. (We think they will).

The Value of Variety

Anyone who works in clinical research knows that clinical trials are so context-based that a one-size-fits-all approach rarely works. In the same vein, the ideal CRO/ sponsor relationship type will depend on countless factors, from budget, to location, to therapeutic area. Information gathered in the 2014 Nice Insight Pharmaceutical and Biotechnology Survey demonstrates that there is both value and need for a variety of outsourcing relationships, three kinds in particular: tactical, preferred providers, and strategic partnerships. According to the report, 23% of business goes to tactical proiders (less than the figure for biotech), 47% goes to preferred providers, and 30% goes to strategic partnerships. While 46% of Big Pharma executives reported interest in forming more strategic partnerships, qualitative reports revealed that the majority still recognized the importance of other relationship models.

While the increasing popularity of strategic partnerships will inevitably reduce the amount of business available to smaller CROs, most agree that smaller CROs will continue to have an important place in clinical trial outsourcing.

Small CROs Must Adapt

Until now, we’ve referred to small and mid-sized CROs as part of the same category. However, changes in the outsourcing environment (i.e., the increasingly consolidated market and growing focus on strategic partnerships) impact the two differently, with small CROs experiencing more dramatic effects. The main difference is in their potential for growth; whereas many mid-sized CROs have a shot at growing to become large, global organizations, it’s almost out of the question for small CROs to do so given the consolidated market. As a result, experts agree that the strategic choice for many CROs will be to specialize in a highly specific area. While this may mean they will never grow to be one of the giants, they will have the chance to become a major player in their niche.