Written by Kevin Hampton, VP of Marketing, Kineticos

Over the past few years, we’ve witnessed a number of CROs consolidate. Regardless of them occurring via JVs, M&A, etc., I’m convinced that the recent spike in activity indicates we are in the midst of a CRO consolidation movement. I’m even more convinced this movement will have a significant downstream effect on the biopharma industry.

Before getting into the impact of this broad theme, it’s important to point out that one of the primary driving forces behind this consolidation is the growing emphasis on global clinical trials. More than ever, and for a variety of reasons, biopharma companies are leveraging the global markets for their trials, which means CROs looking to grow their global market share need to be able to service such trials. Tying this back to consolidation, it’s been proven that an effective method to gain capabilities in another region is through M&A.

Moving on to the impact, there are several ways to look at how biopharma is (and will be) affected by this wave of CRO consolidation. Lets start with the positive, which is related to the impetus mentioned previously. Simply put, CROs that are in growth mode are typically growing by way of expanding their global reach, which allows for scale and creates cost efficiencies. While some of the small-mid size biopharma companies may not have enough leverage to benefit from such efficiencies, global CROs are sometimes able to pass cost savings down to potential anchor clients (i.e. big pharma). Whether or not they are actually willing to do so hinges on several factors and is a topic for another day.

Looking through a more realistic lens, more times than not, consolidation causes disruption. Because of how the CRO industry operates, there is really never an ideal time to integrate. For example, lets say that two large CRO players, each with a fully functioning lab, merge. This consolidation will likely result in a lab (or multiple labs) being shut down in the middle of a running a critical trial. This means that all of the samples, data, knowledge etc. must be transferred to a new site that likely does not have the same level of global standardization as the previous lab. Additionally, what if the new designated site for the trial does not have any available capacity? In short, the new site will need some time to get up to speed and integrate effectively, which almost guarantees an impact on ongoing trials.  To no one’s surprise, biopharma clients are never keen to hearing that there has been any sort of hiccup with their multi-million dollar investment.

As large as the CRO industry is, it remains a very transactional industry. Cost and quality remain the most important buying preferences while capabilities need to just be good enough. If this CRO consolidation trend continues, eventually, biopharma will be left with fewer CRO options, forcing biopharma organizations and CROs to truly partner with each other. And, with both parties forming more durable relationships, I’d expect to see some operational efficiencies in the drug development process. So, while CRO consolidation may very well cause a lot of disruption in the short-term, I’m one to think that the potential of reducing the time it takes to get a therapy to an ailing patient is worth the hassle.

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Kevin Hampton,  VP of Marketing, leads Kineticos’ marketing efforts and is focused on building a brand that reflects Kineticos’ deep life science expertise and passion for improving patient outcomes.  Mr. Hampton is responsible for the strategy and execution of Kienticos’ thought leadership and lead generation programs and also supports the sales function within Kineticos to ensure objectives remain aligned.

 Contact Kevin