Global Market Outlook on FSP Models in CRO

The global CRO market was estimated at $29 billion in 2017 and is expected to grow at a CAGR of 7.31% to reach $36 billion by 2020.

This is due to the increased outsourcing (>50%) seen from the pharmaceutical and biotechnology companies, with 85% comprised by the clinical segment.

CRO Market Growth (2015–2020F)

  • The clinical segment of the CRO market is valued at $24.6 billion in 2017 and is expected to grow at a CAGR of 7%. Almost 85% of the global CRO market revenue comes from the clinical CRO market. This is directly related to about 50% of Phase II–IV activities already being outsourced by pharma companies
  • On the other hand, the preclinical segment was valued at $4.4 billion in 2017 and is expected to grow at a CAGR of 10%, as more in-house preclinical activities, such as discovery and early phase studies, are beginning to be outsourced by pharma companies at a range of 38–40%

Regional Analysis

North America and Europe hold greater than 80% of the CRO market, as pharma spend ~70% and 18% of their clinical trial R&D spending in these regions, respectively.

Clinical Services Market Share 2018 (By Region)

  • Though the cost of conducting clinical trials in emerging countries will be 60% less than that of developed countries, greater than 80% of the market revenue is from developed countries, the US, Canada, the EU, Japan
  • APAC contributes to 10–15% of the overall CRO revenue, which makes this region the third largest market share holder with increased trials being witnessed in China, Russia, and South Korea
  • Increased outsourcing of clinical services, such as Clinical Data Management, Biostatistics, Pharmacovigilance, etc., by large pharma to emerging market of India is being witnessed. The reason being low cost labor availability, which will further drive up the revenue of Asia-Pacific region in the future

Outsourcing Penetration

According to the recent industry analysis, outsourcing penetration was 39% in 2015, and it increased to 42% in 2017/2018.

  • Looking into the trend of outsourcing strategies greater than 60%, reliance on CROs was observed
  • This trend is mainly attributed, due to the rising costs of R&D, coupled with the profit pressure, need for innovation with the R&D process, globalization of clinical trials from pharma perspectives, achieving greater efficiencies via improving scientific, and therapeutic expertise from CROs viewpoint
  • In the past two years, over 60% of sponsors have shown greater reliance on CROs, only 3% have reduced outsourcing

Average No. of CROs Used

  • Average number of CROs used by small and mid-sized vendors increased to an average of 5.5 vendors
  • Larger CROs preferred to keep their vendor list unchanged, as large pharma is now at a stage of rationalizing vendors, whereas small emerging biotech is looking for a new set of vendors for its unique needs

Types of CROs Engaged

  • Considering the type of CROs being engaged, the large CROs at 34% are the preferred choice for exclusive partnerships compared to smaller ones
  • This trend demonstrates that the large CROs continue to expand their market share
  • However, private equity firm continues to show their interest in CROs, serving mid-sized and small pharma/biotech, due to the current industry trend in R&D spending, which continues to be more positive for mid-sized pharma than larger pharma or biotech companies. For example, Cinven trying to buy Medpace

CRO – Pharma Engagement

Functional models tend to appeal to companies that wish to retain a high degree of control over project delivery, while full-service models have appeal to companies that need access to expertise, technology, and leadership 

  • In both full and functional service model, there is a growing interest among the pharma companies, moving toward contracting to an FSP output-based model, in which companies pay for a result and not a resource, though FTE-based contracts still prevails for support services, such as CDM, biostatistics, etc.
  • FSP and full-service outsourcing are being integrated to offer efficiencies in oversight and cost flexibility. For example, for phase I services, a combination of both are used interchangeable for healthy volunteer studies and patient studies
  • The number of integrated alliance is the highest for phase III trials, with >70% of them signed as a full-service deal