12 April 2018

#KCR_Trends: To each their own: Product differentiation in the Contract Research Organization industry

The Contract Research Organization (CRO) industry is projected to grow at a compound annual growth rate (CAGR) of 5-8 per cent in the next 5 years. To maximize this opportunity, CROs need to ensure they have the right infrastructure to provide companies with services they require.

In our previous post, we discussed innovation in clinical research and the distinct roles CROs take depending on the type of sponsors involved. We concluded that smaller pharma and biotech companies were more willing to implement innovation while larger companies were typically slower to demand implementation.

Further differentiating between big and small pharma and biotech, the market research distinguished two opposing trends that indicate a difference in the types of services required. The Healthcare Equity Research unit at Jeffreys, LLC conducted a survey among pharmaceutical professionals identifying a change in the willingness and interest of big pharma to go for full-service or outsourcing. With large companies reducing their preference for full-service but increasing their uptake of Functional Service Provision (FSP). There are several reasons to support change such as the creation of efficiencies by insourcing certain activities (for instance statistics), the option to scale workforce according to need, or to assume more control over the execution of studies.

CROs must establish flexible structures

On the other hand, there is a clear trend by small pharma and biotech companies to lean on the capabilities of CROs to execute their studies. Evidence points to a clear difference in internal capabilities of companies. While big pharma has sufficient resources to acquire FSP, or set internal resources to the task, small pharma and biotech often need to concentrate on their core value areas and rely heavily on outsourcing of other activities. Such patterns create a challenge for CROs who must establish flexible structures to provide services to both types of organizations.

Anais Colin, in her piece "Outsourcing Planning for a Successful Sponsor-CRO Relationship", explored two challenges to establish such structures. First, the need to create an effective communication strategy to ensure people are speaking to the right counterpart and that both parties understand the needs of the other, eliminating misalignment of expectations. The second is the need to create a culture of consistent performance to reinforce trust and create a positive feedback cycle. While both are important regardless of sponsor type, it becomes evident they are acutely relevant for biotech and small pharma due to differentiated resources and capabilities.

Ernst & Young states in their report “Beyond Borders - Staying the course”, that the number of biotech companies increased by 9 per cent in 2016 only in Europe. The implications of this figure for the industry are evident, and in our next post we will analyze how CROs should customize their product and service offering to address the specific needs of small pharma and biotech sponsors.

 

Sources: ReportbuyerContract PharmaOutsourcing-pharmaEY#KCR_Trends

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