Our previous post described the overall growth prospects for the CRO industry. In this post, we follow up with a discussion about how the need for product differentiation and customization of services will impact the CRO industry.
Functional Service Provision (FSP) is an efficient solution to bring capabilities into an organization lacking resources to develop them internally. In the clinical research environment, it has become a common tool to provide highly rigid structures with some flexibility in the sourcing of talent and competencies. The appeal of the FSP model has translated to all large global CROs including it in their product offering as well as widespread adoption by pharma companies. Unfortunately, the model could become a victim of its own success.
The FSP model is feeling consequences due to a reduction of full-service projects and natural limitations of the model. Increased competition between providers will result in many of them reducing their margins to make their solutions more attractive to customers in a clear “race to the bottom.” Additionally, to counter the reduction in margins, large CROs may cease to adapt to customer needs, eroding one of the original advantages of the model. The latter will particularly affect small pharma and biotech companies due to their differentiated needs.
All this begs the question: Can large CROs adjust their product offering to the needs of small pharma and biotech companies?
Current trends seem to indicate there will be a form of “assortative matching” between CROs and sponsors, with companies selecting CROs that reflect their values and have capacity to address their needs. This means that biotech and small pharma will prefer midsize and small CROs while larger companies will opt for their counterparts that can deliver on the scale they require.
In this context there are several factors that will help define how CROs and sponsors match. First, pricing. Business Insider recently reported that funding for biotech has increased consistently, nonetheless, price is still a deal breaker for many start-ups. Niche and boutique CROs are better positioned to provide competitive solutions to customers who are more sensitive in this regard.
Second, attention. Organizations have diverse needs, and the higher the stakes involved the more attention required, and several biotech or smaller companies are betting their future on the success of a study. In this context, boutique CROs can concurrently offer experience, expertise and a level of attention that fully respond to the company requirements.
Third, customization. Pharma companies are going after more ambitious indications and challenges. This influences their approach to projects. Pharma companies in the 21st century require organizations that have capabilities to deliver on projects while maintaining flexible structures to adapt to the challenges each one brings.
The pharmaceutical industry is changing rapidly and CROs are adapting their models and strategies to thrive in this new context. As Standish Fleming mentioned in Forbes: “The breathtaking complexity of the new landscape [in clinical research] is the source of both great uncertainty and opportunity.”
KCR is a Contract Research Organization (CRO) providing clinical development solutions for the pharmaceutical, biotechnology and medical device industries. The company supports clients with full-service capabilities across three main services: Trial Execution (TE), Functional Service Provision (FS) and Late Phase (LP) in a broad range of therapeutic areas. KCR operates across four main regions: North America (NA), Western Europe (WE), Central Europe (CE) and Eastern Europe (EE) with hubs located in Boston, US, Berlin, Germany, Warsaw, Poland and Kiev, Ukraine respectively. The company’s geographical set up suits perfectly to deliver optimized trial execution strategies for life-changing therapies.
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