Research and Development Pharmaceutical Research and Development – Outsourcing is in Fashion
Falling profits, tight margins and a declining consumer spending have persuaded companies in some healthcare sectors to undertake huge efforts to reduce R&D expenditure and increase profitability. The outsourcing of clinical trial activities to Contract Research Organizations (CROs) is only the latest trend of this development...
New York/USA – A new report by GBI Research suggests that the R&D productivity of top pharmaceutical companies has declined over recent years, as a result of increasingly stringent Food and Drug Administration (FDA) regulations concerning the approval of new drugs. This development also affects the revenues of pharmaceutical companies, encouraging further CROs in future, analysts believe.
From 2004 to 2010, R&D expenditure for the 10 largest pharmaceutical companies increased at a compound annual growth rate (CAGR) of 8.3%, while revenue turnover during this time came to only 6.5% the report shows. With declining turnover rates and growing fefforts for the development of new drugs and treatments, many companies struggled to maintain their level of returns on R&D expenditure. Additionally many patents are set to expire in 2012–2018, which will further reduce revenue and erode profits.
Outsourcing Shall Put the Lid on Exploding Research and Development Costs
Consequently, companies now try to put a lid on exploding R&D costs, GBI states: The market researches witness that outsourcing clinical trial activities to Contract Research Organizations (CROs), particularly in the developing nations, is rapidly gaining acceptance in the industry. As figures from clinicaltrials.gov show, 43.9% of clinical trials had been carried out in the US, while 22.9% had been carried out in Europe, and 11.6% had been carried out in Asia by November 2011.
Market Analysts See Growth Potential for Private Researchers
In 2009, the CRO industry recorded revenue of $19.1 billion, showing an estimated increase of only 6% from 2008 due to the global economic crisis, which caused many pharmaceutical companies to reduce their R&D expenditure.
Meanwhile however, funds have begun flowing back into R&D, and the expected expiry of several patents may force financially struggling pharmaceutical companies to outsource clinical trials. GBI Research therefore estimates that the CRO industry will grow at a CAGR of 12.8% to $56 billion by 2018.