CRO Consolidation to Bring New Developments to Clinical Trials

The M&A trend among CROs and clinical service providers raises concern about sustainability and its impact on their pharma clients, bringing new changes through consolidation.

FREMONT, CA: A company that acquired a contract research organisation (CRO) to leverage its clinical trials and predictive analytics capabilities has shocked the healthcare space and raised various questions about the sector’s future outlook. Few organisations questioned the future impacts this would have on the CRO market. They debated whether this spinoff refers to recent merger and acquisition (M&A) activity growth among CROs and will lead to more spinoffs in the future, as the ongoing consolidation may not be sustainable for the industry.

The combined company was intended to leverage technologies for several purposes. This included improving patient recruitment for clinical trials, increasing efficiency in conducting clinical trials, delivering data quickly to drug sponsors, physicians, and patients, and optimising the increased scale of its central laboratory operations and collective data resources to drive greater R&D productivity for its clients. Many companies have undergone M&A in the CRO space.

Increased scale, geographic expansion, lower costs, and operational savings are why companies choose M&As instead of building the same offerings internally. Healthcare infrastructure can be a focus area for companies for an M&A as having more healthcare infrastructure control is increasingly crucial for building resilience. There are many similarities between clinical trials and APIs, and access to APIs is key to speeding up clinical trials.

Gaining capabilities in niche areas is also a reason behind increased M&A activities among CROs. This is because numerous larger companies prefer to acquire smaller players or start-ups, particularly in areas related to patient recruitment and monitoring and digital tracking of outcome measures in clinical trials.

Smaller software start-ups can often solve specific challenges in clinical trial execution with a greater focus on operational pain points.

The ongoing consolidation within the CRO industry has led to one-stop global companies offering several services. Big pharma corporations prefer investing heavily in new therapies when they have already given positive proof-of-concept results or when a biomarker has been identified, as they invest when they believe a therapy will be successful and make it through clinical trials.

With certain rare diseases having no available biomarker, like pancreatic cancer, biotech and smaller companies are typically involved, often more than big pharma, as they have the risk appetite to focus on moonshots. These companies have smaller budgets and often cannot afford a large CRP. In such cases, there will be disease-specific niches where companies providing CRO services can excel at offering significant value. Moreover, within the value chain for clinical trials, the range of types of vendor services like patient engagement or electronic data capture is broad and complex.

When a small vendor is acquired and ingested by a large CRO, the vendor’s services often get consumed into the CRO’s wider offering and ultimately fail to continue to exist. In such scenarios, the consolidation is sustainable or will continue in this manner.

The ongoing consolidation and M&A activity will continue in the coming years, shaping a new landscape among CROs. The CRO industry will be fragmented, with a few large players and a few highly specialised smaller players offering specialised services or clinical service atomisation such as patient recruitment, feasibility, planning, and data collection and management. This ongoing consolidation will be a successful strategy in the long term.