Due to the continued global economic recovery and rising consumption of advanced medicines around the world, drug manufacturers of all sizes have increased their investments in innovation, leading to burgeoning pipelines and near-record-level approval rates by FDA. That has led to a significant need for research support. Indeed, the latest estimates from TechNavio (January 2015) have the bio/pharma contract research services market growing at a compound annual growth rate (CAGR) of 9.83%. According to the 2016 Nice Insight CRO Outsourcing Survey of bio/pharma professionals (n=586), 56% of respondents indicate that they spent more than $50 million annually on services provided by contract research organizations (CROs) in 2015, up from 23 to 24% for the period 2012-2014. There are, however, numerous differences in the preferences, needs and expectations for emerging, small, mid-sized and large bio/pharma companies.
Survey Demographics
The CRO outsourcing survey includes responses of 586 outsourcingfacing pharmaceutical and biotechnology executives, with the majority (37%) of survey participants acting as key decision-makers (holding executive/management positions) in their organizations. Professionals with positions in operations and engineering (4%); R&D, formulation and analytical (15%); and development, production and manufacturing (5%) functions are also well represented. As importantly, the new CRO survey is truly global in nature, with 61% of respondents from North America, 20% from Asia and 19% from Europe. It also includes input from representatives of biopharmaceutical and pharmaceutical companies of all sizes – large (>$5 billion in annual sales – 39%), medium ($500 million to $5 billion – 41%), small ($100 to $500 million – 14%) and emerging (<$100 million – 6%).
These statistics clearly suggest that the results of the new 2016 Nice Insight CRO Outsourcing survey should be highly indicative of the conditions in the global pharmaceutical CRO sector. In addition, the breadth of companies represented in the survey makes it possible to analyze the preferences, needs and expectations of drug manufacturers of different sizes.
Current Outsourcing Levels
For instance, while on average 39% of survey respondents currently outsource to CROs and contract manufacturing organizations (CMOs), the percentage or participants from large and medium companies that do so is much higher (45% and 40%, respectively) than those for respondents from emerging and small bio/pharma companies (29% and 20%, respectively). On the other hand, more survey particpants working for emerging and small companies than representing medium and large companies said that their firms only outsource to CROs (55% and 45% vs. 35% and 30%, respectively).
There are also differences in the makeup of current and future pipelines as a function of company size. According to survey participants, approximately 60% of large bio/pharma companies have small-molecule generics and new biologic entities (NBEs) in their pipelines compared to 55% and 51% with new chemical entities (NCEs) and biosimilars, respectively. Generics and NBEs are also the focus of the greatest number of medium-sized firms (65% each), but nearly as many of these companies also have NCEs in their pipelines, with the fewest focusing on biosimilars (51%). Small companies, however, focus largely on NCEs (71%), with approximately 50% of companies also having generics and NBEs in their current or future pipelines, but just 39% involved in biosimilar development. The spread for emerging companies is different again, with close to 50% of companies developing NCEs, generics and NBEs, and just 29% targeting biosimilars.
Some trends can be noted here. The percentage of companies outsourcing to CROs for NCE-related projects declines as the company size increases (34%, 28%, 25%, and 20% for emerging, small, medium and large firms, respectively). On the other hand, the percentage of companies partnering with CROs for generics and NBEs are similar regardless of company size. Finally, fewer emerging and small companies focus on biosimilars than medium and large companies.
Outsourcing Needs and Preferences
Interestingly, company size does not seem to influence the types of services that sponsor companies outsource to CROs. On average, 80%, 76% and 38% of respondents to the 2016 Nice Insight CRO survey use preclinical, clinical trial and miscellaneous (environmental testing, regulatory support, animal models, etc.) services, respectively, and this pattern is typical for emerging, small, medium and large firms.
Within each service category, however, there are different preferences. For large and medium companies that use preclinical trial services, bioanalytical and analytical testing were mentioned most often by survey participants; followed closely by chemistry/stability testing, biostatisitcs and toxicology. For emerging companies, on the other hand, chemistry/stability testing is used most often and by a wide margin, followed distantly by bioanalytical testing and general toxicology services. Chemical/stability testing was also mentioned most frequently by respondents from small firms, with bioanalytical testing and biostatistics the next most used services.
When it comes to clinical trial services, large, medium and emerging sponsor companies seek assistance from CROs for clinical trial design. Small companies most often seek data management support, with clinical trial design services a distant second. Finally, large, medium and small companies are more likely to seek special services form contract research service providers than emerging companies.
The reasons for outsourcing research activities also vary based on company size. Improving quality is the main driver based on the overall 2016 Nice Insight CRO Outsourcing Survey results. However, improving quality is the top motivator only for large and medium sponsor companies. Small companies turn to contract research providers to improve efficiency, while emerging companies seek to partner with CROs because they lack in-house capabilities. Interestingly, the greatest source of dissatisfaction for large and emerging companies is poor product/service quality, while for small and medium companies cost overruns are seen as the top negative factor in an outsourcing relationship. On the other hand, regardless of size, sponsor firms will switch to another CRO if they believe they will receive better quality. Better price is the second motivating factor for large, medium and emerging firms, while better timelines are the second most important driver for change by small companies.
It is also noteworthy that many more emerging pharma companies are interested in forming tactical partnerships than strategic partnerships, while small companies are equally interested in tactical and preferred partnerships, medium-sized sponsor firms look for preferred partnerships and large companies seek preferred and strategic partnerships.
Expectations All Positive But Variable
Survey respondents have significant expectations for increases in outsourcing spending, however the numbers do vary as a function of company size. The results of the survey indicate that the largest percentages of large and emerging bio/pharma companies (29% and 37%, respectively) spend over $100 million annually on contract research services, while the largest portion of medium and small companies spend $51-100 million/year (49% and 40%, respectively). In addition, while respondents from all different sizes of companies expect their expenditures to increase over the next five years, the anticipated level of increase rises from 66% to 79% as the size of the company decreases from large to emering. Interestingly, more respondents from large companies expect to see a decrease in spending on research services than those from smaller companies (9% vs. 3-4%).
The number of CROs used by sponsor firms is also expected to increase by respondents from companies of all sizes. Currently 74-79% of respondents from small, medium and large bio/pharma companies and 90% of survey participants from emerging pharma firms use up to 10 CROs. Slightly more respondents from large and small firms (66%) expect to increase the number of outsourcing partners they use than do survey participants from medium and emerging companies (62% and 63%, respectively).
The drivers for this expected growth also slightly differ. For medium and small companies, previous positive experiences are influencing the use of more outsourcing partners, followed by company strategies to move to a larger proportion of outsourced relationships in their supply chains (due to patent life issues, the need for new delivery forms and specialized technologies, decentralization, etc.). Strategy is the prime driver for large and emerging companies, followed respectively by positive experiences and a general increase in product portfolios.
To learn more about Nice Insight contact Guy Tiene, at Guy@thatsnice. com or visit www.niceinsight.com and the annual study websites: clinical services at www.niceinsightcro.com, contract development and manufacturing at www.niceinsightcdmo.com, pharmaceutical excipients suppliers at www.niceinsightexcipients.com and pharmaceutical equipment (products, systems and services) at www. niceinsightpharmaequipment.com.