Industry research
Scope
Europe
Companies
97
Table of contents
Key takeaways
The US clinical research organization (CRO) market covers businesses that offer outsourced research and development services to pharmaceutical and biotechnology companies. Companies offer services in areas of early-stage drug discovery & development, clinical trials and comprehensive support services crucial for efficient and compliant drug development processes. We segmented the market based on the core service offering into: (i) discovery & preclinical; (ii) clinical, (iii) integrated CROs and (iv) CRO support services.
The CRO market is defined by the significant investments, lengthy development and approval timelines as well as regulatory challenges of bringing new medicines to market. The process of developing a single FDA-approved drug takes ~10-15 years, ~10-15k drug candidates and up to ~$2.5bn of investments (Charles River Laboratories, February 2023). This underscores a large addressable market for outsourced research services, in which players focusing on specific research stages or therapeutic areas face competition from integrated peers, CDMOs and life science conglomerates (Labcorp, Thermo Fisher Scientific) with drug discovery and trial capabilities. Herein, the market is poised for further consolidation as companies strategically merge to gain quick entry into high-demand specialty areas, address talent shortages, achieve scale dynamics and offer integrated services, meeting the client preferences for a one-stop CRO.
Investor-led interest in the US CRO market has been significant with >60% of the identified assets backed by financial sponsors (February 2024). Herein, investors are attracted to (i) stable and growing demand for outsourced research services, (ii) new business from novel modalities (e.g. gene & cell therapies), (iii) tailwinds from CRO digitalization and implementation of AI and (iv) buy-and-build opportunities in fragmented niches. These factors can be seen at play in the recent performance of KKR-backed Headlands Research. Completing 10 acquisitions over the past 5 years, the company strengthened its trial site capacity and expanded its offering for the high-growth neurodegenerative diseases niche.
ESG issues primarily cater to social and environmental concerns. While CROs contribute to society value by accelerating medical research, addressing safety considerations in trials, animal welfare and ensuring patient diversity remain top of mind for the industry. Additionally, sustainability leaders focus on mitigating environmental impact, with measures like decarbonization efforts and carbon offset purchases contributing to a more sustainable CRO landscape.
Company benchmarking
Market growth
The global CRO market was valued at ~$77bn in 2023 and is expected to reach ~$127bn by 2028, showcasing a CAGR of ~10% (Statista, September 2023)
Syneos Health (February 2023) estimated the total addressable clinical development market at ~$120bn globally in 2022. Of this, ~$64bn was outsourced to CROs with a projected growth rate of 4-7% per year in 2023-2024
Positive drivers
Rising trial complexity leads to higher revenue per trial. As trials follow more intricate protocols and incorporate more sites to address patient diversity, multi-site CROs and SMOs will benefit from additional project demand and strategic importance associated with protocol complexity (Harris Williams, March 2023)
The emergence of novel therapeutic pathways will support the demand for outsourced research (Harris Williams, March 2023). The anticipated doubling of the cell and gene therapy market in the next five years necessitates outsourcing highly technical research like bioanalysis modeling to identify drug candidates more efficiently and cost-effectively than insourcing (interview by Gain.pro; ICON, March 2022)
Digitalization of CRO operations improves the efficiency and efficacy of clinical trials. DCTs and hybrid site settings allow for enhanced patient recruitment, diversity and engagement, while the incorporation of wearables, electronic clinical outcome assessment (eCOA) and electronic patient-reported outcome (ePRO) systems enhance the trial data collection and monitoring (WCG Clinical, January 2024)
Negative drivers
Patient recruitment challenges translate into higher operating costs. ~90% of clinical trials face delays due to recruitment issues, while >10% of clinical research sites fail to enroll any participants (Cromos Pharma, March 2022). This is further affected by the high patient dropout rates of up to 30% (TCG Digital, October 2023)
Limited availability of clinical research coordinators (CRCs), clinical research nurses and regulatory affairs professionals (CRPs) obstruct CRO operations. Notably, job postings significantly outnumber applicants (7:1 for CRCs, 10:1 for clinical research nurses and 35:1 for CRPs), leading to high turnover rates and staffing costs (PharmaVoice, February 2023)
The impending “patent cliff” as major pharmaceutical players face the expiration of patents on top-selling drugs (Bio Pharma Dive, February 2023). Paired with government drug pricing and demand shifting to generics and biosimilars, this is expected to reduce the big pharma revenue by ~$200bn in 2022-2030, prompting cost-cutting and lower development activity across the value chain (Informa, April 2022)
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