Table of contents
The European pharmaceutical contract research organisation (“CRO”) market comprises businesses that provide pharmaceutical research and clinical development support to third parties. We segmented the European pharmaceutical CRO market based on the research stages into: (i) drug discovery & pre-clinical and (ii) clinical.
The European drug discovery & pre-clinical research market has a long tail of regional niche players specialising in certain therapeutic areas and modalities (e.g. advanced therapies, compound-specific, personalised medicines), while the less diversified clinical research segment is more concentrated around major players. An inclination towards portfolio diversification and integrated services are key drivers for consolidation in both segments with European players facing significant competition from the US and Asia.
Sponsor-led interest has been significant, with ~60% of identified assets backed by financial sponsors (June 2023). Private equity investors are attracted to the defensive nature of the pharmaceutical sector, the growing demand for research outsourcing and related services, and the underlying growth driven by an ageing population combined with a rising prevalence of chronic diseases and opportunities arising from various technological innovations.
Relevant ESG topics mainly revolve around social and environmental challenges linked to the ethical aspects of clinical trials and their carbon footprint. As such, identified players with large global sites increasingly rely on renewable energy sources and eco-friendly development strategies. From a social standpoint, the well-being of trial participants can be safeguarded with the introduction of novel technologies.
The global pharmaceutical CRO market was valued at ~$67bn in 2020 and is expected to reach ~$96bn by 2024, equivalent to 9% CAGR in 2020-2024 (Statista, August 2020)
The global drug discovery services market is expected to grow from ~$16.1bn in 2021 to ~$31.4bn in 2026 at a ~14% CAGR. The European segment of the market is forecast to grow at a 13.5% CAGR during the period (Selvita, March 2022)
According to the industry executives (interview by Gain.pro), the European pharma CRO market is projected to grow at single-digit rates in 2023-2024. Afterwards, the market is set to follow a double-digit growth trajectory
Growing demand for research nearshoring from big pharma due to concerns over IP, regulatory challenges and quality control issues. European CROs are well positioned to capitalise on this (interview by Gain.pro; Hovione, October 2020) while also benefitting from the EU Clinical Trial Regulation streamlining the approval processes across the member states (EMA, January 2022; McKinsey, August 2019)
Ageing populations, increasing global obesity and diagnosis of related chronic illnesses will drive the development of new drugs (United Nations, May 2023; interview by Gain.pro). This will increase the total R&D spending (+4% CAGR 2021-2025) and the related outsourcing rates (+5pp 2021-2025) due to the increasing complexity of clinical trials (ICON, March 2022)
New modalities will provide additional opportunities to incumbent players. In particular, the market for cell and gene therapies is expected to more than double in the next five years (ICON, March 2022) with the efficacy of research and discovery greatly enhanced by the AI-powered tools (Sanofi, February 2023; interview by Gain.pro)
Shortage of experienced clinical research associates (“CRAs”) serves as a key impediment for the European pharma CRO market, intensifying competition and driving up costs associated with recruitment and retention (PharmaVoice, February 2023). As such, patient-facing staff costs have surged by up to 50% compared to pre-COVID times (Outsourcing Pharma, June 2022)
Rising patient recruitment costs threaten clinical-stage CROs with 85% of trials failing to enrol enough participants (Forbes, October 2021). The industry's commoditised nature will likely hinder smaller players, who must invest in expanding sites or evolving patient engagement models, driving up expenses (Applied Clinical Trials, March 2022).
Pressure on CROs trickled down from government drug pricing and demand shifting to generics and biosimilars (BiopharmaTrend, May 2023). The impending “patent cliff" from 2022 to 2030 could impact big pharma revenue by up to ~$200bn, prompting cost-cutting and lower development activity across the value chain (Informa, April 2022).
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