Another Exciting Year for Clinical Research Outsourcing

2016 Nice Insight CRO Outsourcing Survey Findings
 

In the 2016 Nice Insight CRO Outsourcing Survey, a few new and exciting trends emerged in sponsors’ outsourcing practices. Pharma-biotech companies, regardless of size or type, demand a broad spectrum of services in preclinical and clinical phases for their research and development needs. An increased level of focus on many therapeutic areas was observed. 

This trend suggests that expanding product portfolios to multiple areas has become a commonly adopted pipeline development strategy by the industry. Meanwhile, the level of CRO engagement at every clinical phase has increased prominently. Along with the robust growth of the global pharmaceutical outsourcing market, buyers’ outsourcing expenditures will continue to increase in the next five years as well as the number of service providers they will work with. In terms of CRO selection, quality continues to be the ultimate decision driver and the fundamental reason for dissatisfaction and/or causing of a current CRO. Finally, despite the growing importance of the emerging markets, the industry is still quite cautious about engaging CROs there.

2016 Nice Insight CRO Outsourcing Survey Findings

The Nice Insight Survey represents the wellbalanced perspectives of 586 buyer respondents from four different sectors of the industry: 39% from Big Pharma/Big Biotech, 41% from Midsized Pharma/Biotech, 14% from Small Pharma/Biotech, and 6% from Emerging Pharma/Biotech. Alternatively, the composition of the respondents can be initially broken into two primary sectors followed secondarily by size: 63% of the respondents are from the Pharma sector (Big: 24%; Midsized: 27%; Small: 9%; Emerging 4% †) and 37% from the Biotech sector (Big: 15%; Midsized: 14%; Small: 5%; Emerging: 3%). The 2016 survey also better provides a regional representation since respondents from Asia increased to 20% from previous year’s level of 1%, an indication for the growing importance of Asia in the category of contracted services. Nevertheless, the majority (80%) of the buyers are still from North America (61%) and Europe (19%).

With respect to buyers’ job functions, as with the previous study, the respondents work in a variety of departments. In comparison to the 2015 survey, proportionally, there are more respondents from Corporate Management, up by 20% to 37%; Clinical Trials Operations/ Management up by 6% to 14%; and R&D/Formulation/ Analytical up by 2% to 15%; Quality Assurance/ Quality Control was down by 6% to 10%; Regulatory Affairs was down by 1% to 4%; and Contracting/Sourcing/ Purchasing was down by 1% to 6% †. Ninety percent of the respondents hold management positions: C-Level Executive — 36%, Manager/Senior Manager — 25%, Director/ Senior Director/Scientist — 23%, and Vice President/ Senior Vice President — 6%. All of them have job duties closely tied up with contract research organizations (CROs), either being part of the decision-making unit that selects CROs (67%), or being part of the team that establishes criteria/makes recommendations on the selection of CROs (20%), or supervising or coordinating with CROs (13%).

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The Level of Focus has Increased in Many Therapeutic Areas, with Metabolic and Cardiovascular Diseases Receiving the Most Scrutiny

In the 2016 survey, Nice Insight observed a dramatic increase in the degree of focus on 6 out of 7 surveyed therapeutic areas. Infectious Diseases is the only area that received the same level of focus from 2015 to 2016. Further, it is no longer the most focused therapeutic area falling behind Metabolic Disorders (53%), Cardiovascular Diseases (52%), and Respiratory Diseases (50%). A smaller portion of respondents focus on Endocrine Diseases (46%), Oncology (44%), and CNS Disorders (33%). In addition, with the consideration of their current and future product pipelines, the respondents focused more on New Chemical Entities (NCEs) (60%), Generics (60%), and New Biological Entities (NBEs) (59%). A fair number of respondents (48%) focused their efforts on Biosimilars. Over-the-Counter medications (OTC) received the least attention, but are still strong at 27%. As the competition among drug makers intensifies, pharma/biotech companies expand and diversify their product pipeline portfolio, for example, focusing on multiple therapeutic areas and/or drug molecules, to counter the risk and uncertainty of drug development and maximize their chance of success.

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Pharma/Biotech Companies Require a Broad Spectrum of Contract Services, and Buyers are Engaging More with Outsourcing Partners for Clinical Trials

The 2016 Nice Insight industry-wide outsourcing survey took a deep look at buyers’ demands for contracted service through all development phases as well as their current outsourcing practices based on drug type and development stage. The data indicate that pharma/biotech companies, regardless of size or type, acquire or plan to acquire a broad spectrum of services for their research and development needs. A strong demand for Preclinical Trial Services (80%) and Clinical Trial Services (76%) was observed. The demand for Clinical Trial Services is much more evident among Big Pharma/ Biotech and Midsized Pharma/Biotech sectors (79% respectively) than Small Pharma/Biotech and Emerging Pharma/Biotech sectors (66% respectively).

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Among a cluster of 13 Preclinical Trial Services, Bio-analytical Testing (53%), Analytical Testing (49%), Chemistry and Stability Testing (48%), and Biostatistics and General Toxicology (45%, respectively) are the top 5 most needed services. As for Clinical Trial Services, Clinical Trial Design (54%), Clinical Trial Phase I/IIa and Clinical Trial Phase II/III (51%, respectively), Clinical Trial Data Management (50%), and Clinical Trial Recruiting (48%) have made the top 5 list out of 13 services. Besides Preclinical and Clinical Trial Services, buyers also demand Specialized Services including Environmental Testing (55%), Regulatory Services (53%), Research Models (Animal Models) (50%), Process Chemistry/Scale-up (47%), Surgical Services (Animal Models) (45%), and In Vitro Assays (42%).

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Phase II is now the phase with the highest CRO engagement rate replacing last year’s Pre-Clinical Phase.

To fulfill their research and development needs, currently 75% of the respondents outsource services or operations to CROs (36%) or to both CROs and Contract Development & Manufacturing Organizations (CDMOs/CMOs) (39%). Big and mid-sized Pharma/Biotech companies tend to use a combination of CROs and CDMOs/CMOs (45% and 40%, respectively, within their sector) while Small and Emerging Pharma/Biotech companies rely more on CROs (45% and 55%, respectively, within their sector). Additionally, only 16% of the Emerging Pharma/Biotech respondents do not currently outsource research services or operations, which is the smallest fraction out of all sectors (Big Pharma/Biotech: 25%; Midsized Pharma/Biotech: 25%; Small Pharma/Biotech: 35%). Given Emerging Pharma/ Biotech companies’ limited resources and capital, it is not surprising that they are more inclined to utilize the outsourcing strategy to achieve their research and development goals.

Based on the types of drug molecule, on average, 24% of the contracted services are outsourced for NCEs, 22% for Generics, 21% for NBEs, 18% for Biosimilars, and 15% for OTCs. With respect to buyers outsourcing practices based on the development stage, an exciting new pattern was observed: a higher proportion of respondents were engaging CROs during clinical phases than before. In comparison to 2015 findings, buyers engagement with CROs has increased in every clinical phase in the 2016 survey: 58% in Phase I (up by 2%), 63% in Phase II (up by 21%), 51% in Phase III (up by 22%), and 39% in Phase IV/Post-Launch (up by 17%).

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In addition, Phase II is now the phase with the highest CRO engagement rate, replacing last year’s Pre- Clinical Phase. The increased engagement in clinical stages may be an indication of the pipeline drug candidates successfully advancing to the new development stages, or an indicator of buyers’ enhanced willingness to engage CROs for their clinical development needs, especially during mid to late stage. Also, in the survey, Emerging Pharma/Biotech companies showed a much lower CRO engagement rate in Phase III (32%) and Phase IV (21%), which may be due to their lack of products in the late stage, or due to mergers and acquisitions. Generally, small and/ or emerging companies will be acquired by larger companies once their products progress to late clinical stages, which in turn, can lead to fewer-than-expected CRO engagements at later clinical stages.

77% of respondents felt it was hig hly likely
that a pr eferred provider would become a strategic partner, while 75% agreed that a CRO
that started off as a tactical service provider

would become a preferred provider .

Quality Continues to be the #1 Decision Driver in CRO Selection

As the pharma/biotech industry is leaning more on outsourcing to meet their research and development needs, identifying and engaging with the right CROs and/or CDMOs/CMOs is an increasingly important business decision to make. From a buyers perspective, the desire to Improve Quality is the most important strategic reason for outsourcing. Other top-ranked strategic reasons include Improve Time-to-Market, Reduce Cost, Process Improvement, and Access to Specialized Technologies. Among the 6 decision drivers behind CRO selection, Quality remains to be the most important driver, followed by Reliability, Innovation, Productivity, Regulatory Track Record, and Affordability. Along with the decision drivers, a variety of attributes also factor into CRO selection. The top-rated attributes are: Regulatory Compliance (85%), CRO Understands the Customer’s Requirements, CRO Industry Reputation (83%, respectively), Financial Stability and Experience (Operational, Methodological, Therapeutic), and Cost (82%, respectively), as well as Risk Adherence (81%).

Quality is the greatest concern among those who
would not consider emerging market providers.

In terms of buyers’ satisfaction level with their current CROs, 82% of the respondents expressed satisfaction (43% Satisfied and 39% Somewhat Satisfied), 6% expressed dissatisfaction (1% Unsatisfied and 5% Somewhat Unsatisfied), and the rest remained Neutral. The foremost disappointing trait is Product/Service Quality. Other top-ranked most disappointing traits include Cost Overruns, Inflexibility, Customer Service, Security/Confidentiality, Timeliness of Resolving Issues, and Products/ Services Availability. Furthermore, many factors can prompt service sponsors to change CROs. Among these factors, Better Quality at Competing CRO is the most appealing reason to trigger the change, followed by Better Price Offered by Competing CRO, Better Timeline Promised by Competing CRO, Improved Logistics, and Operational Expertise offered by Competing CRO.

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Outsourcing Expenditure Will Continue to Grow in the Next Five Years

Another exciting trend observed in the 2016 survey is the prominent increase in buyers’ annual outsourcing expenditure. In 2015, 62% of buyer companies had an annual outsourcing expenditure between $10M and $50M, 23% over $50M, and 16% less than $10M.† The landscape changed completely in 2016: more buyers are in the category of more than $50M (56%; a 32% increase). Consequently, fewer companies are in the categories of $10M to $50M (32%) and Less than $10M (10%). The category of More than $50M can be further broken down into two categories: Annual Expenditure between $51M to $100M of 38% and More than $100M at 18%. This expenditure increase aligns with the global pharmaceutical outsourcing market growth trend: the entire market with a current value of $130.65 Billion is projected to reach $215 Billion by 2020 at a compound annual growth rate (CAGR) of 8.7% within the period of 2015 to 2020.1

Correspondingly, the majority of the respondents hold quite a positive view on the alterations of their annual outsourcing expenditure in the next five years, with 71% in favor of increase and only 6% in favor of decrease. The positive perspective is also reflected in buyers’ prediction of the number of CROs their company will work with in the next three years. Currently, the respondents companies work with a wide range of CROs, varying from 0 to 99, with 76% of respondents falling into the category of 0-10 CROs. The percentage dropped to single digit for the rest of categories: 11-20 (7%), 21-30 (5%), 41-50 (6%), 51-60 (2%), and 1% each for 31-40, 61-70, 71-80, 81-90, and 91-99. On average, each respondent worked with about 12 CROs. Looking into the future, 64% of the respondents predict an increase in the number of CROs their company will work with in the next three years, while only 1% foresee a decrease. The main drivers behind the number increase are: Positive Experiences with CRO(s) (61%), Company Strategy {to move to larger proportion of outsourced relationships in supply chain} (56%), and General Increase in R&D portfolio (55%). The decline in CRO numbers is largely due to Decline in R&D Portfolio and Negative Experience with CRO(s).

Caution Remains in Engaging CROs Located in Emerging Market, Especially for Big Pharma/Biotech Service Sponsors

Despite the growing importance of the emerging markets, in the NI 2016 survey, the respondents actually outsourced a smaller fraction of their projects to the emerging markets: a total of 47% of projects outsourced to the emerging markets (China: 10%; India: 9%; Eastern Europe & Turkey: 8%; Singapore & South East Asia: 7%; Argentina & Brazil: 7%; Middle East: 6%) vs. 61% in 2015 (China: 17%; India: 11%; Eastern Europe & Turkey: 10%; Thailand & Vietnam: 4%; Argentina & Brazil: 15%; Middle East: 5%). Even though in the 2016 survey, more respondents are located in Asia (19% vs. 1% in 2015), percentage wise, mature markets received more projects than last year: 31% of projects are outsourced to the U.S. & Canada vs. 23% in 2015 and 14% to Western Europe vs. 11% in 2015. Some possible explanations for this phenomenon could be that pharmaceutical makers in Asian countries are targeting the western markets, or service sponsors become more cautious in engaging CROs in the emerging markets.

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This caution is further reflected by a decreased level of interest in buyers’ consideration of outsourcing to CROs located in the emerging markets: 71% of the respondents this year are interested, in contrast to an 84% interest rate among Pharma respondents and 86% among Biotech respondents last year. In addition, the Big Pharma/ Biotech respondents demonstrated a “No Consideration” rate of 15% while the overall “No Consideration” rate was 19%. A variety of reasons contribute to the industry’s hesitation in engaging CROs from the emerging markets. Similar to 2015, concerns on Quality (47%) and Regulatory Compliance (46%) remain the top two issues. Intellectual Property concerns (42%) jumped to the third place this year while it was the least issue of concern in 2015 (19%). Furthermore, except Quality (down by 3%), the degree of concerns in all other five surveyed areas have increased by a range of 5% to 20%: Regulatory Compliance, up by 15%; Intellectual Property, up by 23%; Communication Concerns/Challenges, up by 12% to 37%; Logistics, up by 15% to 37%; and Simply Have Not Considered It, up by 5% to 28%. On the other hand, among the “Yes” respondents, 65% of them have worked with CROs in the emerging markets, a 12% increase from the 2015 level. Meanwhile, the Emerging Pharma/Biotech sector showed the highest engagement rate of 85% with CROs in the emerging markets. Nevertheless, it is going to be a long way for service providers in the emerging markets to gain trust and build rewarding partnerships with pharma/ biotech companies worldwide.

References

  1. PR Newswire. Outlook of the Global Pharmaceutical Outsourcing Market 2015-2020 – Current Market Accounts for Approx $130.65 Billion. Accessed at: http://www.prnewswire.com/news-releases/outlook-of-the-global-pharmaceuticaloutsourcing-market-2015-2020---current-market-accounts-forapprox-13065-billion-300064148.html

 

Nice Insight

Nice Insight, established in 2010, is the research division of That’s Nice, A Science Agency, providing data and analysis from proprietary annual surveys, custom primary qualitative and quantitative research as well as extensive secondary research. Current annual surveys include The Nice Insight Contract Development & Manufacturing (CDMO/CMO), Survey The Nice Insight Contract Research - Preclinical and Clinical (CRO) Survey, The Nice Insight Pharmaceutical Equipment Survey, and The Nice Insight Pharmaceutical Excipients Survey.