Top-heavy market makes times tough for mid-size CROs

Between billion-dollar IPOs and big-name exclusive partnerships, it's a good time to be a giant in the CRO world. However, all the recent consolidation has made it harder for mid-size outfits to compete, Biopharm Insight reports, as medium-capped players lack the capacity to challenge heavyweights and don't offer the kind of niche services that keep small CROs afloat.

For the likes of Quintiles ($Q) and Parexel ($PRXL), it makes good business sense to lock down long-term preferred provider agreements with Big Pharmas like Pfizer ($PFE) and Merck ($MRK), but the volume of those deals squeezes out mid-size CROs that used count on smaller partnerships to keep revenue moving, Edgemont Capital Partner David Blume told Biopharm Insight. That leaves some companies trapped in the middle, he said.

"The mid-tier CROs don't have the resources to win these contracts," Blume told the website. "They are also not small or specialized enough to provide high-end services like the boutique CROs that focus on particular diseases."

As a result, many mid-size CROs need to find buyers to stay alive, but, while consolidation is rampant in the industry, acquirers are more likely to look at smaller outfits with particular therapeutic expertise.

That's where private equity comes in, according to Biopharm Insight, citing the case of Gryphon Investors, which owns Synteract and presided over the purchase of Harrison Clinical Research, combining the two to form SynteractHCR and compete for big-CRO contracts. Same goes for Vince and Associates, a CRO snapped up by Altasciences last month, an equity group with other CRO holdings.

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