CROs scramble as Big Pharma lines up strategic partnerships

With Pfizer ($PFE) pushing a top-to-bottom restructuring on the R&D side as it carves billions of dollars from its R&D budget, analysts at Jefferies & Co. say that the pharma giant will soon whittle down its list of vendors, helping drive a broad consolidation of the CRO field as Big Pharma lines up long-term outsourcing deals.

That's good news for the industry's biggest players: Covance, PPD, Parexel, Charles River, Icon, Kendle and Quintiles, whose collective market share is expected to zoom from 41 percent to 49 percent by 2015 as Big Pharma relies more on strategic partners for clinical trial work it no longer wants to do in-house. Dave Windley, managing director, healthcare equity research at Jefferies, says that Pfizer is likely to shift to a short list of vendors, with an announcement expected later this year. And that kind of strategic outsourcing is all the rage.

"Within five years, and potentially much sooner, we could see over 80 per cent of sponsors engaged in some sort of strategic relationship", said Windley, who was quoted in an article by Outsourcing Pharma. Mid-tier CROs are fairing "quite well," adds Windley, but the trend will likely put considerable pressure on them as pharma partners up for the development dance ahead. Still, the trend does offer significant opportunities for the mid-tier group, which has been winning key deals.

- here's the story from Outsourcing Pharma