Small and mid-sized drug developers have been hit hard by the credit crisis. As sources of funding dry up and companies look to extend their cash runway long enough to survive the downturn, layoffs, restructurings and refocusing follows. Most often, biotech companies choose to focus on their most advanced program and shelve early-stage projects. Big companies have also cut R&D spending. According to PharmaFocus, "Among the top 20 companies R&D spending growth was a little over 5 percent in the first 9 months of 2008"
That drop in early-stage research is having a substantial impact on CROs. Contract research companies enjoyed a strong growth year in 2007 and into early 2008. But as the economic crisis caught up with the industry, CROs have suffered as early-stage projects have been halted by developers.
"An awful lot of smaller CROs and CMOs are dependent on these companies, and as they run into financial problems and as the absolute number of compounds in development falls these providers will suffer," explains Jim Miller of outsourcing consultancy PharmSource. "And it will have a longer-term impact as the effect works its way through the pipeline over the next three to four years."
Miller says preclinical work, toxicology, process development and small-scale manufacturing of clinical trial materials will be the hardest hit. He projects that these tough times will last until 2010 or 2011, and will lead to consolidation among smaller CROs.
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