Analyst: Bet on another boom for big CROs

After a booming 2012, the CRO industry is likely to grow even further, one analyst projects, riding an increase in biotech funding and drug development successes.

The FDA has been approving more new drugs each year since 2010, ISI's Ross Muken points out, and, with biotech venture funding finally showing signs of life, it's a good time to be a CRO.

"We believe these trends should benefit the large, diversified, late-phase CROs with global presence and full-service offerings, (which are) far better suited for integrated strategic partnerships," Muken wrote in an investor note.

The keyword there being "large," and Muken expects even more consolidation in an already giant-laden industry. Back in 2004, the world's 7 largest CROs controlled 35% of the market, Muken said; they hold a 60% share today.

So far this year, giants like Parexel ($PRXL) and Quintiles ($Q) have used M&A to grow their footprints, and private equity firm KKR spent billions to buy and merge PRA and ReSearch Pharmaceutical Services, creating what it says is the world's fourth-largest CRO.

Last year, the 40 biggest CROs in the world hauled in $13.6 billion, according to GlobalData, a 10% annual increase. And while that's a hardly a bad sign for the industry at large, in keeping with the CRO world's top-heavy DNA, Quintiles and Covance ($CVD) accounted for nearly $6 billion of the total.

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