As Pfizer ($PFE) confirmed it has killed off its planned $160 billion megamerger with Allergan ($AGN) after a crackdown from the U.S. Treasury, CROs may have a sense of relief in the short term, but longer term they may be hit.
A combined company would have created the largest drugmaker in the world with a research budget estimated to be more than $9 billion. Pfizer is a major outsourcer for its research with large tie-ups with Parexel ($PRXL), Icon ($ICLR) and PPD, but there had been fears that a megamerger would inevitably bring cuts and shuttering of operations from across its CRO services, as the company was projected to make around $2 billion in savings from its research budget.
It looks like these CROs have dodged a bullet from cancellations and fewer bookings this year, but in the long term, the newly expanded company would likely have sought more cost efficiencies internally and once again looked to its CRO partners.
Speaking recently to Bloomberg, Tim Evans, a research analyst at Wells Fargo, said: "Pfizer's use of CROs has been very successful--it's become a bit of a role model in some ways for how to drive efficiency into your R&D process by using outsourcing. … In the longer run, it's [the megamerger] a positive." The CROs have yet to comment on the deal, or the termination.