Clinical-development outsourcing has seen it all in the past few decades. What initially started as a large-scale swing toward full-service outsourcing to contract research organizations (CROs) has given way to a return to more insourcing among biopharmaceutical companies, especially among larger pharma companies, and the pendulum will continue to swing. Our findings suggest that CROs should continue to focus on adapting their services to serve smaller biotechnology companies, which have emerged as leading stakeholders in the clinical development of new therapies, driving innovation and growth.
Over the past decade, large pharma companies’ share of the industry’s clinical pipeline has declined, with the share of pipeline for the top 15 pharma companies shrinking from around 40 percent to around 20 percent from 2011 to 2021.
Looking ahead, biotech has a significant proportion of advanced molecules in development across areas including cell and gene therapy, monoclonal antibodies, and DNA and RNA therapeutics. While large pharma companies are expected to grow R&D spending at a rate of 4 percent annually—to $234 billion for the industry in 2025—R&D spending in biotech is forecast to grow twice as fast, at up to 8 percent per year.
While large pharma companies are expected to grow R&D spending at a rate of 4 percent annually, R&D spending in biotech is forecast to grow twice as fast, at up to 8 percent per year.
CRO revenues also are expected to grow, reaching $46 billion by 2025, up more than 40 percent from 2020 (Exhibit 1). This growth will be largely driven by growing product pipelines in biotech, coupled with a trend toward biotech companies retaining their assets longer. As established pharma customers bring more services back in house, the value that CROs bring to smaller biotech companies has become ever more apparent. This may be a good time for CROs to ask themselves if they are doing enough to serve this market—and to do everything they can to raise their game.
Biotech needs CROs
CROs offer a unique value proposition for biotech companies, which are inherently fast growing and resourceful, often taking the approach of building the plane while flying it. While established pharma companies have the option to build best-in-class capabilities in-house and outsource selectively, biotech companies—given their rapid growth and relative lack of development infrastructure—often must rely on others to provide the full offering of clinical services before they can consider building out their own development organizations.
In addition, biotech companies often have not yet established a reputation. When it comes to interactions with clinical-trial sites, investigators, patients, caregivers, and regulators across the world, biotech companies may have neither the relationships nor the name recognition of a large biopharma or global CRO that has feet on the ground and relationships with stakeholders across many countries.
In addition, innovation in clinical development today often means working with specialized vendors offering best-in-breed point solutions, from electronic clinical-outcome assessments to trial payments and decentralized or virtual trials. In addition to large players, such as Oracle and Veeva, that provide technology and data-enablement offerings across the spectrum of development activities, a slew of smaller companies (for example, Science37, Documentum) focus on one or more offerings in the clinical-trial life cycle. While contracting with several best-in-breed vendors individually may yield the most advanced clinical trials, it also requires large-scale vendor management capabilities and processes that are virtually impossible for most emerging biotech companies to manage on their own.
As a result, biotech companies may partner with a larger company, as BioNTech did with Pfizer and as Genmab did with Janssen and AbbVie, and they may turn to a CRO, which can act as both a general contractor for outside services and a source of operational innovation. CROs that understand where biotech companies feel underserved and align their services to fill in gaps should find, and are already finding, significant opportunities to support this fast-growing sector.
Biotech companies report feeling underserved by CROs
We surveyed 80 CRO customers from both large and small pharma, including biotech, about their satisfaction with the top global CROs.
In all 14 service areas we measured—study design, project management, lab services, and supply logistics, to name a few—respondents at the small biopharma rated the CROs lower than those at large pharma companies did (Exhibit 2).
We also conducted qualitative interviews with the biotech companies surveyed, and their responses highlight several themes:
- Biotech companies feel that CROs today do not deliver enough on their need for strategic advice and the integration of technology point solution providers. Biotech teams typically have exceptional basic scientific expertise but fewer clinical resources than established pharma players, and the needs that biotech companies have in these dimensions are often fundamentally different from those of established pharma. CROs are well suited to the role of biotech “thought partner,” complementing biotech companies’ scientific expertise with their established relationships, their access to best-in-breed tools, and the sheer scale of their development engine.
- Biotech companies feel that CROs do not focus enough on the companies’ C-suites. As opposed to established pharma (where CROs are chosen and managed by midlevel executives in either clinical or clinical-contracting groups), in biotech companies, the choice and performance of the CRO and the clinical program is often the top priority for the CEO. Additional investment in cultivating relationships with biotech leaders can pay dividends when these players succeed in development and launch or get acquired by established pharma companies, bringing opportunities for additional clinical programs. The CRO that helped develop a biotech company’s first star asset can become a trusted partner for further development projects.
- Biotech companies feel that there is still misalignment of incentives between them and their CROs. The typical fee-for-service model of CRO compensation incentivizes CROs to focus on the time they spend, encouraging them to add services rather than aligning payment terms with how efficiently they manage clinical trials. The result can be delays in trial execution, inadequate cost controls, and a feeling among some biotech executives that CROs lack the appropriate commitment to the programs and teams they are supporting.
- Biotech companies quite commonly believe that they are not fully prioritized in terms of CRO team experience and expertise, with members lacking the ability to advise them strategically. They also report high turnover of key personnel, such as clinical-research associates.
A CRO that can position itself as a full-service “general contractor” of choice for biotech companies can become an invaluable development partner.
By serving biotech companies more effectively, large CROs could gain credibility with a quickly growing customer group in a, to some extent, undifferentiated competitive landscape. The biotech companies in our survey see limited differentiation among the large CROs, even those that have historically given more attention to biotech. A CRO that can position itself as a full-service “general contractor” of choice for biotech companies, bringing relationships, access to services, and strategic perspective, can become an invaluable development partner.
How CROs can raise their game today
All the major CROs now have dedicated biotech teams and capabilities. Players offer a variety of tailored services to serve biotech’s specific needs, such as collaboration with technology players, focused support on asset strategy, Therapeutic Area-specific expertise, patient centricity in trial design, and implementation of virtual trials.
However, our findings suggest there continues to be significant opportunity for CROs to be better strategic partners for biotech companies. Based on our research and broader experience working with small and midsize pharma companies, including biotech companies, we can identify three things CROs should start doing today or, if their current CRO biotech divisions are already doing them, do more of:
- Further emphasize their role as an integrator of point solutions that drive speed, quality, and stakeholder experience in clinical development—and build the capabilities to orchestrate the use of point solutions flawlessly. In a world where dozens of companies provide solutions for crafting and executing better clinical trials, biotech companies may not be able to source the best services from across this fragmented landscape themselves (see sidebar, “The ecosystem of clinical services”). The CRO can act as a reliable integrator of the capabilities that biotech companies need and should continue to signal the importance of this role.
- Further position themselves as end-to-end strategic partners—that is, from asset strategy to launch, which is even earlier than CRO biotech divisions are currently offering. CROs should spend more time in the biotech ecosystem and venture capital world, engaging founders and CEOs at the inception of the business. Building these relationships early also provides a basis for determining later which companies to support through risk-sharing outcome-based arrangements.
- As with any service offering, focus on reliability and credibility by providing not only top-notch program management but also strategic input on a level with the scientific and clinical talent of the biotech company. A targeted white-glove service model, engaging with the C-suite where possible, can demonstrate this credibility and may unlock opportunities with companies that are looking for strong value from development partners, not just the lowest cost.
CROs should consider fundamental changes to effectively serve biotech companies in the long-term
For CROs to support the biotech segment effectively and enhance their reputation as great clinical partners with innovative scientific leadership teams, they could contemplate six fundamental changes.
Emphasize role as an integrator of best-of-breed capabilities
CROs can further acquire capabilities in key innovation areas within clinical development. They should consider expanding their capabilities in specialized skills with rising importance in clinical development, such as decentralized or hybrid trials. Developing capabilities in these areas can help CROs bolster their value as both general contractors and integrators of market-leading point solutions and strategic partners to biotech companies. For example, ICON’s 2021 acquisition of PRA Health Sciences allowed it to expand its offerings in decentralized and hybrid trials, while Syneos’s 2020 acquisition of Illingworth let them move into mobile and home nursing. These added capabilities make partnerships with large CROs more appealing, as they can eliminate the need to contract with multiple solutions providers.
Continue to position themselves as the end-to-end partner of choice for biotech companies
CROs can offer more flexible and outcome-based contract arrangements. Those that formally tie their success to that of the clinical programs they are overseeing are better able to embrace an ownership mentality and improve their perception as an aligned partner. Although several CROs are starting to align their incentives with clients, they can do so at a larger scale, taking bolder steps and putting skin in the game as a rule, rather than by special agreement. This can go a long way toward convincing biotech clients of a CRO’s commitment to their success.
Eliminate incentives that reward prioritization of large pharma companies over smaller biotech companies
Even in CROs that have created dedicated biotech divisions of meaningful scale, company-wide incentives that favor larger pipelines may continue to influence trade-offs, particularly in the allocation of resources between biotech companies and established pharma clients. CROs should recognize and promote the value of building long-term relationships with biotech companies so that this value becomes engrained as a core belief shared by CRO program managers, CRAs, and account executives.
Focus on reliability and credibility through top-notch service
CROs can significantly increase the attention given to biotech companies’ CEOs and C-suites. Providing biotech leaders with top-tier service at all stages of the customer relationship—from the request for proposal, to program design, to final execution—shows the CRO’s commitment to building a relationship that is more than transactional and truly complements the scientific rigor of the biotech company. Besides focusing on project delivery, CROs should ensure strong communications—including digital solutions such as operational dashboards—that help the biotech company’s leadership monitor and understand the progress of its clinical programs, which are often the most valuable part of a biotech company and top of mind for its leadership.
Develop a flexible concierge-like model of clinical-development support
Biotech companies approach clinical development with a heterogeneous set of internal resources and capabilities. While some biotech companies require significant assistance with design considerations, others need CROs purely for operational support. To accommodate biotech companies’ needs, CROs can add significant value by developing a service model geared to the needs or gaps of individual biotech companies, rather than a one-size-fits-all service offering.
Hire and retain more high-caliber, biotech-specific clinical talent
CROs should focus on hiring top talent, including biopharma veterans, who can function as true strategic clinical-development partners to biotech CEOs and founders. A strategic approach to recruitment should position CROs as an attractive “exit” for late-career clinical-development talent—one that offers an opportunity for these seasoned professionals to influence important emerging clinical programs.
These fundamental changes won’t just affect the experience of biotech companies that work with CROs. They could also have a lasting impact on the way CROs are perceived within the industry and beyond, including with regulators, payers, and academic researchers. Perhaps a stronger partnership between CROs and biotech could lead to even safer and higher-quality drugs, as well as a richer biotech drug pipeline.
Even though biotech companies currently report a lower level of satisfaction with CROs, CROs have a chance to continue to up their game with biotech. By substantially strengthening their value proposition, they can position themselves more centrally in the future innovation of the industry, where biotech companies are a central driver. CROs that think big and focus on bringing their best to the customers that need them most have an opportunity to transform themselves from a somewhat undifferentiated but absolutely necessary service provider to an actively sought-out innovation partner.