Your Primer to Healthcare Mergers and Acquisitions

6 Reasons Why CROs Are Leading The Healthcare Revolution

Mar 14, 2017

by Teresa Gonzalo

By Teresa Gonzalo, PharmD, PhD, MBA, CM&AA

Volume 4 Issue 6, March 14, 2017

Contract Research Organizations (CROs) positioned themselves as the best performing sector in the healthcare market in 2016 with a thought-provoking and increasingly attractive business model. 2017 looks to be even better.

This research and clinical trials sector hit $31.8 billion in 2015 and will attain at least 12.4% annual growth (CAGR) for the next decade, according to ISR and Frost & Sullivan reports, reaching $57 billion revenue in 2020.

So, how are CROs achieving such success while leading the healthcare revolution?

CROs were born in the 1970s with the goal of serving Big Pharma’s desire to outsource their R+D operations, including drug discovery and preclinical work. But what started out as a way to cost effectively meet the needs of Big Pharma´s R+D has evolved into an innovative business model that has become very attractive to Pharma (Big and Small), as well as other companies looking for an affordable and creative answer to their research challenges.

As early adopters of disruptive technologies, CROs are now in the forefront of a revolution that has altered the healthcare landscape forever. Here’s how they are leading the way:

  • CROs are actively seeking M+A targets: To attract new customers and expand their capacities, CROs seek to acquire synergistic CROs and Contract Manufacturing Organizations (CMOs) to accelerate their growth of market share.
  • CROs are embracing healthcare IT: They are actively acquiring new technology with cutting-edge software to streamline their development processes and actively manage sophisticated clinical data.
  • CROs are adopting cutting edge Medtech: Integrating the latest medical instrumentation allows CROs to specialize per indication and facilitate cost-effective approaches at a faster pace than ever before.
  • Talent is being courted to the huge market upside of CROs: Attracting top-notch executive teams with deep knowledge in drug development as well as operational and regulatory procedures is occurring because of the obvious market potential for talented and ambitious scientist/entrepreneurs.
  • Dynamic activity is fueling CRO innovation: Fierce competition in this sector is forcing CROs to constantly seek new paths to reduce costs in R+D and clinical research, while providing a valuable service to Pharma and Biotech firms.
  • CROs are getting leaner: By adopting integrated research processes, CROs can shorten the time it takes to develop new drugs - sometimes by more than half - while keeping fixed costs low and operating at a significant profit.

All these factors validate the rapid evolution and modernization of a sector that it is becoming more and more attractive for investors. CROs are clearly the catalyst for rapid innovation that is positively impacting the clinical research marketplace. Small Pharma loves it and Big Pharma has taken notice. And this is just the beginning!

Given this dynamic marketplace, we forecast significantly more CRO M+A activity in 2017 as providers continue to scale up locally and globally. We will witness an increased number of CRO mergers with CMOs, with increasingly sophisticated marketing and branding efforts in place as CROs/CMOs fight for market share in the next few years.

Teresa Gonzalo

Teresa Gonzalo PharmD, PhD, MBA, CM&AA

Former Managing Director

After receiving her MBA from IE business school and a PhD in nanomedicine from Groningen University in Holland, Teresa became the head of the US office for Venture Valuation, where the global team evaluated healthcare companies facing a fundraising event, licensing deals, or an M+A transaction.  She was also the CEO and co-founder of Ambiox Biotech (application of dendrimer nanotechnology for antiviral treatment).  She regularly speaks at healthcare conferences in the Pharma/Biotech/Medtech/CRO sectors.  She has co-authored two patents in nanotechnology and drug delivery and she was awarded the 2011 MIT TR35 Innovator of the Year award by the Massachusetts Institute of Technology.  Teresa was honored to be among the top 100 women leaders in Spain in the entrepreneurial and innovative category for two consecutive years in 2012 and 2013.  In addition, she was selected as Woman of the Year by the magazine Scientific Entrepreneurial Woman Today.

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