Why Are the Contract Research Organizations in Great Demand?
Posted Dec 14 2012 9:45am
With increase in the number of drug manufacturers, the number of contract research organizations is also on its rise. As more drug makers outsource the clinical trials to clinical research organisation, few must be astonished to see that the CRO sector is now generating great investor interest. One of the most attention grabbing deals was announced few days back when two private equity companies agreed to pay a good amount of cash to buy a leading Pharmaceutical company in no random bet.
If you are thinking “will there be more of such acquisitions?” then the answer to your question is, yes. Clearly now days the contract research organizations are on the radar screen. The main reason for this is that prices of drugs are soaring now. As per a survey which was conducted few days back, around 42% of the drug manufacturers say that the prices of the drugs rose last year up from 1/3 rd. Mid and large size drug manufacturers have reported incredible price increase, while small companies which involve biotech companies also, reported that more price increase is likely to take place in coming few years. This attracts the willing and prospective investors to invest in CRO sector and mint money.
Meanwhile the bio-techs and drug makers say that the CRO clients anticipate 8-9% increase in the research and development budget which is outsourced, with complete penetration by CRO augmenting from 35% in the year 2010 to 38% in the year 2011. Amongst the large drug manufacturers, nearly 27% anticipate to outsource while forty seven percent of the small companies anticipate doing the same. Looking ahead in future, we can say that though the client Research and Development budget will become flattish in total; even then the CRO sector secular market will move to elevated involvement and continue moving higher. This will result in clients replacing less competent internal functions with peak effective and economical external solutions.
The Association of CRO says that since the returns on investment made in CRO sector are so promising, it has attracted number of investors to invest their money and mint profits. The penetration of the pharmaceutical companies in the market segment is incredible attracting potential and prospective investors towards the CRO sector.
Further the ultimate end game has exceptional outsourcing penetration in leading pharmaceutical industry achieving amid 60% to 80% in the coming far future. Also this CRO sector has opened many job opportunities for the individuals interested in making their future with clinical research organisation. If you are asking where the jobs are, then the answer is flourishing CRO sector. With all that growth and success, CROs will probably continue being attractive in various aspects. And going private provides an additional bonus – giving an opportunity to run away from the microscopic scrutiny which is regularly applied to some well known public traded companies.