Analysis of the Development Status of the Global CRO Industry
From the perspectives of R&D expenditure and outsourcing rate, the global CRO industry has gradually begun to recover after experiencing a low boom in 2008-2012.
In recent years, new treatment methods, new drug discovery technologies have continuously emerged, primary market financing has been active, new drug R&D costs have been continuously increased, and drug review speeds have accelerated and other factors have jointly promoted the growth of pharmaceutical R&D expenditures. The growth of pharmaceutical R&D expenditure is reflected in two aspects: one aspect, the absolute amount of R&D expenditure has grown rapidly, the R&D expenditure of PhRMA member companies in the United States has increased from US$2 billion in 1980 to US$79.6 billion in 2018, an increase of 39 times; On one hand, the proportion of R&D expenditure in revenue has continued to increase, and the R&D expenditure in revenue of PhRMA member companies in the United States has increased from 8.9% in 1980 to 19.5% in 2018. (The United States is the most active and leading market for drug R&D in the world. It is believed that the R&D expenditure of PhRMA member companies in the United States can roughly represent the changing trend of global pharmaceutical R&D expenditure).
The R&D expenditure of pharmaceutical companies in 2008 and 2009 decreased year-on-year, mainly due to the macroeconomic impact; the year-on-year growth rate of R&D expenditure of pharmaceutical companies in 2011 and 2012 was lower, mainly due to the impact of patent cliffs. Since 2013, it has been accompanied by the rise of immunotherapy, PD-(L)1, CAR-T, and gene therapy.
The financing amount of pharmaceutical R&D companies has continued to rise, with significant growth in the past five years. According to PWC statistics, in 2018, there were 434 transactions of drug R&D companies in the U.S. primary market, with a financing amount of US$13.7 billion, a year-on-year increase of 44.9%. In the past five years, from 2014 to 2018, the CAGR of US primary market drug R&D companies’ financing amount was 27%.
The difficulty of research and development of new drugs is increasing, the cost and complexity are increasing. Only no more than 12% of drugs that enter clinical phase I will eventually be approved by the FDA for marketing. For these new drugs that the FDA has approved for marketing, the average research and development cost of each new drug has risen 13 times since 1970. The process of new drug development is also becoming more and more complex.
The acceleration of drug review has increased the enthusiasm of pharmaceutical companies for research and development. The average time required for the approval of each drug in the US FDA fluctuates between different years, but the overall trend is decreasing. In 2016 and 2017, the US FDA drug review time has been significantly shortened. In recent years, the number of new drugs approved for marketing by the FDA each year has also shown a clear upward trend, and the proportion of macromolecular biological drugs has continued to increase.
The continuous emergence of new technologies and new therapies has set off an upsurge in research and development. The successful listing of tumor immunotherapy, CAR-T and gene therapy has greatly enhanced the enthusiasm of pharmaceutical companies in R&D activities, which is beneficial to the development of the CRO industry. According to the “Clinical Cancer Advances 2019” released by ASCO, in 2018, existing research results expanded the scope and influence of various immunotherapies. Key research on immune checkpoint inhibitors has shown that the use of immunotherapy and combination of other treatments (including other immunotherapies and chemotherapy) in the early treatment period will increase the survival rate. In adoptive cell therapy, long-term data provides a deeper understanding of the benefits and risks of this therapy in different hematological tumors. In 2018, the FDA also approved some new immunotherapies. It is expected that tumor immunotherapy, cell therapy, and gene therapy will remain the hot spots of future research and development.
The outsourcing rate of R&D by pharmaceutical companies will continue to increase. On the one hand, by cooperating with CRO to improve work efficiency, reduce the time required for clinical trials and save costs. On the other hand, CRO can help pharmaceutical companies complete tasks that cannot be done on their own, such as the recruitment of global multi-center clinical patients and a series of R&D processes of virtual biotech companies. Many large pharmaceutical companies even choose to spin off some R&D centers and outsource these services to more professional or cost-effective CRO companies. In this way, pharmaceutical companies can reduce investment in fixed assets and improve the efficiency of time and capital use.
Small pharmaceutical companies are playing an increasingly important role in drug R&D, which has also contributed to the increase in the rate of outsourcing of pharmaceutical R&D. According to statistics, the number of small pharmaceutical/biotech/virtual pharmaceutical companies doubled during 2013-2017, and their share of global pharmaceutical companies increased from 69% to 76%. At the same time, the contribution of small pharmaceutical companies to the research and development of new drugs is also rising. From 2013 to 2017, among the NMEs approved by the FDA, the proportion of small pharmaceutical/biotech/virtual pharmaceutical companies continued to increase. Small pharmaceutical/biotech/virtual pharmaceutical companies are more dependent on pharmaceutical R&D outsourcing companies, which will benefit the development of the pharmaceutical R&D outsourcing industry.
——From the Perspective of the Overall Market,
the global CRO market has grown from US$40.1 billion in 2014 to US$57.8 billion in 2018, with a compound growth rate of 9.6%; by 2019, the market size has increased to US$64.2 billion. As the penetration rate of the CRO industry continues to increase, the overall market growth rate is slightly higher than the growth rate of drug R&D expenditures.
Analysis of the Development Prospects of the Global CRO Industry
Affected by the epidemic, international pharmaceutical companies will suspend part of their research and development plans, and international CROs may suspend work and services in the short term. According to a Reuters report on March 26, affected by the global new crown epidemic, Pfizer, Merck, Ms. Squibb, and Eli Lilly have suspended a number of ongoing R&D and new research. Among them, Pfizer has suspended the registration of a number of ongoing and new clinical trials, and postponed the recruitment and enrollment of multiple global clinical trials for a period of three weeks; however, the postponement of clinical trials will not affect the continued recruitment of patients in China, Japan and South Korea jobs. Pfizer Pharmaceuticals will spend US$6.9 billion in research and development in 2019 and plans to invest US$8.5 billion in research and development in 2020. On March 23, Eli Lilly announced that it would postpone the initiation of most new research and suspend registration of most ongoing research. Leading overseas CROs may suspend work or service due to the epidemic.
According to Frost & Sullivan’s forecast data (without considering the impact of the epidemic), the global CRO industry market is expected to increase to US$95.1 billion by 2023, and to US$116 billion by 2026.