2005 starts
The strong revenue momentum that the pharmaceutical contract services
business generated in 2004 carried into the first quarter of 2005. Most
industry segments generated double-digit revenue growth for the
quarter, and new contract signings remained strong.
Demand for early-development services, including preclinical and Phase
I research, remained especially strong, and waiting times for capacity
continued to stretch into the 3–6 month range. Several CROs brought on
new Phase I capacity, including PPD's (Wilmington, NC, www.ppdi.com)
300-bed Austin, Texas, facility and Radiant
Research's (Bellevue, WA, www.radiantresearch.com)
120-bed facility in Dallas, Texas. Substantial new preclinical capacity
won't be available until late in 2005 or 2006, however.
A big driver of clinical CRO revenue was the growing strength in Phase
II–III activity. Bookings for new late-development
studies began growing in early 2004, and the revenue effect of those
signings is being felt this year. Clinical CROs reported continued
strength in new business signings, with the large public CROs
benefitting from their ability to secure preferred provider
relationships with major pharmaceutical companies.
The growth in late-stage development is especially good news for API
and dose manufacturers as well as providers of analytical chemistry,
formulation, and packaging services. Conversations with exhibitors at
April's Interphex show confirmed that the nonclinical service providers
are experiencing growing demand as well.
Prospects for the industry look good through the rest of the year. The
only cloud on the horizon appears to be reduced funding opportunities
for early-stage companies. The initial public offering window closed in
the first quarter of the year, and several companies postponed their
new public offerings or took a substantially lower price per share to
seal their deals. Venture capital funding remained strong in the first
quarter but dropped precipitously in April. The funding environment is
a critical concern for nonclinical CROs and small clinical CROs
because early-stage companies make up a large portion of their
business. The large clinical CROs get a large and growing share of
their business from major pharmaceutical companies, and they should
benefit as Big Pharma enhances its new product pipeline with licensing
deals and acquisitions. PT
Bookings for new late-development
studies began growing in early 2004, and the revenue effect of those
signings is being felt this year. Clinical CROs reported continued
strength in new business signings, with the large public CROs
benefitting from their ability to secure preferred provider
relationships with major pharmaceutical companies.
