Early-stage contract research organizations (CROs) could face a tougher time in coming years, according to Jim Miller of PharmSource. After rapid growth in 2007 and early 2008, pharmaceutical outsourcing slowed in late 2008 due to restructuring at large drug companies and efforts to preserve cash by medium- and smaller-size pharmaceutical firms. The number of drug candidates in development is declining, a trend accentuated by the business difficulties now faced by smaller- and medium-size firms, which account for 80% of early-stage candidates. The net effect in coming years will be declines in demand for preclinical work, toxicology and process development. Larger early-stage CROs are better positioned to weather the slowdown, but smaller players will face difficulties until 2010. As a result, consolidation, restructuring and acquisitions by private-equity firms are expected to increase. However, demand for outsourcing of phase II–III development is growing, and larger CROs, particularly the top 10 companies, which represent 75% of the industry, continue to do well.


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