CRO Market Size: Growth in a Flat R&D World

“The only constant is change.” This famous quote has been attributed to people ranging from Heraclitus, an ancient Greek philosopher who lived ~100 years before Plato, to Francois de la Rochefoucauld, a French author. Those of us who have spent considerable time working in the CRO industry have our own version of a “constant” and that is constantly asking the same question: What is the size of the CRO market?

The difficulty in accurately answering this question comes from the current and historic dynamics of the industry. The CRO industry is still relatively young, highly fragmented, and a considerable proportion of the industry consists of private companies. ISR has wanted to release this report for several years and what tipped us over the edge was the decision by Quintiles to re-enter the public market. Estimating an industry market size without a clear understanding of the financial position of the market share leader seemed irresponsible.

Over the past several years, the pharmaceutical industry has witnessed a relative flattening of R&D spending. No longer can CROs and service providers count on increasing R&D budgets to fuel their growth. Growth now has to come from (1) a continued increase in outsourcing penetration and (2) stealing market share from competitors. That said, CRO revenues and backlog continue to rise as a result of the rising proportion of development dollars being outsourced.

ISR recently released our “2014 CRO Market Size: 2012-2018” report in which the CRO market is projected to reach $23.6B in 2014. This report looks the CRO market from the top-down and segments the spending by phase (I-IV), geography, and service line. With a 7.9% CAGR from 2014 to 2018, CROs are benefiting from the increased rate of outsourcing and increasing R&D budgets from biotech and specialty/ generics companies.