Two private equity firms paid $3.9 billion in cash for Pharmaceutical Product Development -- a CRO. Why? A recent RW Baird survey of 388 drugmakers and biotechs sheds some light on the matter. Namely, prices at CROs rose by 42% in Qtr2 (up from 33% in Qtr1). This coupled with an expected increase of 3.6 to 8 percent in R&D budgets among drugmakers and biotechs makes the area look attractive.
CRO clients report that their R&D budgets for outsourcing will go up on average by 9% again projecting good growth potential for the sector. CROs in fact have seen their share of market projects rise from 35% to 38% in 2011. The folks at RW Baird project over the very long term this might rise as high as 60 to 80 percent.
Further, "The vast majority of internal pharma staff surveyed believe that they are spending the same, or more, per unit of outsourced work today than in the recent past," writes RW Baird analyst, Eric Coldwell.
Thus the influx of private investors to a perceived market opportunity with the added bonus of NOT having to report quarterly earnings as seen in the public sector.
Posted by Bruce Lehr Oct 4th 2011