Could CRO revenues become a victim of the Pfizer-Allergan merger?
- Over the short term, companies such as Parexel, Icon, and Pharmaceutical Product Development could see declining revenues as Pfizer and Allergan cut redundant costs. Contract Research Organizations (CROs) depend on Pfizer and other companies for much of their annual revenues. Parexel, for example, reaped 14% of its revenue from Pfizer last year.
- Pfizer, as well as other big pharma companies, relies on CROs to provide support by handling clinical trials, regulatory consulting, reimbursement strategy work and other research-related tasks.
- Although there may be a short-term revenue hit as the post-merger operations are implemented, experts see a long-term benefit for CROs, according to reporting by the Wall Street Journal.
CROs have proven to be an efficient way to handle many aspects of the R&D process, and the relationships benefit both pharma companies and the CRO themselves. At the same time, something as disruptive as a merger—especially a $160 billion merger—is likely to have a major impact on bottom lines.
However, the long-term outlook still looks positive. At this point, estimates project roughly $600 million to $700 million in cuts from Pfizer's R&D budget—a small sum compared with what might be expected. When the merger is finalized in the second half of next year, there may be a couple of challenging quarters. But overall R&D spending has become more efficient and is not likely to diminish in importance any time soon.