Demand slipped for several large contract research organizations last year, and a new report from William Blair analysts suggests these firms should brace for a similar R&D landscape in 2025.
While the analysts believe “pipeline reprioritization activities had peaked” for Big Pharmas by the end of 2024, they expect demand in 2025 will look “a lot like it has over the last couple quarters,” the analysts wrote in a Jan. 22 report.
The analysis is most relevant for CROs that get a significant chunk of their business from large pharmas, the analysts said, including ICON, IQVIA, Fortrea and Charles River Laboratories.
While large pharma spending on R&D actually increased by 9.7% in 2024, according to the report, R&D spending from 13 companies including Roche, Johnson & Johnson and Novartis is expected to increase by only 2.2% this year.
Another factor decreasing pharma spending on CRO services is the loss of exclusivity for approved drugs, according to the report. Around the industry, 46 key drugs have already lost or are set to soon lose exclusivity, the analysts wrote, which will drop their sales from $162.8 billion in 2024 to a projected $67 billion in 2029.
The CRO the analysts are most worried about in the near term is Charles River, due not only to slipping demand but also a move by the Secretariat for the Convention on International Trade in Endangered Species to halt shipments of long-tailed macaques, which Charles River uses for research.
Numerous CROs struggled last year amid the shifting pharma spending landscape. With revenues dipping, Charles River, ICON and Javara all executed layoffs.
In the long term, though, tides are expected to turn, with the CRO and clinical trial markets expected to grow through 2030, especially in the Asia-Pacific region.