The sponsor-CRO strategic partnerships just keep coming.
The latest was doled out by medium-sized Belgian drug maker UCB, which declared CROs Parexel and PRA International to be its exclusive outsourcing partners for global clinical development services.
Investment firm William Blair said in a report on the new partnership deals that R&D expenditures at UCB are about $1 billion annually, and that annual bookings from this new contract should exceed $100 million for each partner.
Terms were not disclosed, but William Blair said it expects the contract to run three to five years, and at maturity—estimated to be at the beginning of fiscal 2014—it could boost Parexel’s revenue base by 2% to 5% and earnings base by 4% to 8%. (William Blair covers top-tier, publicly traded CRO Parexel, but not mid-tier, privately held PRA.)
A recent William Blair survey of drug companies showed that about 80% of big pharma either are in the process of restructuring in order to strategically outsource more of their trials to CROs or have already completed their restructuring plans. Of that 80%, just 12% said they had completed their restructuring, meaning many more sponsors are poised to announce deals, said analyst John Kreger.
UCB’s partnerships with Parexel and PRA fall right in line with that.
“This is another example of this business increasingly shifting to a strategic or preferred partnership model where pharma outsources more, and does so with a smaller list of vendors with which they have a closer relationship,” said Kreger.
Parexel has been a strategic partnership powerhouse. The CRO has publicly announced partnerships in place with Pfizer, Bristol-Myers Squibb, GlaxoSmithKline and Eli Lilly. Parexel founder, president and CEO Josef von Rickenbach confirmed this summer that the CRO has other such relationships in place that have not been made public.
This is Raleigh, N.C.-based PRA’s first publicly announced strategic partnership agreement, though a PRA spokesman said the company has others in place that it has not announced publicly.
PRA’s vice president of business development Doug Fulling said PRA and UCB have worked together on about 20 trials over the last four years. For that reason, being handpicked alongside one of the field’s most dominant, top-tier CROs was not a big surprise.
“We’re pretty ingrained into UCB’s organization already,” said Fulling.
UCB’s process of selecting its two strategic outsourcing partners took about a year, he said, adding that PRA, Parexel and UCB worked together to develop a set of metrics and standards they all will adhere to during the execution of the long-term contract. That took about a year, as well.
“It takes time and consensus to define those,” said Fulling.
Rumors have circulated since the summer that PRA, owned by Genstar Capital since 2007, is up for sale. A robust strategic partnership agreement such as this will only make the company more attractive to any potential suitors, said one industry observer.
According to a Wall Street Journal report over the summer, Genstar was seeking more than $1 billion for PRA.
UCB, which has about 9,000 employees, was founded in 1928 as an industrial chemicals company with a small pharmaceuticals division, as well as a film division. In the 1970s, UCB developed piracetam, which was marketed as Nootropil and used to treat memory and balance issues. The drug remains one of UCB’s key products. The company later developed the blockbuster antihistimine Zyrtec.
Over the last 10 years, UCB has sold off its chemical and film holdings, expanding its pharmaceutical capabilities. In 2004, it acquired British biotechnology company Celltech, and two years later it began its purchase of German pharmaceutical firm Schwartz, which brought UCB into the central nervous system area. Through Schwartz, UCB now markets Neupro (rotigotine), a transdermal patch for treatment of Parkinson’s disease, and Vimpat (lacosamide), an anticonvulsant. In 2006, UCB licensed Toviaz (fesoterodine), a compound to treat overactive bladder, to Pfizer.