A new report by healthcare sector corporate finance and strategy specialist Results Healthcare says the CRO sector is seeing a recovery, driven by improved optimism across the biopharma industry, the sector’s largest customer group, where many key CRO customers are now at the tail end of multi-year patent cliffs and are stepping up investments into their pipelines, particularly products in late-stage development.

After two years of declining budgets, rising R&D expenditure and increased outsourcing—due primarily to biopharma’s need to shift fixed to variable costs and access capabilities not found internally—are expected to continue fueling steady growth of the global CRO market, which is poised to grow from $23 billion-$25 billion to over $30 billion by 2018, according to recent estimates from Bank of America Merrill Lynch.

The report, CROs and other outsourced pharmaceutical support services: M&A drivers and trends, said while M&A continues to be driven primarily by strategic buyers looking to increase scale or add specialist capabilities, they currently do not have in-house to improve their overall service offering and it is often the private equity deals that make the headlines, frequently because of their sheer scale and the impact they have on the industry.

It cites two important secondary private equity transactions completed this year, KKR’s purchase of PRA International and Research Pharmaceutical Services (RPS), as evidence of consolidation and a move to increase scale, and potentially game changing deals in the CRO sector.

“We are seeing strong appetites for acquisition in particular segments of the CRO sector,” said Hemavli Bali, executive director of Results Healthcare. “These range from medical communications and patient recruitment, to health economics and outcomes research, to patient engagement solutions, health informatics and pharmacovigilance. Healthcare IT will also remain a major focus, as CROs look to increase efficiencies across the board, including technologies that allow for real-time access to data, cloud platforms and the use of mobile devices to simplify the collection of data.”

Results Healthcare is part of Results International.