Strategic partnerships with large pharma recently have become the holy grail among CROs. And two have been awarded by Pfizer, the largest drug maker in the world.

The CROs put in charge of clinical trial implementation services for the hulking pharma company were Parexel and Icon. The five-year agreements went into effect June 1.

Just how much are these deals worth to the two CROs? No one is saying. But investment firm William Blair estimates that Pfizer’s R&D budget for 2012 should be close to $6.75 billion. In theory, each CRO could see half of that total. But no one’s sure whether Pfizer will outsource all of its phase II-IV work to Parexel and Icon, or just most of it.

Regardless, the “win,” as analysts call deals like this, should be good for both CROs. “Our initial estimates suggest that by calendar 2013, the win could boost Parexel’s revenue and earnings base by roughly 11% to 12%, and Icon’s base by 13% to 15%,” wrote William Blair analysts in their report on the partnerships.

Neal McCarthy, managing director of investment firm Fairmount Partners, said Pfizer’s new agreements with Icon and Parexel represent a seismic shift away from how the company had been outsourcing: largely through the functional service outsourcing (FSO) model, in which whole functions (i.e., data management) for many trials are outsourced versus outsourcing the management of entire trials.

“Pfizer concluded that they were spending too much money to oversee their outsourcing programs, and also that they would do better with a traditional CRO model,” he said. “This is big pharma saying, ‘we don’t just want the arms and the legs, we also want the scientific expertise from CROs.’”

Added Kreger, word on the street is that 20 to 50 CROs had been providing services—functional outsourcing and otherwise—for Pfizer. Most, if not all, of those will now be phased out. But when? One big challenge, said Josef von Rickenbach, Parexel’s founder, president and CEO, will be to figure out whether trials already being handled for Pfizer by other CROs will stay with those CROs or move to Parexel or Icon.

“The key is to make sure the solution is not more complicated and costly than what is in place right now,” said von Rickenbach. But strategic partnerships like these take a while to ramp up and pan out. In fact, the implementation date for the agreements was June 1, but as late as May 31 very little was known about matters such as how the work would be divided between the two CROs.

“We haven’t really gotten to all the detail yet as to when, whom and where,” said von Rickenbach. Both CEOs, however, said new awards for new studies have already been made as part of the partnerships.

Peter Gray, CEO of Icon, said although the details aren’t yet clear, Pfizer has told the two CROs it wants them to closely collaborate. “Pfizer says they want the three of us to work closely together so that there’s standardization in the way in which things are done,” he said. “As we come up with process-improvement ideas, we’ll share them so all parties can get the benefit from these efficiencies. What’s likely to happen? I think Parexel and Icon are going to also be somewhat competitive, but I think Pfizer is aspiring, in this case, to have very deep collaboration.”

Von Rickenbach wouldn’t say if this strategic partnership is Parexel’s biggest to date, but he did acknowledge it is near the top. It’s the fourth strategic partnership Parexel has publicly signed, following deals with Bristol-Myers Squibb (BMS) in June 2010 and GlaxoSmithKline (GSK) and Eli Lilly last September. Von Rickenbach also confirmed that the CRO has other such relationships in place that have not been made public. He said Parexel’s oldest such relationship has been in place for about two and a half years.

For Icon, this also constitutes its fourth publicly announced strategic partnership. Others are in place with Eli Lilly in 2009, and with BMS and Merck Serono, both announced last year. Is the Pfizer deal the biggest? “Time will tell on that,” said Gray.

--Suz Redfearn