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CROs gain traction from pharma cost cuts

August 13, 2010 By Mass High Tech: The Journal of New England Technology

Parexel International Corp. reported this week that its profit more than doubled in the second quarter year over year.

The Boston-based contract research organization, which conducts clinical trials for pharmaceutical and biotechnology companies, has responded to this growth by adding 500 new employees to its roster since the start of 2010. The company now has a total head count of 9,720 worldwide.

Parexel is a poster child for the findings of Westborough-based global talent management firm ZRG Partners in its recently released Global Life Sciences Hiring Index. The survey — which included 30 of the largest pharma, biotech, medical device and services/outsourcing firms in the United States — found that services and outsourcing firms are hiring at the fastest rate in the sector. It also found that the current hiring rate in services was 500 percent higher than in pharmaceutical companies, and 250 percent based than in medical device firms, on a per-employee basis.

Several factors are at play, including consolidation in the pharmaceutical industry that has led to large numbers of layoffs, particularly among sales and marketing staff — to the advantage of services firms. For instance, the hiring index found that sales and marking jobs represented only 19 percent of available open positions, down from 30 percent in 2007. The vast number of patents that are about to expire also lowers the need for more salespeople, as market share of branded drugs is expected to dwindle following generic competition.

The so-called “patent cliff” also boosts hiring at outsourcing firms, as pharmaceutical companies increasingly engage contract research organizations (CROs) in an effort to speed up development of new drugs.

“Many of these pharma companies are coming out of a hard 10-year period when research and development was not that productive. They are likely engaged in a new business model. They are not investing less in research and development, but they are more deliberate in how they spend it,” said Josef von Rickenbach, CEO of Parexel. Von Rickenbach and others said that it has been easier to recruit good talent lately, because CROs have less competition from pharmaceutical and biotech companies for the same candidates, and because the image of CROs as a workplace is evolving in a positive direction.

“Five years ago, I couldn’t recruit for a CRO. Candidates didn’t want to hear it, they thought it was minor league,” said Steve Tosches, managing director of life sciences at ZRG Partners. But Tosches said that has changed, as pharmaceutical jobs become more unstable. Tosches said that outsourcing is now often seen as a crucial cost-containment measure for cash-hungry biotechs, as well as pharma companies, post-recession.

“This is a matter of survival. They can’t just sit back and take VC money anymore and wait to be acquired or for an IPO, because that might not happen. They have to leverage expertise from outside the organization, to move ahead quicker,” Tosches said.

The changing life sciences marketplace is also prompting the need to create new roles and seek out new services. For instance, many biotechs are now looking for “alliance managers” who will foster the ongoing relationships with existing pharmaceutical partners or seek out new partnerships.

“Biotech companies increasingly realize they cannot get a drug to market on their own because of the high costs and must partner with pharma,” said Laurie Halloran, CEO of Waltham-based Halloran Consulting Group.

In addition to alliance management services, Halloran’s firm has also recently been asked to offer product management services to follow a particular drug candidate through its life cycle, and work on the budget, time line, design and management of clinical trials.

“More and more clinical trials now include patient groups from outside the U.S., and the global nature of these trials increases the complexity and the need for coordination,” she said.

 

SOURCE

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