About 25 percent of all preclinical drug testing is already outsourced to CROs, but according to this latest article in the International Herald Tribune, it is expected to grow to 50 percent in three years. Over the next five years, larger CROs are expected to absorb many specialized companies to boost their diversity. This expectation has already lift shares of CROs such as Covance and Parexel International, which were in stock market trouble this year.
Drug companies save millions of dollars each year by outsourcing clinical trials to CROs since it eliminates the need to build its own laboratories and researchers are not needed. David Windley, an analyst with Jefferies mentions as long as drug makers "keep trying to develop new drugs, then you have to do a lot of work. What they're then doing, they're turning to outsourcing in a more cost-efficient way."
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