The contract research organization (CRO) market presents a mix of numerous challenges and opportunities and is likely to provide pharmaceutical and biotechnology market participants the opportunity to achieve their strategic objectives by offering services that seek to reduce cost and time to market drug candidates. CROs are likely to capitalize on this tremendous opportunity by pursuing a mix of organic and inorganic growth initiatives that will ensure greater penetration of the market and higher share of R&D spending.

According to a new analysis from Frost & Sullivan, the market earned revenues of $7.44 billion in 2006 and is likely to reach $19.35 billion in 2013.

Biotechnology and pharmaceutical companies are outsourcing their R&D to CROs due to the lack of internal expertise, infrastructure, mounting costs of drug development and stringent regulatory guidelines. Biotechnology companies have limited investments in developing infrastructure compared to their pharmaceutical counterparts. This is resulting in greater business volumes for CROs from the biotechnology market.

"The increase in globalisation of trials is likely to result in several CROs expanding across geographical boundaries and augmenting their capacity to cater to this opportunity," notes Frost & Sullivan Research Analyst Barath Shankar S. "As the market continues to enlarge and inorganic growth emerges as a critical component of this expansion, the trend of deepening focus on core expertise is becoming crucial."

Along with offering required expertise to manage complex global trials across a variety of therapeutic segments, CROs provide a full line of preclinical and clinical services, which aid rapid expansion of the drug discovery CRO market. Their ability to deliver clinical trial participants with high levels of efficiency and productivity are further strengthening the need for companies to outsource R&D.

Several leading CROs have proactively established global presence through a strategic mix of organic and inorganic growth strategies. Achieving the right breadth and depth of services can prominently position these CROs in the highly competitive and rapidly growing market.

Market participants can gain prominence by shifting from the traditional route of drug discovery to the emerging "proof of concept" model. The complexity of the drug discovery process necessitates high degree of technical change to drive innovation and achieve greater efficiency in commercially launching products.

"However, there is an increasing level of commoditization of CRO services due to similarity in quality and range of services provided," observes Shankar. "CROs can benefit from offering cost-effective services to retain companies likely to change loyalties based on lower cost benefit."