CROs Are Hurting, But Better Times Are Ahead

CROs are hurting in 2009, largely due to softening demand from cash strapped biotechs that have halted discovery in favor of later stage clinical programs. Charles River's pre-clinical business is off 17% in Q1 2009 compared to same period last year. The good news for pre-clinical CROs is that these programs will get funded and restarted at some point. Money is already gathered by those that recognize a unique opportunity to buy into research programs at highly depressed valuations, as evidenced here, here, here and here. Companies whose programs get funded will likely outsource a lot of work rather then rehire those that were previously laid off, and those CROs that are still around will be overwhelmed with demand. Given the trend towards vertical integration, CROs that can offer complimentary services as part of a single agreement will likely have a competitive edge over their niche rivals.