CRO Industry Braces for Continued Slow Growth in Pharma R&D Spending

Contract Research Organizations (CROs) should prepare for another year of sluggish demand from Big Pharma, according to a recent report by William Blair analysts. Despite a 9.7% increase in large pharma R&D spending in 2024, the outlook for 2025 suggests a significant slowdown, with R&D spending from 13 major companies expected to grow by only 2.2%.

Factors Contributing to Slow Growth

Pipeline Reprioritization and Loss of Exclusivity

While the analysts believe that pipeline reprioritization activities peaked for Big Pharmas by the end of 2024, they expect demand in 2025 to remain similar to recent quarters. This trend is particularly relevant for CROs with significant business from large pharmaceutical companies, including ICON, IQVIA, Fortrea, and Charles River Laboratories.

A key factor contributing to decreased pharma spending on CRO services is the loss of exclusivity for approved drugs. The report highlights that 46 key drugs have either lost or are set to lose exclusivity soon, resulting in a projected drop in sales from $162.8 billion in 2024 to $67 billion in 2029.

Impact on Specific CROs

Among the CROs, Charles River Laboratories faces additional challenges beyond slipping demand. The Secretariat for the Convention on International Trade in Endangered Species has halted shipments of long-tailed macaques, which Charles River uses for research, further complicating its near-term outlook.

Industry Response and Long-term Outlook

The shifting pharma spending landscape has already led to significant changes in the CRO industry. In 2024, several companies, including Charles River, ICON, and Javara, executed layoffs in response to declining revenues.

Despite the current challenges, the long-term outlook for the CRO and clinical trial markets remains positive. The industry is expected to grow through 2030, with particularly strong growth anticipated in the Asia-Pacific region.

As the pharmaceutical industry navigates these challenges, CROs will need to adapt to changing demand patterns and explore new opportunities for growth in emerging markets. The coming years will likely see a reshaping of the CRO landscape as companies adjust to the evolving needs of their pharmaceutical partners.