From The Editor | October 16, 2024

A New Barometer For Clinical Outsourcing Performance

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By Dan Schell, Chief Editor, Clinical Leader

Andrew Schafer Screenshot
“With the SCDI, all I'm really trying to do is give people another signal as to the health or sickness of the market,” says Andrew Schafer (left).

You know what the clinical trial industry doesn’t need?

Another acronym.

Well … I take that back. About two years ago, Andrew Schafer coined the eponymous Schafer Clinical Development Index, or SCDI, and I think it could be really helpful to a lot of people who want some way of tracking the performance of at least a portion of the clinical development industry.

Schafer, who is president of market research firm Industry Standard Research (ISR), started his clinical research career in 2003 at Quintiles (now IQVIA). Since then, he has been no stranger to listening in on earnings calls and reading 10K reports and 10Q filings for competitive intelligence and for ISR’s many clinical-focused reports. He decided to create the SCDI as a way for him to better track “the pulse” of the clinical development industry, specifically the outsourcing part. He admits, though, that a conversation with his wife also served as a catalyst for the creation of his index. “She runs a digital marketing agency,  and one of their specialties is LinkedIn,” he says. “She’s taught me that, when you post on LinkedIn, you not only need to be deliberate, but you also have to post unique content that provides value. So that’s what I’ve tried to do with the SCDI.”

Most companies in this industry are private, which makes it difficult to get financial information from them. So, for ease of tracking, Schafer picked the following 14 public companies (sorted alphabetically) he thought would be representative of the industry:

  • Bio-Rad (BIO)
  • Catalent (CTLT)
  • Charles River (CRL)
  • CryoPort (CYRX)
  • Evotec (EVO)
  • Fortrea (FTRE)
  • Harvard Bioscience (HBIO)
  • ICON (ICLR)
  • IQVIA (IQV)
  • Medpace (MEDP)
  • Science 37 (SNCE)
  • Thermo Fisher Scientific (TMO)
  • Veeva (VEEV)
  • West Pharmaceutical Services (WST)

Catalent and Science 37 have been removed since they are no longer public. Schafer says there are other companies he could include (e.g., some lab-related), but he’s not sure how much of their business comes from clinical-trial based services versus hospital-based testing, for example. (He recognizes that Thermo is the only company on his list that is not exclusive to clinical development).

SO HOW IS THE SCDI PERFORMING?

All the companies in the SCDI are equally weighted, and as of early October, the index is not having a great year. “It is down roughly 20% YTD, with the DJIA up approximately 13% and the NASDAQ up about 20%,” he says. “I don't think there are one or two specific things that have caused that downward trend; I think some of it just might be market driven. But if we look at other things like R&D funding and outsourcing penetration, they seem OK.”

It's probably no surprise that Schafer follows and occasionally speaks with Joel White, a consultant and self-proclaimed “CRO guy” who regularly posts via his Joel’s Thoughts newsletter about the financial performance of clinical outsourcing companies. When I asked White why he thought the SCDI had performed so poorly this year, he said:

“The SCDI is equal weighted and thus its poor performance is heavily impacted by the huge declines in several small preclinical/discovery providers. If [Schafer] had Chinese CROs/CDMOs in there, it would have been even worse!”

Soon, Schafer plans to expand his analysis of the market by starting a new series that tracks the backlog (i.e., how much money they win, but haven't turned into revenue yet) of the large CROs. And if that doesn't entice you to follow him on LinkedIn, he also plans to continue his “Pharma Feud” questions. “This is just fun and entertaining content; it comes right from some of the add-on questions to our ISR reports,” he explains. For example, these were the questions he posted so far this year:

  • What is the worst part of your job?
  • Name an industry acronym you use every day at work.
  • I hate it when my Phase II/III CRO...
  • What is the best part of your job?

His Pharma Feud LinkedIn posts try to get people to guess what the final answers were from the actual ISR reports. He says these posts elicit between 1,500 to 13,000 impressions. As for his posts about the SCDI, they garner between 800 to 5,000 impressions, highly correlated to how well the index performed. “What I’ve learned is good news gets more attention than bad news,” he says. “With the SCDI, all I'm really trying to do is give people another signal as to the health or sickness of the market.”