Research firm Industry Standard Research has released the latest edition of its Phase II/III Study Trends and Market Outlook (2022-2026) report. The goal of the report is to provide readers with a high-level view of the Phase II/III clinical development space to illustrate current market dynamics and inform strategic planning. For this report, 132 decision-makers shared insights into where the Phase II/III market is now and changes they expect over the next several years.
I spoke with Rebecca McAvoy, VP of market research at Industry Standard Research, to learn more about the report and some of the insights contained in it.
Ed Miseta: Across all organization sizes, spending on Phase II/III trials is expected to increase over the next five years. This seems to be at least partially due to rising trial costs. Do you have any insights into what is driving the higher cost of trials?
Rebecca McAvoy: Nearly half of survey respondents who predicted that their company’s Phase II/III spend will increase cited rising cost of research as one of the reasons for the anticipated spend increase. Inflation and the ‘great resignation’ likely have a lot to do with higher costs of clinical trials. Prices seem to be increasing on everything, from a gallon of milk to housing – and everything in between. Clinical trial services are no different. The great resignation is creating challenges for companies of all kinds to find staff. Recent interviewees at sponsor companies have shared that CROs and sites are having trouble filling positions. CROs are likely having to offer higher salaries to get qualified staff in the door. Costs for the CROs are rising which will lead CROs to charge more for their services.
Miseta: The proportion of Phase II/III spend that was outsourced over the past year was highest among small companies (80% compared to 55% in large companies). The largest projected increase in Phase II/III spend is also in small companies. Are small companies planning to outsource more work or will this increase come from larger pipelines?
McAvoy: I dug into this by analyzing the reasons given for the increase in spend and outsourced proportions by respondents at small companies. The most cited reasons for a predicted increase in spend among small respondents are pipeline success/more compounds to study, company growth/success, and increasing trial size. The most mentioned reasons for an anticipated increase in outsourcing proportions are pipeline success/more compounds to study, insufficient internal capacity, and more complex or large studies. So, it’s a bit of both. Respondents are telling us there will be more work to be done due to success of their pipelines but also that their trials are getting larger and more complex and that they don’t have enough staff to run the studies in-house. All of this points to a growing need for external resources.
Miseta: Your research found the largest Phase II/III study (in dollars) that a company would feel comfortable awarding to a large CRO was $44,895,400. For a small CRO it was $4,179,100. I am sure this is mainly because larger studies require a large CRO with global reach. But do you suspect many companies also have more confidence that a study will be successful if it is handled by a larger service provider?
McAvoy: Yes, the global footprint of the larger CROs really comes into play when sponsors are conducting large, global studies. Large CROs are sometimes ‘dinged’ for being too bureaucratic and smaller sponsors sometimes get the sense that big CROs overlook their trials in favor of the projects of larger sponsors, but it is hard for smaller CROs to compete with the global reach offered by the largest CROs. I also agree with your hypothesis that outsourcers have more confidence in large CROs. They know the large providers have significant in-house resources, operational experience, and processes in place to handle these large projects. Outsourcing to a smaller provider they haven’t worked with before for a large, critical study can put an outsourcer in a tough position if the CRO underperforms.
Miseta: Large companies have the capability to do some studies inhouse. Smaller companies generally must outsource almost all trial work, because they do not have the capability to perform the work themselves. That being the case, do you have thoughts on why PPAs are not more common in smaller companies like they are in larger sponsor companies?
McAvoy: In one-on-one conversations with outsourcers at small sponsor companies, we are often told that they like the flexibility afforded to them by not having a preferred provider list. If a trial has a specific need, they can use their selection process to vet vendors that can meet unique needs without having to explain why they’d like to use an ‘off-list’ provider. Smaller companies also have fewer trials taking place so there is less benefit to be gained by shepherding providers through a rigorous vetting process to become a preferred provider. Conversely, large sponsors with seemingly countless trials can save a lot of time by having pre-vetted vendors that can be used by scores of project teams. Additionally, smaller sponsors are less likely to have full-fledged outsourcing departments to handle the preferred provider vetting and management process.
Miseta: What is the primary benefit to sponsor companies of having a PPA in place?
McAvoy: Sponsors that have established preferred provider agreements with CROs gain several benefits for their efforts in setting up these arrangements. They enjoy relationship continuity with their providers, simplified contract logistics which facilitates easier selection, as well as potentially pre-negotiated pricing. Providers with already-established PPAs do not typically have to go through the vetting process each time which speeds up provider selection. On the other hand, when an outsourcer at a sponsor wants to use a provider that is not on the preferred list, they might experience some pushback for not using a pre-approved provider.
Miseta: What did you find to be the primary factors driving CRO selection in Phase II/III trials?
McAvoy: We collect data on CRO selection drivers across various decision-making scenarios (in which sponsors are choosing among preferred providers, going “off-list”, and in the absence of a preferred provider list). Some attributes are more important in CRO selection in some scenarios than in others. However, looking at an overall level shows that operational excellence, therapeutic expertise, and prior positive experience with service provider top the list in terms of selection importance. These attributes have consistently been rated as key selection drivers throughout our years of researching Phase II/III CRO selection. Outsourcers want their CROs to operate effectively and efficiently and to understand the nuances of their therapeutic areas. And they place considerable emphasis on having positive experience working with a provider in the past.
Miseta: Executive management seems to be the most important decision maker when it comes to deciding if a study should be outsourced and making the final CRO selection. Any thoughts on why that function is not delegated to a medical director, therapeutic unit representative, outsourcing rep, or someone who likely understands the trial and the available CROs much better? Or is that something that varies by company size?
McAvoy: When decision-making data is analyzed for different company sizes, we see that executive management has a lot of decision-making influence at smaller organizations. Some of these organizations are small enough that the highest-level executives are involved in many of the key decisions about outsourcing a trial. These smaller organizations also have fewer trials so there may only be a handful of trials for the executives to weigh in on. Executives are less involved in these decisions at larger organizations in which more of the decision-making responsibility is shared between other roles such as the medical director, outsourcing departments, or therapeutic unit representatives.
Miseta: More than half of respondents noted their companies have more cell & gene therapies in the pipeline than compared to two years ago. Is this a trend you believe will continue in the future?
McAvoy: Cell & gene is certainly a hot topic in industry news. This feels like a new area in which sponsors and CROs are still experiencing some growing pains in terms of trial design and supply chain logistics. As the industry becomes more sophisticated and learns how to run cell & gene trials smoothly and how to scale up production of these therapies, I do expect the trend of companies growing their cell & gene pipelines will continue.
For more information on the Phase II/III Market Outlook: 2022-2026, please click here.