Frost & Sullivan - The Rising Dominance Of The Asian CRO Market


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Frost & Sullivan - The Rising Dominance Of The Asian CRO Market

  1. 1. The Rising Dominance of the Asian CRO MarketThe Clinical Research Organizations (CRO) industry in Asia is expanding rapidly, concurrentwith the growth within the pharmaceutical sector. In 2009, it is estimated that the AsiaPacific CRO market for clinical services (excluding drug discovery) generated approximatelyUSD 1.0billion revenues and is projected to grow at a CAGR of 20% to reach close to USD2.5billion by 2015.More pharmaceutical companies are finding it easier to outsource the clinical trial process tocompanies that specialize in such activities in order to focus on generating new ideas fortheir R&D pipelines. This practice is fast becoming increasingly important due to the loomingpatent expiration of blockbuster drugs within the region in the next 5 to 7 years.Pharmaceutical companies are also shifting parts of their operations to Asia as part of theirentry strategy into these emerging markets as well as cost-containment. The Asia Pacificpharmaceutical market continues to grow at an estimated 12% growth rate in 2010, and isprimarily driven by the accessibility to healthcare and Asia’s growing middle class segment.As Asia becomes a developing market for pharmaceuticals, regulations have also begunchanging and developing towards a more mature market structure.As a result, Asian CROs have sprung up as a response to growing Western interest in theregion. Combined with the fact that CRO activities in the US and Europe are generally moreexpensive and research quality that is fast becoming equal in Asia; the CRO market in Asiais fast developing into a lucrative business opportunity.Figure 1-1 gives the CRO market size by phases and in total for key Asian markets in 2009,including the top two, India and China, in which India’s CRO market size by revenue isnearly twice as large as the 2nd largest market, China. Clinical trial phases here explains thedifferent stages of trials starting from a patient pool as little as 20 (Phase I) up to a sourcepool as big as 3000 (Phase III – IV).Figure 1-1: CRO Market Size in Total and By Phase, 2009 South Taiwan Singapore Thailand Philippines 2009 India China KoreaTotal market 433.0 255.0 65.0 100.0 128.4 8.6 45.1size ($US Mn)Phase I 48.0 30.0 14.0 11.0 20.3 0.2 3.6($US Mn)Phase II 99.0 52.0 14.0 34.0 33.8 0.9 9.5($US Mn)Phase III 234.0 85.0 23.0 53.0 47.3 5.7 22.5($US Mn)Phase IV 52.0 88.0 14.0 2.0 27.0 1.8 9.5($US Mn) Source: Primary research with CROs and sponsors; Frost & Sullivan 1
  2. 2. Market DynamicsOut of the 7 key CRO markets in Asia, 6 of these markets gained the most revenue fromphase III trials, with China being the only one with greater revenue in phase IV. Phase IIItrials in general, are the most expensive and time-consuming, and require a large patientpool. As a result, pharmaceutical companies often tend to outsource this phase.IndiaAs of 2010, India leads the pack in terms of revenue, technology and trial costs; and isprojected to hold this lead as more CROs look at increasing their footprint in India. Part ofthe main attraction in this market is the availability of well developed clinical trial centersand clinical expertise, as well as providers that meet FDA standards. While India isespecially strong in phase III trials, more companies are offering end-to-end services, whichinclude phase II and IV trial services, and will likely contribute to the growth in thesephases as well. There has also been an increase in small-scale local CROs companies overthe past 3 to 4 years, although they are expected to be taken over by larger operations dueto the competitive Indian market.Other factors driving the Indian CRO market, which is expected to reach USD 1billion by2015, include an improvement in clinical trial regulations, stronger emphasis on R&D amongIndian pharmaceutical companies, and the attractive cost of arbitrage, where there is a 30to 50% price differential over the cost of clinical trials performed in the United States.ChinaThe 2nd biggest CRO market is currently a hotbed of M&A deals and partnerships, many ofwhich are between multinationals and local CROs in order to penetrate the Chinese market.Recent pharmaceutical mergers & acquisitions in the market by foreign companies haveincreased the number of pharmaceutical manufacturers in China. The sheer demand forclinical trials required by pharmaceutical manufacturers is driving CRO market growth,which is estimated to increase by a CAGR of 21% from 2010 to 2015. Recent examples ofCRO activity are Charles River Laboratories International’s USD 1.6 billion buyout of China’sWuxi Pharmatech in 2010, and the partnership between the multinational CRO ICON withlocal Tigermed Consulting, also in 2010. This will only increase market competition from theapproximately 150 CRO players today. Beyond increased competition, there will also begreater investment in trials in areas such as vaccines and biosimilars.South KoreaAlthough it was a late entrant into the CRO market, Korea now has one of the highestgrowth potentials within the Asia Pacific region, estimated to achieve a 19.8% CAGR from2010 to 2015. This fast rate can be partly attributed to The Korea National Enterprise forClinical Trials (KoNECT), which was founded in 2007 for the purpose of developing andimplementing clinical trial technologies within the country. Governmental support,regulations that require local trials and a strong local pharmaceutical and biopharmaindustry have increased the Korean CRO market foothold in Asia Pacific. While the largestrevenue is from phase III trials, a combination of advanced infrastructure, continued 2
  3. 3. governmental support, and availability of expert physicians, will drive growth in early stage(phase I and II) clinical trials in comparison to the rest of the region.TaiwanThe strong government backing and investment in the biomedical sector has driven theTaiwanese CRO market. It has established clinical research centers in hospitals, has giventraining and support to hospitals in order to encourage conduction of new trials, and offersfinancial incentives to companies that carry out clinical trials in Taiwan. The presence ofstrong infrastructure, medical talent, and ease of regulatory approvals will only increaseinternational trials being conducted there.SingaporeSingapore is currently seen as strategic conduit in Asia Pacific for multinationalpharmaceutical corporations (MNCs), many of which have established their APACheadquarters there. This has helped Singapore to increase its CRO market size (80 percentof the trials are international) and is projected to drive growth in early stage clinical trials,with companies such as Pfizer expanding their phase I capabilities there as well.ThailandKnown as Asia’s “medical hub”, Thailand has over 1 million tourists going to Thailand everyyear specifically for medical care, and revenues for this sector is estimated at USD 1.1billion in 2010 . Due to the well established medical facilities and personnel, along with alarge patient pool, Thailand has been experiencing growth in clinical trials, especially forphases III and IV. There has been increased focus on clinical research in infectious diseasesand HIV, due to high numbers of patients, although oncology is also an emerging area ofresearch in Thailand clinical trials.PhilippinesThe Philippines is an attractive location for late stage clinical trials due to the large patientpopulation, which tends to have similar epidemiological patterns of diseases such asdiabetes to the West. Patient enrollment in trials is high, with low attrition rates, due to alack of penetration of medical treatment in the country. A major drawback to the market isthe weak regulatory environment, limiting phase I and II revenue. However, greaterrevenue is expected from Biotech/Biologic and emerging pharma companies in the next 3 to5 years as a result of their heavier spending on R&D as compared to MNCs.Growth OpportunitiesAlthough the Asian CRO market is projected to continue its fast paced growth, each of thekey countries can also maximize their growth by targeting their specific strengths. Figure 1-2 gives the top 3 growth opportunities for the 7 key markets being focused upon.Figure 1-2: Top 3 Growth Opportunities, 2009Rank South Taiwan Singapore Thailand Philippines China India Korea Large, Expansion of Early stage Government Government Cost Expansion of treatment-naïve, clinical trial clinical policies that focus for effective late stage patient pool market research support early stage outsourcing clinical 3
  4. 4. 1 beyond phase (phase I/II) biomedical clinical option research, with III sector research govt. support Diverse Patenting World-class Location to therapeutic Development of Emphasis on traditional infrastructure Specialized hold large and emerging regional (APAC) late stage 2 Chinese and govt services scale clinical areas of clinical trials trials medicines support trials research Training and Training and Emerging Specialized retaining Specialized/niche retaining Large scientific Regulatory areas, such therapeutic clinical therapeutic clinical 3 talent pool support as areas, such research areas research biomarkers as HIV associates associatesAn area of untapped opportunity for CROs within Asia is the South East Asia region. Thesemarkets are relatively smaller in terms of size compared to India, China, Korea or Taiwan.However, the cost of conducting research in countries such as Malaysia or the Philippines isan attraction, and their ethnically diverse populations make them worth exploring for MNCsand CROs looking for other avenues of managing clinical trials cost effectively. Theseemerging markets could continue to support Asia as a cost effective and attractive clinicaltrial location over the medium to long term, and increase the diversity provided within Asia.ConclusionThe 7 key CRO markets all have an increased growth trajectory and are indicative of Asia’simportance in the world CRO market. Whether it is through M&A deals, multinational andlocal CRO partnerships, or expanding local CRO companies, a greater focus is coming uponAsian countries as clinical trial locations and for clinical outsourcing options. While the totalCRO revenue generated by the key countries was approximately USD 1billion in 2009, by2015 it is projected to be US 2.5billion, an increase of more than a double and positiveproof of Asia’s increasing prominence within the global CRO industry.This article was authored by Rhenu Bhuller, Global Vice President of Pharmaceuticals andBiotechnology, and Neha Koul, Research Analyst, Healthcare Practice, Asia Pacific, Frost &Sullivan.Frost & Sullivan, the Growth Partnership Company, enables clients to accelerate growth andachieve best-in-class positions in growth, innovation and leadership. The companys GrowthPartnership Service provides the CEO and the CEOs Growth Team with disciplined researchand best-practice models to drive the generation, evaluation and implementation ofpowerful growth strategies. Frost & Sullivan leverages over 45 years of experience inpartnering with Global 1000 companies, emerging businesses and the investmentcommunity from 40 offices on six continents. To join our Growth Partnership, please visit contact, please email or 4