July 2014 A CenterWatch Feature Article Reprint Volume 21, Issue 07

The CenterWatch Monthly (ISSN 1556-3367). Volume 21, Issue 07. © 2014 CenterWatch centerwatch.com

Jorge Garcia, Ph.D., is corporate development director at CROMSOURCE. Previously, he spent 19 years working for different service providers in the pharmaceutical environment (central laboratories, staffing agencies and CROs), mainly in project management and sales. He was the chapter chair of the German Association of Clinical Research Professionals (ACRP) from 2002 to 2006.

PE investment in CROs: Good or bad?By Jorge Garcia

Private equity (PE) investment in the CRO sector has grown in recent years, and its influence

has touched CROs of all sizes, from niche players to global giants. While many regard this as an inevitable consequence of the need for CROs to globalize, for some, the benefits to the customer are debatable. In-deed, this year’s Annual Conference of the Pharmaceutical Management Group (PCMG) in Lisbon included a session titled “View from the top— Private Equity, Angels or Demons?” The presence of this session high-lights that not all sponsors view PE investment in CROs in a positive light.

Skeptics most frequently cite con-cerns that PE investors encourage management to focus on financial metrics rather than quality, perfor-mance or client satisfaction. Some say PE investors create instability, with each having a clearly defined exit strategy involving a sale to an-other CRO, a sale to other investors or public floatation. This can lead to a sponsor commencing a project with one CRO and completing it with another CRO not initially se-lected for the project.

Furthermore, the implication of such activities is a growth of insta-bility of personnel within the CRO sector, increasing the already high levels of turnover among clinical research professionals in this sec-

tor. As a CRO with a staffing de-partment, CROMSOURCE in Q4 2013 and Q1 2014 saw a significant number of staff at CROs that had announced a sale or merger look-ing for a new job. In other words, PE investment can directly impact the staff turnover rate at the CROs involved. This is a serious issue, be-cause a high level of staff turnover in ongoing clinical trials always cre-ates concern from sponsors.

The highest staff retention lev-els seem to remain with the few independent and privately owned CROs. These CROs now can claim this stability factor as an advantage against their private equity-owned competitors.