Global clinical research organizations in a recovering economy

Feb 27, 2024

Key takeaways

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Clinical research organizations should rekindle their relationships with small to midsize biotechs as funding challenges for some biotechs begin to ease.

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Clinical trials are increasingly global, with China leading growth in clinical research participation.

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Global clinical research brings unique challenges, such as global compliance and reporting risks, which all global CROs must consider.

Life sciences Economics

CROs: Rekindling relationships with small to midsize biotechs

Since the summer of 2021, life sciences stocks have been struggling. As inflation appeared more stubborn than originally anticipated and the Federal Reserve’s target lending rate increased, shares continued to tumble.

Negative share performance persisted until the last few months of 2023 when life sciences shares rebounded by posting gains of 20% to 35%; however, these gains only served to offset losses up until that point with shares ending mostly even for the full year. Additionally, even though life sciences valuations are up now compared to pre-pandemic, they have fallen behind the broader S&P 500 amid investor perception that they are higher-risk assets in an uncertain economic environment.

Investors wondered when the Fed’s target rate would peak, hopefully leading to a turnaround in investor sentiment and a rebound in life sciences equity valuations. This equity rebound may be on the horizon. Six months into the Federal Open Market Committee’s regime to maintain a target rate of 5.375%, Fed Chairman Jerome Powell has publicly indicated that no more increases are on the horizon and that rate cuts are set to begin later this year.

If the market follows historical patterns, the forecast of receding interest rates means we are on the precipice of a rebound for life sciences valuations and, consequently, funding; however, the reality isn’t quite this simple. We expect that there will be a mix of winners and losers over the next year resulting in a net 15% to 20% increase in valuations through 2024. Those winning will have strong clinical pipelines, proven clinical success, or strong cash runways. Unfortunately, companies not meeting these criteria will continue to see a year of tough valuations ahead.

Additionally, throughout the pandemic, the uncertainty in small to midsize biotech funding has led many large service providers to diversify their portfolios away from small to midsize biotechs and into larger pharmaceutical companies. With the expected beginning of a rebound in funding and valuations, service providers, such as clinical research organizations (CROs), should plan to renew their attention on the small to midsize biotech market, which makes up a significant portion of preclinical, phase 1, and phase 2 research and development.

The global reach of clinical research

Clinical trials are increasingly global, and the countries leading the research efforts are often surprising. While industry-funded, phase 3 clinical trials registered on note an average and median number of clinical trial sites of 51 and 21, respectively, the majority of these sites are not in the United States. In fact, according to the data on, only 33% of the sites included in the average clinical trial’s site network are in the U.S. The remaining sites are primarily spread across Europe and Asia.

Asia has seen the greatest increase in recent years, having boosted its share of clinical trial sites to 25% in 2023 from 20% in 2016. This growth has been led by China, which now accounts for 10% of the clinical trial sites, up from just 2% in 2016. Japan accounts for 5% but is losing share as countries with larger potential patient populations come into play.

Europe has seen a recent decline in its share of clinical trial sites, decreasing to 30% in 2023 from 35% in 2016. European clinical research is spread among its many constituents, with Germany making up the largest share at 4% in 2023.

For the growing middle market CRO, navigating the global landscape brings significant challenges. While many relate to the political, economic and social environments of diverse countries, here are a few practical challenges that we’ve seen related to accounting and financial reporting:

  • Global compliance and reporting risks: Finding success here means internationally active companies take time to understand the compliance risks and benefits of operating in multiple jurisdictions. Inaccurate reporting and inconsistent oversight can expose businesses to potential risks and unexpected financial penalties. Missed global filings can translate into substantial fines or even halt operations in important global growth markets.
  • Regulatory and cyber threats: Establishing a data security and privacy strategy while simultaneously considering the evolving regulatory environment, including compliance with FDA IT requirements for on-premises and cloud-based computerized systems, readiness for FDA’s Computer Software Assurance (CSA) guidance, and compliance with Foreign Corrupt Practices Act (FCPA) and General Data Privacy Regulation (GDPR).
  • Timely reporting by sites and pass-through vendors: Monitoring timely reporting of sites and pass-through vendors is critical for accurate financial reporting of CROs and their customers. These challenges are exacerbated in a global environment.
  • Technology to support global financial reporting efforts: Assessing the technology solutions most appropriate to meet your needs is critical to ongoing financial reporting success. Not all technology solutions are created equal, and while many solutions can be customized to meet CRO financial reporting needs, most do not address these concerns off the shelf.

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