In the overall context of global pharmaceutical companies increasing R&D investments, extending development cycles, and facing lower success rates, CROs, with their cost-effective and efficient attributes, are progressively expanding their coverage areas, becoming a crucial link in the pharmaceutical R&D industry chain. According to iResearch, CRO companies can reduce the development time of a new anti-cancer drug by over three years, while also saving 30-70% of R&D costs. The gradual alignment of domestic clinical trial regulations with international standards has also driven CRO development. However, amidst various uncertainties, the path of CRO development has not always been smooth. In the post-bonus era, how can they avoid being outpaced?

01 Development Opportunities in China's CRO Industry

Currently, China's pharmaceutical R&D is experiencing an unprecedentedly positive situation, with the government continuously introducing a series of policies and reform measures to support the development of innovative and generic drugs. For instance, a range of policy documents aimed at advancing the "Consistency Evaluation for Generic Drugs" system has generated a significant demand for outsourced services in this area, spurring the development of China's CRO industry. Additionally, policies such as the "Marketing Authorization Holder (MAH) System" and "Encouraging Drug Innovation with Priority Review and Approval" have effectively promoted the liquidity of pharmaceutical elements and the enthusiasm for research and development. The domestic innovative drug market is thriving, and the CRO industry is experiencing rapid growth as well.

During the transformation of pharmaceutical industry, there has been a surge in the number of innovative drug applications. The pharmaceutical industry in China is currently transitioning from producing low-end generic drugs to producing innovative drugs, which expands the demand for CROs. Furthermore, in the overall context where the government encourages the development of innovative drug R&D industry, the number of domestic new drugs' first INDs has rapidly increased, and the number of clinical trial registrations continues to rise, which provides a sustained impetus for the development of clinical CROs. According to statistics, in Q2 2023, the acceptance number of innovative drug INDs saw a robust increase of 84.6%, ensuring a substantial resource pool for clinical CROs.

02 Steady Development of China's CRO Industry Market

With the increase in pharmaceutical R&D expenditure and the growing demand for pharmaceutical research outsourcing, the global CRO market continues to expand. By 2024, it is expected to approach a scale of nearly one hundred billion US dollars. The growth rate of China's CRO market exceeds the global average, with a noticeable expansion in the clinical CRO market. According to Frost & Sullivan forecasts, the annual compound growth rate of China's CRO industry market from 2019 to 2024 is estimated at around 26.5% on average, reaching 22.2 billion US dollars by 2024.

Additionally, as domestic investment in drug R&D grows and professional specialization develops, demand in the local CRO market is rapidly increasing, with a continuous rise in market penetration. Frost & Sullivan statistics show that the market penetration rate of China's CROs was 29.8% in 2016, reaching 36.8% by 2020. It is estimated to further grow to 49.9% by 2026, indicating an increasingly significant role for the CRO industry in China's medical innovation development.

The domestic clinical CRO market started later than overseas markets and was initially featured by low industry concentration. As companies build their service platforms, their differentiated capabilities are becoming more apparent. From the perspective of revenue scale and employee size, companies in the industry are also hierarchically distributed. With the perfection of China's drug regulatory policy system and increased quality requirements for new drug data by regulatory agencies, the concentration of the domestic clinical CRO market is expected to significantly increase.

03 Current Challenges in China's CRO Industry

While experiencing rapid industry growth, China's CRO industry also faces a series of challenges and problems.

The CRO industry in China has developed for nearly 20 years. Beginning with the establishment of JOINN in 1995, followed by the founding of ChemPartner and WuXi AppTec, along with the rise of many local companies, China's CRO industry has gradually developed. It wasn't until 2015, with the introduction of the Marketing Authorization Holder system, the increased R&D demand brought by the Generic Drug Consistency Evaluation, accelerated drug reviews, the introduction of national centralized drug procurement policies, and continuous growth in pharmaceutical R&D investment, that the domestic pharmaceutical companies' demand for pharmaceutical R&D gradually emerged, marking a turning point for China's CRO industry.

In the subsequent period, the CRO industry began to expand chaotically, attracting a flood of capital and human resources. The negative consequences of this rapid expansion gradually became apparent. The number of CRO companies and personnel increased significantly, creating a certain degree of market saturation. According to the China Food and Drug Administration (CFDA), the number of accredited institutions qualified for drug clinical trials in China rose from 625 at the beginning of 2018 to over 1186 in 2022. The excessive number of participants led to a continuous decrease in market prices on the supply side, turning the industry into a highly competitive red ocean.

Simultaneously, as the output of innovative drugs declined, the domestic innovative drug industry, in a "bubble-bursting" phase, also substantially reduced its R&D investments. Pharmaceutical companies frequently cut clinical pipelines, laid off staff, and sold assets. As a result, the demand declined, and the market share of CROs decreased. To seize more market share, some companies even resorted to price wars, intensifying the competition.

Moreover, due to the significant technical diversity in pharmaceutical R&D, although there are many domestic clinical CRO enterprises, most of them only offer a single type of clinical trial outsourcing service. They have not formed scale or core competitive strength. Additionally, the overall R&D investment is relatively insufficient; the transformation rate of research results is relatively low, and the research level is relatively backward. There is a gap between these domestic enterprises and multinational clinical CRO companies in terms of market size, business scope, industry recognition, and R&D innovation strength.

04 CRO Enterprises Striving for a Breakthrough

The CRO industry is undergoing significant transformations, facing a more challenging environment and intense competition. In the context of a market downturn and internal industry strife, CROs are actively seeking breakthroughs. Some CROs are attempting to expand overseas to get out of the domestic difficulties, but going global does not necessarily resolve the problem of internal strife in the CRO industry in the short term. As a result, the entire industry is forced to "seek for orders" and extend customers, while starting to expand their business into areas beyond oncology, including ophthalmology, cardiovascular, endocrinology, and even the niche market of rare diseases - a field some leading CROs have been venturing into since last year.

Within the limited options available, some small and medium-sized clinical CROs have started shifting towards the field of traditional Chinese medicine (TCM). However, CROs deeply rooted in this sector believe this notion to be overly idealistic. TCM and chemical medicine represent two distinctly different domains, and the market space in the field of TCM is not as large as imagined. This shift in focus is seen as a forced move following excessive internal competition.

In this new landscape, digitization, intelligence, and internationalization are becoming important trends for the CRO industry. Elixir Clinical Research (ECR Global) is proactively responding and has carved out a differentiated path for itself. ECR Global actively employs new technologies and digital tools to empower multiple aspects of clinical trials, enhancing their accessibility, accuracy, safety, and efficiency, which ultimately aims to achieve an all-win situation for patients, pharmaceutical companies, and clinical trial institutions. The newly launched iECR Center (the digital intelligence center of ECR Global) has developed a composite solution that combines business lines with system tools, transforming traditional service patterns and achieving a more efficient digital transformation.

Furthermore, Elixir Clinical Research is also moving towards internationalization, establishing branches and cooperative relationships worldwide to meet the needs of customers in different regions. This international development enables Elixir Clinical Research to enter a broader market and get more opportunities for cooperation.

For more details, please contact 

info@ecr-global.com