Future of the Pharma-CRO Relationship: The Integrated Business Model

In September 2016, the CRO-pharma world witnessed a deal touted as “transformative” and “unprecedented” in nature. It’s expected to serve as a template for future partnerships in this industry, where sponsors are usually skeptical about the commitment of the CRO. Takeda and PRA Health entered an agreement which will make PRA Health the primary strategic partner for Takeda. Under this deal, apart from managing an entire pipeline of studies across Phase I-IV, PRA will provide its expertise in pharmacovigilance, and operational services and regulatory services for development and marketed products of Takeda. PRA will also manage operations of Takeda’s facilities in the US and Europe. Almost 300 Takeda employees have the option to transition to PRA in US and Europe. Recently, the partnership extended to Japan, where both companies will establish a joint venture called the “Takeda-PRA Development Center,” each holding 50% of the share. This will involve transferring an additional 140 Takeda employees.

Considering the level of integration between the two businesses and deviation from the traditional template for such relationships, this engagement can be termed as “The Integrated Business Model.” The wheels for this restructuring were put into motion in July 2016 when Takeda announced plans to reorganize the company due to years of declining operating profit margins. Under its plan to achieve these transformation goals, Takeda allocated a budget of 75 billion yen (~USD 700 million) to spend over two years with a focus on three therapeutic areas — oncology, gastroenterology and CNS — to ultimately achieve annual cost reductions of around 18 billion yen (~USD 160 million). Such a move is in line with the current state of the pharma industry where, despite a significant increase in R&D expenditures for developing a single drug, the overall drug development cycle time has increased.

Takeda expects such restructuring will refocus their resources on the best bets in the three therapeutic areas, make them more agile, drive innovation and improve R&D productivity, leading to long term sustainable growth. For PRA Health, Wells Fargo Equity Research estimates that by 2018 this partnership will generate revenue upward of $200 million.

Read the full article on the GEP MIND (Market Intelligence News Desk) Blog at https://www.gep.com/mind/blog/future-pharma-cro-relationship-integrated-business-model.