Consolidating SMOs are M&A targets for CROs say analysts
Clinical trial site consolidation by the fast-growing site management organization (SMO) sector will drive M&A activity in the CRO space as contractors to “vertically integrate” their capabilities according to new analysis.
The prediction is presented in the latest report by market research and analytics group Pitchbook, which looked at investment opportunities and emerging trends in the contract services space.
According to the authors it is “becoming increasingly common to assemble platforms from two or three trial site businesses… CROs seeking to vertically integrate are among the key terminal buyers for scaled site management businesses.”
They cite the high degree of fragmentation in the trial site space as well as desire among SMOs to “assemble more tech enablement and CRO-like capabilities, including data management, biostatistics, and regulatory services” as consolidation drivers.
COVID-19 is another factor the authors say, explaining “The COVID-19 pandemic provided a catalyzing event for trial site consolidation as vaccine developers sought SMOs that could support accelerated clinical processes at scale.
They add that “Many trial sites lack tech enablement or have not been able to develop a consistent pipeline of studies. In addition to building scale and professionalizing sites, sponsors may look to diversify a SMO’s therapeutic area exposure or even expand internationally.”
Examples of this type of deal include acquisition of American Clinical Research Services (ACRS) acquisition of Elixia in May and Alcanza Clinical Research purchase of Innovation Medical Research Center in April.
PE activity
The complex dynamics of the SMO space have already attracted the attention of private equity investors.
According to the Pitchbook team “Within the clinical services segment, the clinical trial site market is of particular interest to PE sponsors because it presents the opportunity to not only leverage multiple arbitrages but also pull significant operational levers to improve outcomes.”
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