Contract Research Organizations State of the CRO Industry: Trial Enrollment Delays but Normal Cancellation Rates; CT.Gov Analysis & Biotech Funding Update
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22 April 2020 Equity Research Americas | United States Contract Research Organizations State of the CRO Industry: Trial Enrollment Delays but Normal Cancellation Rates; CT.gov Analysis & Biotech Funding Update Life Science Tools and Diagnostics | Industry Primer Biotech Funding: +2% 2020 YTD (-28% in March): We track multiple data points to Research Analysts measure the health of the biotech funding environment, and according to BioWorld, a comprehensive data source, biotech funding, including public and private sources, has Erin Wilson Wright increased modestly (+2%) YTD as of April 17th (to $17.6 billion), attributable to positive 212 538 4080 trends in IPOs (+8%) and private financing (+1%), partially offset by public/other (-11%). [email protected] In 1Q20, total biotech funding increased 5% (to $15.4 billion), including a meaningful Katie Tryhane deterioration in March (-28%), coinciding with COVID-19. Thus far in April, biotech funding 212 325 2713 has also dropped (-14% yoy as of April 17th). Importantly, we acknowledge y/y growth [email protected] rates reflect tough comps, and we continue to view the absolute level of funding as healthy following years of strength. Note, we emphasize that funding can stem from many sources Haley Christofides and may not be fully represented in this data. For instance, large pharmaceutical 212 325 3720 companies can represent a key source of funding for biotech companies, inherently more [email protected] insulated from broader capital markets activity than VC and public market funding. All in, Matthew Urbik the recent volatility is expected, and while this could contribute to delays in biotech pipeline 212 325 2152 decision-making and clinical trials, we have yet to see a meaningful step up cancellations. [email protected] COVID-19 Update; Delays, but no abnormal cancellation trends: While there have been no signs of an irregular level of cancellations coinciding with the pandemic, sponsors are increasingly delaying patient enrollment and new study starts, consistent with the data we have been tracking from industry constituents and our clinicaltrials.gov analysis. As of April 21st, we have identified 185 named trial delays (178)/cancellations (7) across 106 unique companies, representing 40,698 total patients. That said, it is clear that large pharma/biopharma customers want to continue to move clinical trial work forward, an encouraging dynamic that we view as underappreciated, and CROs are proactively converting site activity to remote monitoring / virtual trials, where possible, to maintain the integrity and regulatory compliance of ongoing studies. Still, COVID disruption will inevitably, albeit temporarily, slow backlog conversion, primarily in 2Q and likely into 3Q (depending on duration), in our view, with likely a gradual catch-up thereon. Net/net, we emphasize sustained R&D priorities from customers with COVID-19 disruption more of a timing issue, in our view, and we remain positively biased on the CRO sector. Of note, we recently caught up with IQVIA (IQV, Outperform) and Syneos Health (SYNH, Outperform) (see notes: SYNH: Catching up with SYNH; COVID-19 Update, IQV: Catching up with IQV), to discuss COVID-19 dynamics and implications for the CRO industry. 1Q Data Points from CT.gov: We track all active and closed studies registered on the clinicaltrials.gov database by location, sponsor, and lead investigator for leading CROs. According to our analysis, PRXL was the most active in 1Q, adding 12 trials, followed by LH (CVD) (11), PPD (9), PRAH (8), IQV (7), SYNH (3), and MEDP (2). Furthermore, our analysis showed two terminations: PPD (1) and PRXL (1); two withdrawals: PRXL (1) and PRAH (1); and two suspensions: PRAH (1) and IQV (1) across the CROs that we track. We have provided additional detail on respective cancellations herein. In 1Q20, PRXL led the way with 110 enrollees per newly registered trial across its 61 trials. DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. 22 April 2020 COVID-19 Impact on CROs Credit Suisse Clinical Trial Tracker—Pinpointing Study Delays: To monitor the clinical trial landscape, we track clinical trial delays and relevant commentary from industry constituents to identify the scope and severity of potential disruption from COVID-19. As of April 21st, we have identified 185 named trial delays (178)/cancellations (7) across 106 unique companies, representing 40,698 total patients. Note: the number of trials and patients quoted understates the actual totals as certain companies (i.e. Pfizer) have not disclosed specific studies impacted. Sponsor decisions to delay enrollment/study starts is primarily driven by: (1) the ability to recruit patients, (2) mitigating the potential of a compromised patient cohort (i.e. having to replace patients participating in an ongoing study), and (3) shoring up resources and capacity to alleviate stress on the broader healthcare system. While the bulk of study start-ups will inevitably be delayed, importantly, CROs can also adapt and pull forward work for CRAs (i.e. regulatory work), and potential change orders from extended trials could be a mitigating factor. See our most recent CRO note (CRO Download: COVID-19 in Focus) for further discussion on COVID-19 implications for the CRO industry. Notable delays includes: Pfizer Delaying Clinical Trial Recruitment: According to Reuters, Pfizer is delaying recruitment for all new and ongoing clinical trials for three weeks (as of March 25th) due to COVID-19. Despite the significant presence of Pfizer in the pharmaceutical industry, its reported delays have been among the least well documented across the industry, making it challenging to quantify their magnitude and potential impact on CROs. That said, we would highlight ICLR, PPD, Parexel and SYNH as four CROs that have preferred partnerships with Pfizer. Bristol-Myers Squibb Letter to Clinical Trial Investigators: In response to the FDA’s guidance on conducting clinical trials, Bristol-Myers Squibb published a letter to clinical trial investigators (see link) detailing its plan for managing the disruption of COVID-19 and how it intends to conduct clinical trials. Focal points of its letter include protocol for ongoing studies and new studies. For ongoing studies, it is permitting existing sites to continue recruiting new patients if certain condition are fulfilled. That said, it will not activate any new locations until April 13th at the earliest. For new studies, it is temporarily halting initiating any new studies until April 13th at the earliest. Lexicon Terminating Two Studies: On 3/19, Lexicon closed out two phase III studies of sotagliflozin (SCORED and SOLOIST). In a press release, Lexicon noted the decision to close out the studies was based on its assessment that sufficient near-term funding from its partnership with Sanofi was unlikely. Moreover, it sited uncertainties relating to the effects of COVID-19 on the trials. Importantly, the study sizes were significant, with SCORED recruiting 10,558 patients across 754 sites and SOLOIST recruiting 4,000 patients across 466 sites. Note, the CROs involve were not disclosed. COVID-19’s Impact on Clinical Trials: STAT Reports conducted a survey from March 12th through13th where it asked clinical trials sites the degree to which they expect to be impacted by COVID-19. Key takeaways include: o 1/3rd of clinical trial sites expect COVID-19 will have a “big or extremely big” impact on their ability to recruit patients or maintain existing enrollment levels o 39% of 170 clinical trial sites surveyed in the US believe patients will be less likely to enroll in new trials o 25% of current sites expect patients to be much less or somewhat less willing to continue their participation in trials o Academic sites reported retaining patient enrollment as their biggest challenge o While there are preventative measures to maintain clinical trials, there seems to be a disconnect between CROs and pharma companies in actually implementing these preventative tools Contract Research Organizations 2 22 April 2020 Clinical Trial Enrollment Trends: Since February 2020, Medidata Solutions has been tracking clinical trial patient enrollment across 4,599 studies representing a combined patient population of 182,321. Through its tracker, it is able to quantify COVID-19’s impact on recruitment by country and therapeutic area. Figure 1 illustrates the y/y enrollment differences for the months of February and March. In the month of February, the most dramatic decelerations in recruitment were China (-83%), South Korea (-64%), and Japan (-62%). In March, India (-84%), United Kingdom (-80%), and France (-68%) experienced the sharpest declines. By therapeutic area in March, Endocrine (-81%), CNS (-69%), and Cardiovascular (- 69%) were most acutely affected. While enrollment trends are down significantly, it’s encouraging to see the rebound in the countries that were first impacted by the pandemic. Importantly, China, Japan, South Korea, and Italy have all experienced notable improvements in