UK contract research outsourcing in life sciences
As the industry grows, so will demand for suitable real estate. Here we examine the dynamics driving expansion and uncover why locational preferences extend beyond the Golden Triangle.
5 minutes to read
Recent Office for Life Sciences statistics show that UK employment in the biopharma contract research organisation (CRO1) sector, has grown by 33% over the past five years with the net addition of 8,783 jobs.
The demand for outsourced research services has clearly been rising and is a trend that is expected to continue. Smaller companies who are seeking to plug skills gaps and remove fixed costs will look towards third-party CROs, while larger life sciences companies will be looking to reduce costs, streamline operations and bolster pipelines in the face of a daunting patent cliff.
Clearly, outsourced expertise will be required to navigate a more complex R&D environment. More specifically in the UK, a significant recent overhaul of the UK clinical trials approval process, coupled with the government’s commitment to invest record amounts into R&D, could accelerate UK clinical trial and research activity, thus furthering demand for the services of CROs.
Expansion and consolidation
Growing demand for these services is translating into expansion-led real estate activity. One of the UK’s success stories is Sygnature Discovery, which started in 2004 in Nottingham and now has over 400 people with operations in Alderley Park as well as San Francisco. It recently acquired Canadian- based CRO NuChem Sciences. Other examples include Sai Life Sciences, who expanded its existing base at Alderley Park four-fold from 5,000 sq ft to 20,000 sq ft, in direct response to an accelerated growth trajectory.
Elsewhere Fortrea (formerly LabCorp) is growing in Leeds, developing a new 68,000 sq ft clinical research facility, while Lonza is set to occupy space at Oxford Science Park. The premises will add to its facilities in Manchester, Cambridge and Slough.
Against this backdrop of growth and opportunity, many large CRO companies have been actively acquiring other companies in recent years. UK-based Eurofins Discovery, for example, acquired DiscoveryBioMed last year.
Consolidation is set to continue, with IQVIA being one of a number of companies putting M&A front and centre in their latest corporate strategies. Such activity will have inevitable consequences for real estate portfolios post-integration.
Opportunity beyond the Golden Triangle
The geography of the CRO sector is interesting and contrasts somewhat with the dominant clusters characterising the wider life sciences sector. More than half (57%) of all CRO sites in the UK are located outside of the Golden Triangle, with key clusters apparent in the North West, Midlands and Scotland. One driver of this geographical distinction is the margin pressures and pricing competition inherent with the CRO sector, although other factors – such as talent availability – will also be at work.
Cities such as Nottingham, Manchester, Newcastle, Bristol, Glasgow and Edinburgh are all providing talent and appropriate lab facilities at a lower cost than the Golden Triangle.
Future real estate trends
So, what key trends will shape CROs in the future and what impact will they have on the real estate needs of companies in this increasingly important life sciences vertical?
Personalised products
Growing adoption of personalised medicine is resulting in increased demand for research with therapeutics targeting specific demographics or sub-categories of conditions, rather than a one-size fits all approach. As a result, life sciences companies are looking for CROs who can develop these personalised products faster and cheaper than they can do themselves.
Technological advances
The convergence of technology and life sciences, as well as greater reliance on data, will simultaneously fuel the growth of new CROs and drive established companies towards new tech-led business models. Fortrea, for example have a stated strategy of differentiating through digital and data. This shift will create fresh occupational demand and potential relocation activity, as companies gravitate towards locations and workspaces that can attract and retain tech talent.
It is also resulting in a significant rise in enabling technology companies who are building research platforms to drive faster and more effective therapeutic development. Good examples of this are Oxford Nanopore, Exscientia and Graphcore.
Clinical trials are undergoing change in the form of decentralised and hybrid trials that use technologies and tools that enable large parts of clinical trials to be done in a home setting or away from a central site. This will demand new infrastructure and may see CROs creating networks of smaller, regional sites or more mobile solutions as demonstrated by the high-profile Grail cancer blood test trials.
Novel advanced therapeutics are dominating R&D pipelines. CROs will need to adapt business models and acquire specialised expertise in these areas. Real estate will need to be aligned to and support such organisational restructuring.
ESG
ESG is a growing concern for the largest CROs. Analysis of the latest ESG reports of the top 10 CROs shows the following actions being taken specifically in relation to real estate operations:
• joining the My Green Lab (MGL) Certification program
• transitioning to 100% renewable energy use
• reducing emissions from business and commuting travel
• factoring in environmental considerations when selecting new locations
• planning building modifications such as the installation of LED lighting and upgrading to energy-efficient HVAC systems, and
• eliminating waste and the use of unsustainable plastics
New types of space
A final trend to closely monitor is the rise of a small number of dominant players that offer end-to end solutions that transcend clinical research and move into areas such as manufacturing. This will add a further expansionary impetus and bring requirements for new types of space.
Whatever the future holds, one thing is certain. The dynamism in the CRO vertical is not going away anytime soon. Those who actively monitor and understand the companies operating within this burgeoning sub-sector will be best placed to fully harvest the real estate opportunity.
[1] Contract research organisation or CRO: Also termed as a Clinical Research organisation, a CRO is a services organisation that provides support to life sciences companies in the form of outsourced research services. Services on offer include: Early phase development services, clinical research services, regulatory consulting and lab services. These companies range from global, full-service companies to small, niche players,they often offer other services, such as manufacturing.
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