Goldzilla vs iKong

Watching titans clash: the 'right kind of dumb'

The plot summary for Godzilla vs Kong includes the sentence: ‘The initial confrontation between the two titans -- instigated by unseen forces -- is only the beginning of the mystery that lies deep within the core of the planet.’

With the recent $8.5bn sale of Parexel to Goldman Sachs (up from $5bn, 6 years ago), soon after ICON’s $12bn acquisition of PRA, and Thermo Fisher’s $17.4bn PPD deal, we are seeing the titans emerge from their lairs - flipped from one private equity to another quickly. The question is: can we expect anything other than carnage?

There is little doubt that the heat in the CRO space reveals a significant trend - the expectation of more and more outsourcing, especially as CROs respond to the need for innovation in clinical studies: paid for by their pharma sponsors, but further increasing their asymmetric advantage. Once you’ve added capabilities that pharma want but will never build internally, there isn’t any way back. Pharma has responded to the need for innovation by feeding the giants: decentralised studies, AI, site selection and more, all capabilities built by pharma funds.

There remains a lot for the titans to clash over - 6-10% CAGR in outsourced spend - and those titans are making sure they scale, so this is far from an easy ride for any one monster. However, we’re seeing the pursuit of size, dinosaurs vs gorillas, fed by easy, cheap money.

Do we expect any of this to benefit the patient? Possibly. Like Kong cradling Ann Darrow to protect her, many of the services pharma is pushing into CRO world are there to care - with the promise of increased diversity, inclusion and speed to new medicines, emergence of developing markets. However, let’s remember: the biggest single cause of ‘failure’ in late stage studies is inability to accrue - there is still a lot to fix in the operational stages. No-one is expecting clinical research to become anything other than more expensive…

What we are not seeing in this pursuit of outright dominance is intelligence - CROs are competing to attract pharma sponsors, offering more and more add-ons and services. What they aren’t offering is ‘thinking’. But early phase demands that - exploration instead of exploitation, studies that are set up to learn, not to succeed or fail. We continue to see early phase studies being called ‘flops’, reinforcing the belief in better prediction, rather than using studies to do what they are for: learning something you can’t learn any other way.

The eyes on the prize for the PE groups may well be the late stage studies - registrational, lifecycle studies - but they provide no answer to the continued decline in R&D productivity. Running the same stuttering engine hotter is not the way to fix it. Nuclear radiation may have driven Godzilla’s mutation and growth in the way that private equity is driving scale in CRO world, but making the monster bigger is something we should be watching with caution: hoping that another titan comes along who is on ‘our side’ can only lead to things becoming more expensive, more destructive, harder to rein in… As Vanity Fair said of Godzilla vs Kong, watching the fight in the overheated waters of clinical research might be ‘just the right kind of dumb’ - “Godzilla vs. Kong competently, efficiently does its job, which is really all you can ask of the fourth movie in a rickety franchise.” We too have a rickety franchise, but one that will keep attracting investors.

Conflict statement: I’m the founder of Protodigm