The life sciences tools & services market will be analyzed taking providers of clinical

trial and contract

research services as players. The key buyers will be taken as companies within the
pharmaceutical and
biotechnology industries, and laboratory equipment and service providers, human
volunteers, and animal
populations as the key suppliers.
The market is relatively fragmented despite the presence of some large players, such as
Quintiles,
Covance, Pro-Pharmaceuticals and Charles River Laboratories, who together account for
just over 40%
of global revenues.
Due to the specificity of the business, buyers tend to enter into contracts with market
players, which can
incur switching costs and can last for several years. Many contracts are fixed-cost and, as
a result, the
market player generally picks up any extra costs incurred during a contract, which is
beneficial to the
buyer. Supplier power is strengthened by the importance of inputs in this market, despite
the abundance
of human volunteers and animal populations. The nature of the market tends to be high-
risk, timeconsuming and expensive. The profitability of companies largely depends on
technical expertise.
Scientific advancement is constantly opening up new opportunities for manufacturers of
scientific and
technical equipment and players need to respond sensitively and quickly to new business
opportunities as
they arise. Competition is alleviated to an extent by players diversifying into other
operations.
Large market players generally have a wide range of buyers and are not dependent on any
one for the
majority of their revenues, which weakens buyer power considerably. However, amongst
the buyers there
are also larger customers (such as government sponsored agencies), who are able to
make large
purchases and have substantial financial muscle; in such cases, buyers have greater
power. Losing such
a buyer would have a considerable effect on player’s revenues. Due to specificity of the
business, buyers
tend to enter into contracts with market players, which can incur switching costs, i.e.
penalties for ending
a contract early and expenses to wind down a study. Contracts can last for several years
depending on
the nature of the trial or research. Many contracts are fixed-cost and, as a result, the
market player
generally picks up any extra costs incurred during a contract, which is beneficial to the
buyer. The high
importance of clinical trials and contract research services to the buyer, which is
commonly required for
regulatory approval, substantially weakens buyer power. Overall, buyer power is assessed
as moderate in
this market.
Some suppliers, such as human volunteers and animal populations, are relatively
numerous thus
weakening their power. However, the high importance of supplies to this market (in
particular, human
volunteers) and their quality strengthens supplier power to an extent. Qualified, educated
employees are
also important as the research process is largely dependant on they knowledge. Overall,
supplier power
is assessed as moderate. COMPETITIVE LANDSCAPE
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The nature of the market tends to be high-risk, time-consuming and expensive which
collectively serve to
dissuade new entrants. The profitability of companies largely depends on technical
expertise. A skilled
work force is required, which contributes to relatively high fixed costs in the market.
Innovation remains a
key determinant of the success or failure of players in this highly competitive market.
Stringent regulations
exist in the US and Europe, which pose further barriers to entry. Quintiles operations are
subject to a
large number of regulatory requirements. The industry standard for the company's
preclinical laboratory
testing is governed by the good laboratory practice (GLP) regulation. The GLP and
current good
manufacturing practice (cGMP) regulations have been mandated by the Food and Drug
Administration
(FDA) in the US and the Department of Health in the UK, and have been adopted by
similar regulatory
authorities in other countries. The regulations include adherence to written standardized
procedures
during the conduct of studies and rules governing recording, reporting and retention of
data and records.
Regulatory authorities, including those in the EU, require study results and data
submitted to authorities to
be based on studies conducted in accordance with regulations for good clinical practice
(GCP). The GCP
provisions include complying with specific regulations governing the selection of
qualified investigators;
maintaining investigator records and reports; and verifying drug or device accountability.
There are also
regulations with regard to the distribution of drug samples. As the company is obligated
to observe such
regulations it needs to devote sufficient resources and manpower to fulfill the
requirements, which would
increase the company's expenses and hence affect its profit margins. This market is also
affected by
changes within the health care sector, which recently in many countries are witnessing
reforms to a larger
extent in order to control growing health care costs. These reforms could limit the profit
of pharmaceutical
companies from the generation of new drugs. In an effort to increase revenues,
companies are beginning
to exploit growing markets in the Asia-Pacific region by pursuing some of the many
pharmaceutical
companies that operate in this area. By doing so, market players may take advantage of
less stringent
regulations to conduct research projects that would otherwise be stagnant in the US and
Europe. The fact
that this market is relatively young, and evolving rapidly, creates an exciting opportunity
for new
companies. Overall, the likelihood of new entrants is assessed as moderate.
There exists no real substitute to the services provided by players in this market.
Substitutes can exist in
terms of the nature of research e.g. biological versus chemical. However, the threat of
substitutes to this
market remains very weak.
The market is relatively fragmented despite the presence of some large players, such as
Quintiles,
Covance, Pro-Pharmaceuticals and Charles River Laboratories, who together account for
just over 40%
of global revenues. However, in certain geographic locations concentration may be
greater. Innovation is
a very important factor within this market. Scientific advancement is constantly opening
up new
opportunities for manufacturers of scientific and technical equipment, particularly in
areas such as DNA,
life sciences and nanotechnology; players need to respond sensitively and quickly to new
business
opportunities as they arise. This market changes rapidly as a consequence of scientific
and technological
discoveries and market player must make significant investments to keep pace with
competition. Such
investments and the presence of high fixed costs strengthens competition in the market.
COMPETITIVE LANDSCAPE
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Several leading companies have undertaken diversification into non-core product areas.
Fields include:
human identity testing (forensic and paternity testing); biosecurity, which refers to
products needed in
response to the threat of biological terrorism and other malicious, accidental, and natural
biological
dangers; and quality and safety testing, for example in food and the environment. This
reduces reliance
on this market specifically, alleviating rivalry to an extent. Rivalry in this market is
assessed as modera