The debate Monday at the annual DTRA conference was a truly interesting. To me, the standout comments were:
- The non-profitable, venture capital or private equity backed companies (Thread, Medidata, Datacubed) are moving away from the ‘Silicon Valley’ funding model – to grow at all costs and grab market share – towards a more traditional growth model based on sustainable revenue and profit.
This is a tortuous journey, involving working out what your focus really is, cutting costs dramatically, and then working out how to grow a business organically. Clearly, this does not apply to Medidata, as they pointed out, referring to the fact that they already have scale and are profitable – something they have in common with Veeva and Oracle and other very large data companies.
- The smaller tech companies that have developed most of their scale during the pandemic have experience that is inevitably virology dominated, although some have other TAs under their belt as well.
Virology trials are a class unto themselves – they have very short therapy periods, patients that need very rapid access to trials, short clinical follow up periods and very clear, blood sample-based efficacy outcome measures in general. This makes them quite different from most trials, so transitioning from a virology focus to a broader TA focus will be a challenge as new processes and training will be required, as well as the hard slog of learning from experience in this different environment. Once again, this does not apply to Medidata, not just because of their scale and historical experience, but also because they focus on providing tools and technology, and essentially let the users of their tools – the CROs and Sponsors – worry about how to implement them in different scenarios. It also does not apply to MRN, as virology trials were unsuitable for companies set up for ‘just in time’ nursing services. As a consequence, our growth, which was just as dramatic, came from supporting all the other types of trials that were at risk of failure due to the inability of sites to continue to support them.
- The drive to sustainable profit for these businesses is also clearly signposted as driven by ‘focus’. All the venture capital / private equity backed companies mentioned they want to double down on what they are good at and partner with others to reduce the need for their own capital investment.
This is sound practice and will be critical to success in the future. It means the DCT tech companies will draw in their horns and focus on delivering good systems.
MRN were invited to the debate – but sadly, due to personal circumstances we could not make it. If we had, this is what we would have said. The pressures we are most aware of are:
- The pandemic led to huge exposure of DCT, much of which was implemented (not surprisingly) in a rush. Many Pharma customers and Sites have smarted under the pressures this and the pandemic itself caused in healthcare, leading many to be presently reassessing their approach to DCT as the waters recede.
- The regulators are not going to give any quarter on appropriate documentation and control of systems and processes on which patients rely for safe and effective management of trials.
- Non-covid trials are still in recovery mode, as are very many Sites, making the return to normality for the rest of the (non-covid related) trial world a bumpy road.
Then, moving into the general management area:
- The pressure on salaries that is going to be felt this year, driving a competition for talent.
- The impact of the global recession post pandemic, exacerbated by the land war in Ukraine and its impact on supply chains and fuel costs driven by the weaponizing of oil and gas by Russia. This is closing the Public Capital and refocusing the Private Capital markets (which are indeed still active) on profitability and resilience.
These are very real pressures on profitable companies, so on a journey to profitability, these will be real bumps in the road for companies new to these sorts of dynamics.
So – what does this all mean for the customers and other stakeholders – patients and sites? Here I whip out my crystal ball…
I expect to see:
For unprofitable companies
- Large scale redundancies (already well under way) – the S&P drop of 30% since January understates the impact on health care services companies, which has been closer to 40% or more, peaking at 85% (and growing) for some.
- Narrowing of service offering and some systems dropped altogether.
- A focus on serving the US market only.
- A reduction in innovation.
- A focus on the full data management ecosystem – reducing focus on DCT and the patient experience and focused more on end to end data systems for the entire data journey, reducing further innovation in working with patients in their own communities.
- An improvement of their approach to roll out and integration of their systems to other systems.
For profitable businesses
- A moderate growth strategy.
- A focus on diversification of the DCT solutions provided.
- A moderate drop in profitability driven by the slowdown in the market and the global economic outlook as they absorb costs.
- Further definition into service providers on the one side and tech tool providers on the other.
- Large number of small players, many of whom entered the sector during the pandemic, either failing or deciding to move out of the sector due to economic hardship, small scale and the loss of the flow of pandemic driven business.
We are moving into a new era where the traditional model and profitability will dictate access to capital and survival – and those that are good at running a profitable business, will thrive.
Executive Chairman, MRN