The outsourcing landscape in life sciences is evolving fast. At a recent panel hosted by BCG at The European Healthcare Investor Association’s Investors in Healthcare Private Capital Conference, senior executives from across R&D, commercialisation, and AI-enabled drug development discussed how regulatory pressure, biotech resilience, and the rise of niche tech platforms are redrawing the market map.
For investors, the key message was clear: opportunity is shifting toward specialised, digitally enabled, and biotech-aligned service providers, while large pharma hesitates and reorganises.
Budget paralysis
The session’s opening presentation looked at the current dynamics of a market where both CRO and pharma commercialisation remain attractive segments, supported by resilient growth.
The global CRO market, estimated at around US$86.5bn, is growing at high single digits and, despite a minor slowdown in recent years, a rebound in activity is expected. Growth in pharma commercialisation activity, meanwhile, which has declined more sharply over the past five years, is expected to turn around to record growth of around 5% annually.
A key factor supporting that outlook is financial pressure on end customers. Large pharma is being squeezed—wage inflation is impacting the bottom line, while aggressive US policy, including the IRA and similar legislation globally, is pressuring the top line. The threats from the IRA, drug pricing reforms and tariff threats have introduced real uncertainty into pharma planning.
“We’ve seen almost a paralysis in our customers—just pausing and holding their breath,” one panellist noted.
Add to that a wave of patent expiries and reduced biotech funding, and it is clear why customers are becoming more price sensitive.
This hesitation is most pronounced in large-cap pharma, which faces budget freezes and repeated internal restructurings.
“No one knows who owns the budget, or who can spend it,” said another speaker.
Yet this pause is also opening space for new winners: nimble biotechs and service providers equipped to help clients do more with less. Investment is also shifting geographically, with Europe and Asia emerging as attractive hubs for talent, R&D, and outsourcing activity – particularly given the threat of tariffs.
“Proximity matters,” highlighted one panelist. “Being in the US is important, but being headquartered in Europe is increasingly seen as a marker of stability.
“In today’s bumpy markets, being part of the ecosystem—locally and globally—is more relevant than ever.”
New models
Outsourcing models are also evolving driven by the cost and capability advantages of scale providers—particularly in specialist areas like new modalities. Large pharma is shifting from episodic engagements to broader Full Service Provider models, diversifying providers, and in some cases partially insourcing to improve outcomes.
While big pharma slows down, small and mid-cap biotech firms are accelerating.
“Maybe the Big Pharma model is fundamentally broken,” said one panelist. “Biotechs are becoming competent enough to commercialise on their own.”
Under pressure to commercialise independently, many biotechs are turning to outsourcing partners to build launch infrastructure and drive market access. This is supporting demand for tailored, high-value services across the product lifecycle—from targeted trial recruitment to specialist medical affairs and regulatory support.
Tightening R&D budgets at big pharma and continued funding pressures for biotechs are contributing to a modest slowdown in clinical trial activity. While trial volumes are under pressure, costs are rising—driven by complex, new modalities that demand longer timelines, higher complexity, and specialised capabilities across the value chain.
More products are now reaching the market under accelerated pathways, including conditional approvals based on Phase 2 data and real-world evidence (RWE). This is transforming both the clinical trial landscape and the commercialisation model.
“You don’t run a Direct to Consumer (DTC) campaign for 300 patients,” said Paul Archer, Chief Commercial Strategy Officer at Envision Pharma Group. “You hyper-target, find the Healthcare Professionals (HCPs) actually treating them, and support them directly.”
This trend favours outsourcing providers with capabilities in real-world data analytics, patient journey mapping, and digital HCP engagement—offering clear openings for investment in point solutions and platforms serving niche indications.
Niche vs full stack
While full-service CROs and commercialisation agencies continue to attract capital, investors were urged not to overlook high-growth niche players.
“There’s a rise in domain-specific AI use cases,” one executive said. “But it’s not about generic automation—it’s about solving very specific problems, especially in medical writing, regulatory, or data analytics.”
Crucially, orchestration is emerging as a competitive edge. Companies that can pull together data, workflow automation, and human insight into a seamless offering are gaining ground—particularly in fragmented therapeutic areas like rare disease or oncology.
Digital focus
Digital transformation continues to reshape the services sector, with generative AI being employed to boost efficiency. Artificial intelligence is beginning to prove itself, particularly in small-molecule drug discovery.
“AI-native compounds have an 80% success rate in Phase 1, compared to 40% historically,” said one speaker, citing recent benchmarking data.
But the consensus was that AI’s real value lies in its integration with domain expertise—not in isolated tools.
“Clients don’t want 15 different point solutions. They want something integrated, with real scientific depth.”
Investors should focus on platforms that combine AI with high-quality data and biological insight, especially those with clear traction in pharma or biotech pipelines.
Need for speed
Overall, the outsourcing market outlook remains positive, though slightly more muted than in the past.
Fragmentation continues to support M&A with the market characterised by classic roll-ups that extend geographic or therapeutic reach, and CROs expanding into adjacent services to capture more value. Biotech remains a focus for some investors as these companies are less exposed to big pharma’s headwinds, and are still underdeveloped in terms of digital capabilities. This offers room for third-party value creation.
There is also strong investor interest in digitally enabled services. This as a major long-term growth driver.
Despite macro headwinds, panelists agreed that the long-term fundamentals for outsourced pharma services remain strong. The demand for speed, precision, and flexibility is opening the door for new winners across R&D, commercialisation, and digital enablement.
“Despite the turbulence, we see a lot of growth,” one speaker concluded. “The challenge is no longer just scale—it’s speed, specificity, and scientific credibility.”
For investors, the implication is clear: growth capital should follow the breakout specialists, not just the traditional incumbents. Platforms that are lean, tech-savvy, and biotech-aligned are likely to capture an outsized share of the outsourcing growth story in the years ahead.
