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Tuesday, May 24, 2022

Explosive investment in virtual testing companies: latest data

By Justin Culbertson, Senior Analyst in Life Sciences with RSM US LLP

Virtualization affects the general public as well as investors, whether applied to clinical trials, the life sciences or health care. A Google Trends search related to “remote health care”, a topic that benefits virtual clinical trials significantly, shows that interest in the topic has more than doubled since the start of the pandemic and It has increased almost five times since the beginning of 2016. In addition, if you listen to recent earnings calls for publicly traded clinical research organizations, you’ll hear topics of decentralization or virtual capabilities being discussed frequently.

In this article I will take a look at this blooming ecosystem and investment growth in the virtual trial space, specifically virtual trial companies that are abandoning legacy clinical trial models and leveraging new technologies, hopefully. change the future of clinical research. In addition, I will explore the power of the virtual testing platform and the key areas life science companies should consider when working with these virtual partners.

What are Virtual Trial Companies?

As is the case with legacy Clinical Research Organizations (CROs), virtual trial companies don’t have a “one-size-fits-all” description. As the industry is educating us all on the definition of decentralization, an acknowledgment from freely using the term “decentralized clinical trials” as a descriptor for trials that use significant levels of virtualization. That virtual clinical trial is a live on. Sliding scale of virtualization. At one end of that scale is a clinical trial model that operates entirely through brick-and-mortar sites. At the other end of that scale are fully decentralized testing, absent brick-and-mortar sites and relying heavily on virtualization. The middle of that scale, with varying levels of virtualization, is where most clinical trials exist today. I prefer a similar approach to our description of virtual testing companies.

A description of the sliding scale for virtual trial companies might look something like this. On one hand, a virtual testing company may act as the sole administrator of a clinical trial reporting directly to the trial sponsor. In this capacity, a virtual trial company is virtually indistinguishable from a full-scope CRO. The primary differentiator is often the virtual trial company’s proprietary software as a service (SaaS) platform, which it uses to align practices across all sites, connect participants to its network of decentralized service providers, and In some cases, wears away with use. of traditional places. At the other end of that scale, a virtual testing company cannot be involved in the administration of a clinical trial. Instead, it can simply license its SaaS platform to a CRO, with which the CRO gets the above benefits of the platform. The middle of that scale could be any combination of these scenarios provided previously, including the performance of discrete tasks while complementing a subset of traditional sites.

Explosive investment in virtual testing companies: latest data

Considering a partnership with a virtual trial company?

As seen in the legacy CRO space, there are exceptions to the rules for defining a virtual trial company. Just as some CROs do not perform full-scope administration of clinical trials, opting instead to focus on a specific area of ​​the trial, such as early-stage research and analysis, there are also virtual trial companies that do different things. work in the areas. clinical trial process. Although many virtual testing companies aim to leverage their SaaS platform to provide a unified home for these discrete virtual offerings, such as electronic clinical outcome assessments, telemedicine and patient recruitment, many virtual testing companies offer only one of these. Emphasis on one component. Sponsors and traditional CROs looking for a virtual trial partner should consider their needs and the following areas of emphasis.

Virtual testing is unique to companies in what I will refer to as the “power of the platform”. The power of leading virtual testing company platforms is that they consolidate discrete offerings of clinical trials into a single in-house. While a virtual trial company may be inclined to sponsor and traditional CROs use all of these offerings, this is not necessarily the case. If the sponsor or CRO is looking for best-in-class patient recruitment using new capabilities in artificial intelligence and machine learning, the virtual trial company has already tested these providers and integrated these capabilities into its platform. has been integrated. Sponsors or CROs may use that sole offering when preparing themselves for possible full integration into the Virtual Trial Platform in the future.

In our conversations with life science executives, one question continues to arise: How are companies addressing the labor shortage? Everyone is feeling the labor shortage as there are more employment opportunities than the available workers. This is where the virtual trial company’s decentralized network of service providers can be beneficial. Since clinical testing requires scale, the labor pool can more readily grow through the identification of potentials in this network versus traditional recruitment processes. As an aside, this flexibility is not necessarily unique to virtual testing companies. Legacy CROs are also using many of the same provider networks.

New entrants and new money

Clinical research is flourishing during the COVID-19 pandemic. The service sector of the life sciences, which includes clinical research and other companies, has outperformed all other sectors. This is understandable because the industry has been at the forefront of the vaccine research and FDA approval process to maintain its strong legacy contract backlog in areas such as oncology. But one thing that has become clear through the pandemic is the extent of legacy clinical trial models. As noted in my separate article on Decentralized Clinical Trials, Decentralized clinical trials: what are the data and cost savings opportunities?The Phase 3 clinical trial period has increased from about two years in 2009 to about 3.25 years today. At some point, this trend of extending the trial period will have to be reversed; Otherwise, the patient will bear the brunt of the effects as life-changing treatments take longer to hit the market.

The virtual trial company executives have spoken to for the short term they hope is possible by taking advantage of their SaaS platform. In some cases, these officers are aiming for a trial period of two years or even one year. At face value, this would be a significant cut. Apart from the need for virtualization due to the COVID-19 pandemic, these ideas of reducing the trial period are extremely attractive and can provide significant economic benefits to patients as well as investors.

Investors are eyeing opportunities with virtual trial companies. In addition to several partnerships between these companies and large CROs, investments have been growing rapidly over the past few quarters. Since January 1, 2020, approximately $1.9 billion has been disclosed in virtual trial companies. About 75% of that investment has been in the past two quarters, indicating a cautiously optimistic and continued investment in the sector.

Explosive investment in virtual testing companies: latest data

Source: RSM US LLP; pitchbook data

While we speak of these virtual testing companies being “new” to the market, the reality is that over 40% of these companies were founded in 2010 or earlier; However, investments made in these companies have skewed significantly towards those established after 2010. Of the $1.9 billion in investments, about 97% are held by companies established after 2010. Companies such as Medable and Sci37, which hold the two largest valuations in the industry, are underrepresented in this population since 2010.

Explosive investment in virtual testing companies: latest data

Source: RSM US LLP; pitchbook data

new era of clinical research

It is up to sponsors and CROs to consider the benefits of virtual clinical trial offerings to themselves and, most importantly, to their patients. The adoption of virtual technologies doesn’t have to be an “all or nothing” situation, but may be lagging behind due to lack of adoption. While investment in this sector should continue, it remains to be seen whether this investment will continue to be exponential. One thing is certain: this isn’t the first time we’ve taken advantage of the “power of the platform” in an industry. Amazon, Facebook and Google all use the platform as the core for their business models. The scalability of the platforms gives flexibility that is not available in the legacy model. Hopefully, clinical research through virtualization can benefit in the same way that other industries do.

About the Author:

Explosive investment in virtual testing companies: latest dataJustin Culbertson is Director and Senior Life Sciences Analyst at RSM US LLP. He has over 10 years of experience serving publicly traded and privately held companies through technical accounting and financial reporting services. He focuses on clinical research organizations (CROs) and similar service organizations in the life sciences industry. Justin has previously advised clients in the areas of new standard implementation, external audits, internal audits, risk management, mergers and acquisitions, process design and improvement, and internal and external financial reporting. He is also a member of RSM’s Life Sciences National Industry Leadership Team.

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