GlobalDataA drastic increase in mergers and acquisitions (M&A) activity propelled the value of pharmaceutical outsourcing deals from $9.9 billion in 2014 to nearly $17.6 billion through October 2015, putting the sector on track for a record-breaking year, according to an analyst with research and consulting firm GlobalData.

In an article for Arena International’s Clinical Trial Year Book 2016, Adam Dion, MSc, GlobalData’s Senior Healthcare Industry Analyst, says that while the pharmaceutical outsourcing services sector has seen a sharp rise in M&A activity in recent years, the value of deals has more than doubled during the past year, from $5.5 billion in 2014, to $12 billion by October 2015.

Dion explains: “This year has seen a number of high-valued transactions, including LabCorp’s $6.1 billion purchase of Covance, and WuXi being sold for $3.3 billion to a Chinese private equity group. Contract manufacturers have also been busy in 2015. Siegfried Holding AG, an API maker based in Switzerland, bought BASF’s pharmaceutical supply business, and Lannett acquired Kremers Urban Pharmaceuticals, a specialty generic drug maker and subsidiary of UCB, for $1.2 billion.”

LabCorp acquired clinical trial contractor Covance under a cash and stock deal valued at approximately $6.1 billion. The combined business will now have pro forma revenue of nearly $8.4 billion, vaulting it ahead of its closest rival, Quest Diagnostics, and establishing a new leader in the medical testing space.

Dion continues: “LabCorp’s intentions seem pretty clear – it wants a larger piece of the contract research organization (CRO) market. The CRO sector has enjoyed impressive growth during the past few years, as plummeting sales from the loss of exclusivity branded drugs, the high cost of pharmaceutical research and development, and the globalization of clinical trials, have led to a surge in demand for outsourced clinical trial work.”

GlobalData expects that Covance will act as a separate entity under the LabCorp moniker, in which LabCorp can leverage Covance’s leadership in clinical trials monitoring, patient and sponsor recruitment, and study site selection through its proprietary Xcellerate technology platform.