PREVIEW OF 2017 CRO MARKET SIZE PROJECTIONS

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1 PREVIEW OF 2017 CRO MARKET SIZE PROJECTIONS MARCH, 2017

2 SMARTER QUESTIONS SMARTER ANSWERS REPORT OVERVIEW The past three years have been quite eventful in the CRO world. We ve had service provider mergers and we ve had service provider mega-mergers. We ve had biopharma mergers and we ve had biopharma megamergers. We ve had public offerings and we ve had privatizations. Overall, the CRO market has been one of the best performing sectors in the financial circles. ISR s report gives quantitative insight into the perpetual question: What is the size of the CRO market? The data provide a thorough, rational perspective for clinical development services segmented by phase, geography, and service line. ISR utilizes both publicly available information and data obtained through our syndicated primary market research efforts. 25 PAGES 24 CHARTS & GRAPHS Publication Date: March, 2017 What you will learn Estimated R&D expenditures through 2021 Projected spending on development, Phase I-IV development, and outsourced Phase I-IV development through 2021, segmented by sponsor type: Large pharma large molecule Large pharma small molecule Non-large pharma large molecule Non-large pharma small molecule Generic/Specialty Government Private Association/Non-profit Academic Spending on CRO services segmented by: Geography Service-line Phase I-IV WHY ISR? 1. ISR has leveraged data from our primary market research. These data, coupled with the facts and figures from secondary sources, allow for intelligent projections into the CRO market size. 2. The use of primary research data gives ISR the unique ability to break down the outsourced market further than ever before, by offering geographic, service line, and Phase I-IV assessments.

3 TABLE OF CONTENTS COPYRIGHT AND USAGE GUIDELINES METHODOLOGY EXECUTIVE SUMMARY INTRODUCTION OVERALL MARKET SIZE AND GROWTH Top-down approach to market size R&D sources and distribution Table 1: R&D expenditures by segment ( ) Model adjustments From R&D to CRO market size Development spending Table 2: Development as a percent of R&D by segment (2017) Table 3: Development expenditures by segment ( ) Phase I-IV development spending Table 4: Ph I-IV development as a percent of development by segment (2017) Table 5: Ph I-IV development expenditures by segment ( ) Outsourced Phase I-IV development spending Table 6: Outsourced Ph I-IV development as a percent of development by segment ( ) Table 7: Outsourced Ph I-IV development expenditures by segment ( ) 2017 full model analysis 2017 GEOGRAPHIC ASSESSMENT Table 8: 2017 geographic distribution (%) of the CRO market size Table 9: 2017 geographic distribution ($B) of the CRO market size 2017 SERVICE-LINE ASSESSMENT Table 10: 2017 service-line distribution (%) of the CRO market size Table 11: 2017 service-line distribution ($B) of the CRO market size 2017 DEVELOPMENT PHASE I-IV ASSESSMENT Table 12: 2017 development phase distribution (%) of the CRO market size Table 13: 2017 development phase distribution ($B) of the CRO market size CRO MARKET MODEL CRO market model growth rates 2016 PUBLIC CRO MARKET SHARE Table 14: 2016 Public CRO market shares ABOUT INDUSTRY STANDARD RESEARCH

4 SAMPLE PAGE: INTRODUCTION SMARTER QUESTONS SMARTER ANSWERS INTRODUCTION 2016 was probably the year CRO finally became a household name on Wall Street and in the halls of private equity firms. That said, those of us who have been in the industry for a while witnessed just another year of solid growth and exchanges of ownership. Make no mistake, more and more people are watching the CRO space. Let s recap: Bioclinica was busy buying Clinverse, Cinven, and Compass Research Covance names industry veteran, John Ratliff, as its CEO ICON purchases Clinical Research Management INC Research focuses new service offerings on sites and patients inventiv Health Clinical files their S-1, opening the door to going public Medpace goes public (market capitalization of ~$1.5B) PAREXEL closes on several bolt-on acquisitions (e.g. Health Advances, ExecuPharm, and The Medical Affairs Company in early 2017) PPD buys Evidera and Synexus and is rumored to be a potential take-over candidate for LabCorp/Covance PRA Health Sciences stock was up ~22% in 2016 Premier Research receives a growth investment from Metalmark Capital Quintiles and IMS merge (market capitalization north of $18B) and buys TKL Research SynteractHCR was acquired by Amulet Capital Partners We think there are several reasons why it might not be too late to jump on the CRO bandwagon. Let s start with first principals, demand. In the United States and Western Europe, the two largest pharmaceutical markets, the population is aging and the demand for pharmaceutical products is increasing. Therefore it is not surprising that, according to various estimates, underlying global R&D expense (read: potential CRO revenue) continues to grow. This helps form a solid foundation from which to build a growing business. If your demand has a relatively consistent 2-4% annual growth rate, then just keeping your market share constant will result in increased revenue. Pharmaprojects also has some good news for the CRO industry. According to its projections, the preclinical pipeline increased from ~6,000 candidates in 2015 to ~6,800 candidates in 2016 (a healthy 13% increase in one year). This increasing preclinical pipeline should provide a solid base for clinical studies over the coming years. ISR projects that outsourcing rates will continue to increase at a modest rate for the next few years. With these fundamentals in place, CROs should see solid topline growth over the next few years. That said, this is far from certain Edition of the CRO Market Size Projections: This is an enterprise-wide license and this file is not to be distributed beyond the terms of this agreement. For information on the license holder, please contact ISR (info@isrreports.com).

5 SAMPLE PAGE: R&D SOURCES AND DISTRIBUTION ISR starts our market model by gathering the R&D spending from the major sources of R&D activity. This page shows the projected total R&D breakdown for SMARTER QUESTONS SMARTER ANSWERS R&D sources and distribution As previously stated, ISR starts its market model by gathering the R&D spending from the major sources of R&D activity. In the following steps that refine our market size estimates, these figures will be adjusted to account for varying degrees of spending directly associated with CRO revenue. PROJECTED 2017 TOTAL R&D BREAKDOWN ($B) Academic $ % Association $6.1 2% Private $4.3 1% Industry Standard Research Small molecule $ % Government $ % Generic/Specialty $15.5 5% Large molecule $ % Table 1: R&D expenditures by segment ( ) $B USD Large company, small molecule $69.5 $68.6 $68.3 $66.5 $64.9 $64.3 Non-large company, small molecule $30.4 $30.1 $30.0 $29.3 $28.7 $28.5 Large company, large molecule $31.8 $35.8 $38.8 $42.9 $47.3 $50.8 Non-large company, large molecule $13.9 $15.7 $17.1 $18.9 $20.9 $22.5 Generic/Specialty $15.0 $15.5 $16.0 $16.4 $16.8 $17.1 Government $68.8 $72.6 $76.7 $78.9 $81.0 $81.7 Private $4.3 $4.3 $4.3 $4.3 $4.3 $4.3 Association/Non-profit $5.8 $6.1 $6.3 $6.4 $6.6 $6.7 Academic $43.1 $44.8 $46.3 $47.4 $48.7 $49.9 Total $282.7 $293.4 $303.7 $311.1 $319.1 $325.6 Industry Standard Research Edition of the CRO Market Size Projections: This is an enterprise-wide license and this file is not to be distributed beyond the terms of this agreement. For information on the license holder, please contact ISR (info@isrreports.com). PROJECTED 2017 TOTAL R&D BREAKDOWN ($B) Academic $ % Association $6.1 2% Private $4.3 1% Industry Standard Research Small molecule $ % CLOSER LOOK >>This chart shows the sources of R&D spending for Small molecule and Large molecule account for 52% of R&D spending. Government $ % Generic/Specialty $15.5 5% Large molecule $ % Data available in the full report. Click here to purchase from ISRreports.com

6 SAMPLE PAGE: MODEL ADJUSTMENT This page highlights ISR s top-down approach to our market sizing calculations. The full analysis and figures for the 2017 Outsourcing Phase I-IV Development Market are available in the full report at SMARTER QUESTONS SMARTER ANSWERS Model adjustments From R&D to CRO market size As previously stated, ISR utilizes a top-down approach to market sizing calculations, starting with R&D spending. We then use a series of deflators in order to narrow the market applicable to pharmaceutical service providers. The steps taken for these calculations are outlined below. R&D expenditures are first analyzed to remove the R (research) and we are left with D (development) spending per segment. Development spending is then analyzed by the amount of spending done for Phase I-IV clinical studies. Phase I-IV clinical development spending is then segmented by the outsourcing penetration of each company size/organization type to arrive at the market size for CROs R&D: $293.4B 2017 Development: $120.7B 2017 Phase I-IV Development: $85.9B Industry Standard Research 2017 Outsourcing Phase I-IV Development Market: $34.3B Edition of the CRO Market Size Projections: This is an enterprise-wide license and this file is not to be distributed beyond the terms of this agreement. For information on the license holder, please contact ISR (info@isrreports.com).

7 SAMPLE PAGE: 2017 SERVICE-LINE ASSESSMENT ISR provides an assessment of the CRO market based on the services CROs typically offer, based on ISR s proprietary survey data. The following chart has been blinded. The full data are available in the report, which can be downloaded from SMARTER QUESTONS SMARTER ANSWERS 2017 SERVICE-LINE ASSESSMENT Based on ISR s proprietary survey data, we provide an assessment of the CRO market based on the services CROs typically offer. We certainly understand that the distribution of service costs varies by study type, phase, compound, etc. However, on aggregate, we believe our data provide one of the most accurate representations of the CRO market size based on services in the industry. We use the same data and assumptions with respect to our model working down from R&D to development to Phase I-IV development activities to outsourcing propensity when working on our service-line splits. Table 10: 2017 service-line distribution (%) of the CRO market size 2017 Clinical Monitoring 21.1% Investigator Clinical Payments Monitoring 13.2% Data Management 10.9% Laboratory Investigator Payments 10.7% Project Data Management 9.0% Patient and Site Recruitment 8.7% Technology Laboratory 7.3% Biostatistics Project Management 6.4% Medical Writing 3.1% Imaging 3.1% Regulatory Technology 2.8% Quality Assurance 2.4% Other Biostatistics 1.3% Total 100% Patient and Site Recruitment Medical Writing Regulatory Imaging Quality Assurance Other 2017 Total 100% Edition of the CRO Market Size Projections: This is an enterprise-wide license and this file is not to be distributed beyond the terms of this agreement. For information on the license holder, please contact ISR (info@isrreports.com).

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10 THE ISR DIFFERENCE act with confidence ISR S REPORTS VS. THE COMMON SYNDICATED REPORT ISR S HEALTH PANEL The industry s fastest growing panel of health care and pharmaceutical professionals, with nearly 1,500 members worldwide. Other 6% CRO 6% Research Site 10% RESEARCH METHODS Mostly primary research; always appropriate for the topic BY COMPANY TYPE One size fits all; usually publically available data Sponsor 78% DATA COLLECTION ISR s proprietary data tools and channels support fast, high quality data collection Struggle to recruit the right targets and enough of them C-level 13% Manager 29% BY JOB LEVEL RESPONDENTS Sophisticated screening ensures genuine decision-makers make up respondents VP 10% Undisclosed methodologies and respondent demographics Director 46% SAMPLE SIZE Robust sample sizes that instill confidence Often insufficient industry representation that leaves you defending results 3-5 years 5% 6-10 years 11% 20+ years 37% BY EXPERIENCE IN YEARS ANALYSTS Decades of experience means more insights that are immediately usable Junior analysts capable of reporting numbers years 24% years 23% Preview of: Benchmarking the Pharma Industry s HEOR Functions 10 To learn more, visit