Guest Column | December 23, 2020

The Unsung Heroes Of Drug Development: Small Pharma-Service Entrepreneurs Make A Big Impact

By Brian Scanlan, operating partner – Life Science Practice, Edgewater Capital Partners


Over the past decade, the consolidation activity in the outsourced pharma services world has left a giant chasm between the global giants and the small entrepreneurial service providers. Transaction activity has been strong, with over 400 deals in past five years alone.1 In the U.S., the large global CDMOs have acquired a majority of the remaining independent midsize players, leaving many of my colleagues challenged to name more than a handful of truly independent midsize pharma services firms remaining in the U.S. today. With so few mid-tier players left, you might be asking, “where have all the entrepreneurs gone?” It seems those technical entrepreneurs from decades past who built the thriving outsourced pharma services industry we see today have themselves been merged into retirement as their organizations have become part of the bigger global contract pharma machine. So, is there a next generation of entrepreneurs building the next crop of successful smaller firms that will grow to fill this void? The answer is a resounding yes.

Over the past year, I have had the good fortune of talking to dozens of rising entrepreneurs – those people who are building the next wave of innovative, technology-focused pharma services companies – about their views on the market, competitive advantages, and the challenges/barriers they face to continued growth. I call these business owners the unsung heroes of drug development, because they are quietly making a huge contribution to the future of drug development here in the U.S. Without their drive and expertise, the U.S. would not remain the thriving global hub of pharma innovation.

The Unsung Heroes Of Drug Development

According to Clearwater International, the top five integrated CDMOs account for only 15% of the market, and the top nine CROs account for only 60%.2 The chasm between the mega-size companies and the smaller, fragmented entrepreneurial service providers is as big as it has ever been. I’ll bet that many of you were not aware of the sheer number of small companies in the U.S. servicing the pharma industry – small companies that provide key products or contract services to advance the drug development process. According to Standard and Poor’s Capital IQ platform, in the U.S. alone there are over 1,500 contract pharma companies with fewer than 50 employees. They quietly contribute to the success and vibrancy of U.S. drug development and go largely unrecognized by the industry at large. Collectively, these companies employ tens of thousands of highly trained professionals, all playing a vital role in our country’s drug development infrastructure.

These small players typically have more niche, specialized product or service offerings, and in spite of the trends toward the larger integrated CDMO models, it is interesting that the niche capabilities are still very much in demand. In fact, nearly one-third of pharma companies list “access to specialized technologies” as the main reason they partner with a CRO.3 The small service providers are often not considered as relevant in the progression of drug development in the U.S., but nothing could be further from the truth; this is why I call them the unsung heroes of drug development.

The Smaller Players Are Generating Some Great Outcomes

These are just a few of the many great success stories business owners have shared with me:

Formulation-focused “specialty CDMO” (25 employees) – Challenge: dealing with increasingly poor solubility of more complex molecules in early development and finding technologies that enable rapid screening to quickly identify a scalable solution. Solution: This 25-person specialty CDMO was founded by a Big Pharma executive turned entrepreneur. Its focus is on developing rapid screening techniques utilizing a range of approaches, including proprietary nanotechnologies, that can be effective in nearly all dosage forms. The company is currently on a rapid growth trajectory, and the CEO is considering how best to drive his expansion plans.

Large molecule-focused bioanalytical CRO (60 employees) – Challenge: plasma-based biologic product recalled due to impurity that caused unanticipated bleeding events. Solution: This CRO beat out its larger peers in determining the cause (low-level impurity) of the bleeding problems (hemostatic risk) and, more importantly, how the manufacturing process could be modified to remove the impurity. Now the biologic product is back on the market.

Pharma products and services provider (100 employees) – Challenge: effective and novel adjuvants to help stimulate immune response from vaccines. Solution: This company developed adjuvant technology that will be used in one of the first COVID-19 vaccines to be used under the FDA’s Emergency Use Authorization (EUA).

Top Five Keys To Pharma Services Entrepreneurs’ Success

Having spoken to nearly 100 small business owners over the past year, I have distilled the top five items the pharma services entrepreneurs cite as keys to their success:

Key to Success


1) High Service Levels – Client Touch

Deep client relations and continuity of personnel throughout the development program

2) Fast and Flexible Operations

No bureaucracy; readily adaptable to changing priorities

3) Strong Cultural Fit With Small Biotech

“We act like you.” A perfect extension of the entrepreneurial culture of the biotech. Perfect partner.

4) More Narrow Technical Focus Means Deeper Expertise

Laser focus on the one or two niche areas we do best. Often these companies have strong connection/proximity to academic institutions. Almost the opposite of the fully integrated CDMO model.

5) Strong “Made in America” Mantra

Pride in U.S.-based location and serving the largest market. Pride that the U.S. is the hub of the world’s pharma/biotech innovation. Love “re-shoring” trends.

As these entrepreneurial companies mature, the business owners are looking for ways to drive the next chapter of their growth. They are considering which systems, processes, and structures it will take to lay a foundation for sustainable next-level growth while preserving the entrepreneurial spirit that got them where they are today.

Creating value while “de-risking” the business for current and future ownership is critical. They cite three key challenges when looking ahead.

Key Challenges – Barriers to Growth


1) Access to Capital

As the company grows, growth capital is critical to continue expanding. How do I balance debt and/or equity investment/partner?

2) Sales/Commercial Horsepower

The business has been largely run by word of mouth, agents, consultants, and limited full-time sales resources. How do I best leverage sales talent? How do I better leverage marketing resources?

3) Business Process Expertise

As the company grows, the importance of systems and structure increases. What best practices should we be adopting? Where do I get the expertise? Will I lose flexibility by bringing in more systems/structure?

Fostering An Environment For Growth

The common barriers to growth that I’ve heard about from so many small business owners are not insurmountable, but the best pathway can be confusing. Access to capital, whether debt or equity, is a key question, and one that business owners must consider carefully. Determining how best to invest in sales and marketing horsepower is also critical, as many small business owners rely heavily on word of mouth and contract sales support. When, and how, to professionalize the sales engine and commit to internal investment in talent is not an easy decision. Finally, developing business processes to effectively de-risk the business and enable a solid operational foundation for future growth is critical. Operational efficiencies, electronic tools, and building a culture of operational excellence are keys to success and scalability.

Despite the challenges to growth, one thing is clear: The 1,500+ pharma services business owners here in the U.S. are true warriors in the fight to bring the next great therapies to market. In my mind, they really are the unsung heroes of drug development. Let’s celebrate them, acknowledge them, and help foster the right environment for them to continue their incredible success.


  1. Capstone Headwaters Pharmaceutical Outsourcing Report, August 2020
  2. Clearwater International Healthcare Team Report, Autumn 2019
  3. Contract Research Organization Growth and Investment, That’s Nice, Jan 2018

About The Author:

BrianBrian Scanlan has spent nearly 30 years in the pharma services sector focused on CDMOs and technology-differentiated organizations. He currently leads the Life Science Practice at Edgewater Capital, a sector focused, lower mid-market private equity firm. He is also the founder and managing partner of Freedom Bioscience Partners, a consultancy firm focused on M&A and strategic business advisory to the pharmaceutical and fine chemical industries. Prior to this, Scanlan served as CEO at Cambridge Major Laboratories, a global chemistry-based CDMO. He holds a BS in chemistry from Northern Illinois University and an MBA from the Illinois Institute of Technology. You can contact him at and connect with him on LinkedIn.