ASX Health Stocks: Resonance Health jumps 25pc on global pharma contract

Resonance Health has been contracted by global pharma Sun Pharma
New contract is worth $6.33m
The Contract Research Organization (CRO) market is forecasted to grow rapidly

Resonance Health (ASX:RHT), a company providing services to clinical trials, saw its share price surge by 25% this morning after announcing a new contract worth $6.33m over 18 months.

Resonance says it has been contracted by Sun Pharmaceutical Industries, an Indian based publicly listed multinational pharmaceutical company.

Under the agreement, Resonance, through its wholly owned subsidiary, CRO Services, will serve as CRO (Contract Research Organization) and local sponsor for Sun, engaging and making payment to the institutions, trial sites, and the vendors needed to conduct the clinical trial.

Resonance will also provide its imaging analysis services to Sun at various timepoints throughout the clinical trial, along with exploratory laboratory biomarker assessment services.

At this point, Resonance has identified several potential trial sites and investigators in Western Australia, and the company expects patient recruitment to commence in late 2023, subject to regulatory approvals.

Of the $6.33m fee, the first payments of $1.055 million is due within 30 days of this agreement execution.

Resonance says this contract win highlights the company’s strategy of providing its technology and services to the burgeoning clinical trials markets.

“The agreement is a direct outcome of the Resonance clinical initiative announced in October 2022,” said Resonance CEO, Andrew Harrison.

“I acknowledge the enormous amount of work performed over the past couple of years to position the company and enable the successful procurement of a pharma services agreement of this magnitude.

“In revenue and range of services terms, this is a very material agreement for the company,” said Harrison.

Rapid growth seen for the CRO market

According to research, the global CRO market is forecasted to grow to US$52.46 billion from 2022 to 2027, growing by a CAGR of 11.75%.

Demand for new clinical trials in cell and gene therapies will be the main factors contributing to the market growth.

Increasing pharmaceutical and medical device R&D pipelines will also act as tailwinds for CRO companies like Resonance.

Research also suggests that clinical trials for cardiovascular diseases drugs will rise rapidly. The World Health Organization (WHO) estimates that these non-communicable diseases would account for 80% of the global disease burden.

All in in all, there are 20,109 medicines in the pipeline for development as of 2022. And as per the ClinicalTrials.gov website, the number of registered studies have increased to 441,378 in 2023.