Cash or Crash: Can Improving Liquidity Drive a Durable CRO Recovery?

Research evidence excerpt

Cash or Crash: Can Improving Liquidity Drive a Durable CRO Recovery?

USA | Pharmaceutical Svcs. EquityJulyResearch16, 2026

Cash or Crash: Can Improving Liquidity Drive a

Durable CRO Recovery?

As 2026 approaches midyear updates, we are increasingly constructive on

CRO demand trends. Private CRO checks point to healthy RFP activity and

improved signature conversion (contracts), while improving biotech funding &

stronger balance sheets, easing restructuring activity, and rising R&D spending

expectations suggest a more supportive demand environment than we have

seen in several years. Don't expect an avalanche all at once, but demand is

increasing.

Industry Feedback Remains Constructive. Checks with private CRO executives were generally

constructive, describing both improved demand trends through 2Q26 and greater confidence

entering 3Q. One executive highlighted record pipeline levels, record net bookings, and elevated

bid defense activity, while another characterized the environment more moderately, citing healthy

RFP flow and improved conversion of existing opportunities despite a largely flat pipeline. Finally,

remnants of cancellations were still evident at sites. Taken together, the discussions suggest

improving bookings trends supported by both solid RFP activity and stronger signature conversion.

Improving Funding Environment Strengthens Balance Sheets. Biotech funding improved in 2Q26,

with TTM public funding reaching $68B (+110% Y/Y; Ex. 1) and $97B public+private. Higher funding

levels have supported cash balances, with average cash runway (Cash/NTM R&D) for our list of

~694 cash-burning biotechs improving to 2.22x versus a pre-pandemic average of 2.04x. Aggregate

cash balances have also reached their highest level since 4Q24, despite continued growth in R&D