Quintiles (NYSE:Q) isn’t in the manufacturing business but in order to explain the growth prospects of his company, CEO Tom Pike draws a comparison to a mainstay of American manufacturing – automobiles.

When cars were first built, the big automakers handled all the manufacturing down to parts like axles.

“Auto manufacturers don’t produce axles anymore,” Pike told an audience of investors and analysts this week. “Other people have gotten better at it than they are and they outsource that.”

Contract research organizations, the companies that run the clinical trials testing experimental drugs among other outsourced services for pharmaceutical companies, are like the auto parts manufacturers providing axles to big auto makers. These CROs can run clinical trials faster and for less money than it takes pharmas to do that work themselves.

Pike addresses analysts, investors

Quintiles, whose $948 million initial public offering last year was North Carolina’s largest ever IPO, was among the companies represented this week during during Goldman Sachs 35th Annual Global Healthcare Conference in California. It was Quintiles’ first time at the conference and Pike spoke for approximately 30 minutes. He painted an optimistic growth picture for the overall CRO industry as pharmas look to cut costs and increase efficiency by outsourcing more work. Within the CRO space Pike portrays the Durham company – already the largest among CROs with $4.9 billion in 2013 revenue – as the company that will continue to lead the pack. Pharmaceutical outsourcing is growing at around 5 to 6 percent.

“Our goal is to capture more than our share of the growth of this market,” Pike said.

Goldman Sachs noted that Quintiles ranks as the CRO leader in book-to-bill ratio, a metric measuring the business growth of a CRO. A number above 1 indicates growth; below 1 shows contraction. Quintiles’ book-to-bill ratio in the last six quarters averaged 1.28. Pike said that Quintiles’ pipeline of business was stronger in the first quarter than the average of 2013 – and 2013 was a record year for the company. Quintiles is turning that pipeline into sales, recording $1.0 billion in first quarter revenue.

CROs are gaining momentum from a rising tide of drug approvals. For the last three years, the Food and Drug Administration has been averaging 33 approvals per year. From 2006 to 2010, the average was 22 approvals. More approvals means more work that CROs can do at various stages of a drug’s development cycle.

Pike pointed to the deeper, exclusive relationships that Quintiles has cultivated with Biogen Idec (NASDAQ:BIIB) and Merck Serono, where Quintiles will be taking on a greater role in various aspects of those companies’ drug testing work. As an example, Pike pointed to Biogen, which has a number of compounds with potential in several different indications. Pike said Biogen might prefer to avoid building huge teams of workers, choosing instead to turn clinical development work to its CRO partner. Pike believes in a matter of time, these big partnerships between pharmas and CRO sole will become the norm rather than the exception.

“What companies in my industry need is one of the big guys to do a sole-source deal,” Pike said. “That would be the tipping point … It will become as common as Apple using Foxconn and Samsung and various vendors all outsourcing all of their manufacturing. It will be just as common.”

Growth beyond clinical trials

But the business growth for pharmaceutical outsourcing does not come only from the opportunity to do more clinical trial work. Some CROs, Quintiles among them, also support their pharma customers in the commercialization of approved drugs. Rather than bring on their own sales teams, pharmas can build a sales team through Quintiles to market their drugs. And even beyond this commercialization work, Quintiles continues to have a growing role in monitoring these drugs for safety.

“This focus both on product launch approval but also an increasing requirement for post-approval monitoring is driving our real world late-phase business there to be our fastest growing functional business unit in the company,” Pike said.

Pike said he believes the CRO industry growth is sustainable because the demand for these services will increase. In a similar way that car makers turned to their vendors for services, parts and expertise in various aspects of the auto manufacturing business, pharmas are increasingly turning to CROs for expertise in aspects such as consulting, clinical trial design and technology.

Quintiles stock was trading between $51.50 and $52.09 Friday, shy of the stock’s 52-week high of $55 per share but well above its $40 IPO price.