Companies conducting clinical trials for pharmaceutical firms, once thought resistant to broader market pressures, have seen their stocks fall from grace since the end of summer, a slide that continued Tuesday.

The profit growth of these contract-research organizations, or CROs, face headwinds as large drug makers narrow their research focus, small biotechs deal with the credit crunch and the dollar strengthens. While confidence remains about the long-term prospects because drug makers are seen increasing their outsourcing of research, short-term pressure is seen continuing.

"You've seen a valuation re-rating as investors come to realize that the CRO earnings stream is not immune to the broader macro environment," Goldman Sachs analyst Randall Stanicky said, noting that recent market turmoil and company disclosures have lead to uncertainty about next year's financial performance.

The CRO stocks gained more than 50% in 2007, compared to 3.5% on the Standard & Poor's 500 index, and rose another 20% in 2008 through mid-September as the S& P 500 plunged 15%. But the shares of the major players - Covance Inc. (CVD), Pharmaceutical Product Development Inc. (PPDI), Charles River Laboratories International Inc. (CRL), Parexel International Corp.(PRXL) and Icon Plc (ICLR) - have dropped an average of 35% in the last month as the broader market dropped 12%.

They continue to fall Tuesday. Covance shares are off 7.4% to $55, Parexel is down 9.5% to$10.23 and Pharmaceutical Product is 6.4% lower at $29.96 on a day in which the Dow Jones Industrial Average was up over 200 points.

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