Kate Hammeke, Contributing Editor
A couple of years ago, Nice Insight explored how the essential qualities for outsourcing relationships varied between large and midsized companies, in addition to traditional pharma companies versus biotechs. As one would imagine, these essentials differ quite a bit from emerging or start-up companies, as their needs when it comes to outsourcing are different from larger companies’.
Oftentimes the company is too new to the industry to have a well-established process for selecting providers or a track record of what has worked well in the past. To further complicate matters, it is not uncommon for senior leadership at start-up companies to have a history at a Big Pharma or biotech and to be brought on for their expertise — which is a strong positive in many aspects of running a successful business but not necessarily in finding the right type of outsourcing partner.
Folks in the biopharmaceutical industry know that identifying which qualities make the greatest contribution to a positive relationship with an outsourcing partner is an ongoing and ever-changing process. The fluid nature of the drug development industry – one that is constantly adapting to new health challenges, technologies, and regulations – is part of what makes it so difficult to outline which attributes in a contract manufacturer should be prioritized so that the relationship functions like a strategic partnership in which both the buyer and CMO benefit. The continual transformation of drug development reiterates the importance of keeping an open mind and learning from the successes of one’s industry peers. That way, the pressure to find the right business for a project diminishes and is replaced by confidence in finding a company with the right mix of attributes that will make for a successful long-term partnership.
PRACTICES OF EMERGING PHARMA AND EMERGING BIOTECH COMPANIES DIFFER
Nice Insight reviewed the outsourcing behaviors and strategic partnering preferences of respondents who work at emerging / niche or start-up pharmaceutical companies and those who work at emerging or virtual biotechs to see how these smaller businesses identify CMOs and develop mutually beneficial relationships. Starting with the methods used to identify potential outsourcing partners, Nice Insight found that the practices of emerging pharma companies and emerging biotechs differ. Emerging pharma relies on referrals from colleagues as their main resource (60 percent), whereas emerging biotechs use industry research to identify potential CMOs (62 percent). Emerging pharma companies are more likely to seek advice from consultants on outsourcing (56 percent as compared to 51 percent of emerging biotechs), while emerging biotechs are more likely to seek out suppliers at trade shows than emerging pharma companies (53 percent vs. 39 percent).
The primary reason for engaging contract manufacturers — improving quality — was consistent between emerging pharma, Big Pharma, and Biotech companies; however, among emerging biotech respondents, this trait came in second after improving time to market. It is no surprise that cost savings are a key factor in outsourcing. Whether it is decreasing fixed costs or capital investment, reducing financial outlay proved important among established and emerging companies and for both traditional pharma and biotechs.
An interesting area where outsourcing motivations diverged between emerging companies is the desire to gain operational expertise: prioritized fourth among emerging pharma companies but ranked eighth among emerging biotech companies. Mitigating supply chain risk carried greater importance among emerging pharma companies than among emerging biotechs (5th position vs. 10th). Conversely, emerging biotech companies ranked general process improvement much higher than emerging pharma (6th position vs. 10th).
When it comes to selecting a CMO, the number one factor for both emerging pharma companies and emerging biotechs is experience. Experience is one of two common rankings between these two buyer groups, the other being “risk sharing opportunities” in fifth position. Emerging pharma placed the CMO’s financial stability over quality and timeliness (3rd and 4th, respectively), whereas emerging biotechs ranked financial stability after those merits, identifying quality/regulatory positioning as their second priority, followed by timeliness. Neither emerging pharmas nor emerging biotechs placed much importance on the size and structure of the CMO or its geographical location.
As a contract manufacturer, you should apply this knowledge to pitch the right company strengths to the relevant audience in key sales communications, which will more strategically position your business. Emerging companies that understand how other buyers identify and prioritize CMO qualities before engaging a provider can eliminate some of the trial and error elements of vendor selection and serve as an advantage with respect to strategic decision making in outsourcing.
Survey Methodology: The Nice Insight Pharmaceutical and Biotechnology Survey is deployed to outsourcing-
facing pharmaceutical and biotechnology executives on an annual basis. The 2013-2014 report includes responses from 2,337 participants. The survey is comprised of 240+ questions and randomly presents ~35 questions to each respondent in order to collect baseline information with respect to customer awareness and customer perceptions of the top 100+ CMOs and top 50+ CROs servicing the drug development cycle. Five levels of awareness from “I’ve never heard of them” to “I’ve worked with them” factor into the overall customer awareness score. The customer perception score is based on six drivers in outsourcing: Quality, Innovation, Regulatory Track Record, Affordability, Productivity, and Reliability. In addition to measuring customer awareness and perception information on specific companies, the survey collects data on general outsourcing practices and preferences as well as barriers to strategic partnerships among buyers of outsourced services.