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REPORT EXCLUSIVE LIFE SCIENCE FEATURE 40 LIFESCIENCELEADER.COM JULY 2014 CMO SUPPLEMENT FOLLOWING THE LEAD FROM BIG PHARMA OR BIOTECH MAY NOT IDENTIFY THE RIGHT SUPPLIER FOR EMERGING/NICHE OR START-UP COMPANIES By K. Hammeke ftentimes the company is too new to the industry to have a well-established pro- cess 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 indus- try know that identifying which qualities make the greatest contribution to a posi- tive relationship with an outsourcing partner is an ongoing and ever-changing process. The fluid nature of the drug development industry – one that is con- stantly adapting to new health challeng- es, technologies, and regulations – is part of what makes it so difficult to outline which attributes in a contract manufac- turer should be prioritized so that the relationship functions like a strategic partnership in which both the buyer and CMO benefit. The continual transforma- tion 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 success- ful long-term partnership. PRACTICES OF EMERGING PHARMA AND EMERGING BIOTECH COMPANIES DIFFER Nice Insight reviewed the outsourcing behaviors and strategic partnering pref- erences of respondents who work at emerging / niche or start-up pharmaceu- tical companies and those who work at emerging or virtual biotechs to see how these smaller businesses identify CMOs and develop mutually beneficial relation- ships. Starting with the methods used to identify potential outsourcing partners, Nice Insight found that the practices of emerging pharma companies and emerg- ing 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 emerg- ing pharma companies (53 percent vs. 39 percent). The primary reason for engaging con- tract manufacturers — improving qual- ity — was consistent between emerg- ing 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 outsourc- ing motivations diverged between emerging companies is the desire to gain operational expertise: prioritized fourth among emerging pharma compa- nies but ranked eighth among emerging biotech companies. Mitigating supply O K A T E H A M M E K E Contributing Editor Following The Lead From Big Pharma Or Biotech May Not Identify The Right Supplier For Emerging/Niche Or Start-Up Companies 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'. 0 7 1 4 _ R e s e a r c h _ R e p o r t s _ O I _ S p o n s o r . i n d d 5 0714_Research_Reports_OI_Sponsor.indd 5 6 / 2 3 / 2 0 1 4 2 : 3 5 : 5 4 P M 6/23/2014 2:35:54 PM