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BIO INNOVATION NOTES Client Relationships: How CMOs Can Avoid The Pitfalls By Eric Langer, president and managing partner, BioPlan Associates, Inc. O utsourcing in the biomanufacturing industry is increasing, and biotherapeutic developers are starting to contract out activities previously considered too core or strategic. Competition has intensified among CMOs who are keen to respond to increased demand for their services. But how can CMOs best differentiate themselves? Our latest study of the biopharmaceutical manufacturing industry (10th Annual Report and Survey of Biopharmaceutical Manufacturers) looks at the issues clients consider when outsourcing manufacturing to a CMO. Results from the study suggest that while technical expertise is obviously a factor, "soft" issues that surround communication skills and contract management are actually the crucial differentiating elements that clients focus on when evaluating potential partners. We asked 238 biomanufacturing decision makers from around the world to assess the importance of numerous factors when making a decision to outsource to a CMO. The most common consideration, indicated by 94.7 percent of respondents to be either "very important" or "important," was for CMOs to offer a secure supply (control of capacity). Other common considerations included sticking to a schedule (91.2 percent), demonstrating a track record with similar products (89.5 percent), establishing a good working relationship (89.5 percent), and complying with the company's quality standards (85.9 percent). On the other end of the spectrum, fewer respondents indicated that providing superior process development services, assistance in determining the value of capital avoidance, or "being local" were important considerations. TOP DIFFERENTIATORS FOR CMOs When it came to the most crucial differentiators, though, the rankings changed considerably. The top two factors viewed as "very important" by the most respondents were: • • Stick to a schedule (52.6 percent) Establish a good working relationship (49.1 percent). It's interesting to see that while capacity control was most commonly cited by respondents as a general issue, it did not figure among the most important. This factor also seems to have become less important over the past few years after hitting something of a peak in 2009. 6 The CMO Leadership Awards 2013 It's also worth noting that two of the top five most important factors relate to issues of communication. While those may appear to be "soft" factors, they strike at the core of these relationships, which are ultimately built on trust and a shared commitment. Each party has a stake in the outcome and must share in the responsibilities entailed. The prevailing sentiment in these relationships really needs to be that the contract and its associated negotiations are not the determiners of the relationship — it's the commitment and bond between the two parties that's most important. Establishing a strong relationship allows both flexibility and a shared focus on a common cause. Benefits include improved time management, the most crucial consideration for most biomanufacturers. Clearly, formal agreements and processes do have to be in place – but when a good relationship has been established, the inevitable issues that arise can be better handled or avoided. For CMOs seeking to differentiate themselves from their peers, fostering a reputation as an effective and cooperative partner can be just the nudge needed to sway a potential client's decision. The "technical" issues that are most important to clients should be part of a worthy CMO's expertise in any case. Obviously, everyone strives to avoid obvious patent infringement, and if a CMO did not practice "good intellectual business practice," it would not stay in business very long. The same could be said about complying with quality issues, these will clearly always be important to clients, but CMOs that cannot demonstrate a strong track record with quality issues are unlikely to last very long in the business. This is the ante required just to be in the game. Another very important component of any customer-CMO relationship is that both sides must be flexible and cooperative, and make efforts to understand the perspective of the other party. This component will make itself evident during early conversations about the individual steps of the collaboration, when potential red flags can be identified and resolved. This understanding of client needs appears to be lacking in the biopharmaceutical CMO space. Our study shows that many decision makers complain about a range of problems, including service suppliers' inflexibility and lack of responsiveness. Most CMOs claim to listen and communicate, but our data shows that these problems continue to top the list of relationship hurdles. Granted, this isn't universal, and many CMOs certainly listen to their clients' needs.