By Nigel Walker, Managing Director, That’s Nice
More than ever, pharmaceutical and biotechnology companies are considering CROs and CMOs as partners in collaboration to achieve long-term development goals.
The Nice Insight 2015 industry survey of emerging pharma buyer groups showed how these companies today are choosing and evaluating strategic partners and the provider qualities that are most important to them. For the purposes of the survey, a strategic partnership is defined as a long-term commitment between two organizations to achieve specific business objectives by maximizing the effectiveness of each participant’s resources. The survey indicates that nearly three-quarters (73 percent) of the emerging pharma companies surveyed are interested or very interested in becoming involved in a strategic partnership with a CRO or CMO in the next 12 to 18 months.
The most important considerations made by emerging pharma companies when choosing an outsourcing partner are the provider’s financial stability and history of success (both 31 percent), followed closely by their operational, methodological, and therapeutic experience (28 percent). Also important are adaptability (27 percent) and range of service offerings (23 percent). Among the lesser important attributes influencing their choice are the use of contractors in emerging markets to save costs (17 percent) and the size and structure of the outsourcing organization (15 percent).
"Looking at the impact of company size on outsourcing relationships, there are strategic partnership opportunities for businesses and outsourcing companies of all sizes."
When emerging pharma buyers evaluate CROs or CMOs, the three most important qualities that influence their assessment are a provider’s industry reputation for doing quality work, followed closely by its responsiveness, transparency, and good communication, and by understanding the customer’s requirement. Cultural fit is considered least important. In terms of the methods used to assess a partner, unbiased peer reviews are extremely important, especially when trying to determine which outsourcing companies will work well with a company like theirs.
Looking back, comparing selection methods of emerging pharma and emerging biotech companies in the 2014 Nice Insight survey, emerging pharma companies placed considerable importance on referrals from colleagues (71 percent), followed by industry research (66 percent) and consultants (65 percent). Emerging biotechs showed less reliance on referrals (29 percent) and more on industry research and consultants (52 percent each). Emerging biotechs sought out CROs at trade shows and events (38 percent); however, more than half of emerging biotech companies attended trade shows to identify CMOs.
Coming back to 2015, in terms of work style preferences, emerging pharma companies rank operating procedures that are established collaboratively and long-term commitment as the most important factors when they evaluate a CRO or CMO as a strategic partner. The attribute of customized protocols is another important factor.
The biggest sources of dissatisfaction for emerging pharma when working with CROs and CMOs are unexpected charges, the timeliness of resolving issues, and product quality, with nearly one-third of companies naming each of these concerns.
Not surprisingly, the most important measure of a CRO’s or CMO’s project performance is the quality and accuracy of its work (50 percent). Other important performance-related factors include results of safety and compliance audits (44 percent) and technical expertise (44 percent), followed closely by costeffectiveness (42 percent) and on-time delivery (41 percent). Least important of the listed performance factors is billing practices (23 percent).
Looking at the impact of company size on outsourcing relationships, there are strategic partnership opportunities for businesses and outsourcing companies of all sizes. However, smaller companies and emerging companies who contract with big CROs worry that their projects will receive significantly less attention than the CRO’s strategic partnerships. Smaller CROs are concerned there won’t be a place for them in the industry, since their offering is narrower, and they cannot provide support services across the entire development cycle.
Downplaying these concerns, Nice Insight data shows that CROs with a solid customer perception score from Big Pharma or Big Biotech have similarly strong scores across other smaller buyer groups. In fact, the larger the percentage of businesses that have worked with the outsourcing company, the higher the customer perception score across all company sizes. The 2014 research showed that for Big Pharma, the lowest percentage of projects went to tactical providers* (23 percent), and nearly half (47 percent) went to preferred providers** rather than strategic partnerships*** (30 percent). Big Biotechs allocated approximately one third of their business to each type of relationship. Biotechs also showed the strongest interest in forming strategic partnerships.
The 2014 research also revealed that emerging pharma and emerging biotech companies allocated the smallest percentage of projects to strategic partnerships (27 percent). It also revealed, however, similar interest levels to Big Pharma in forming strategic partnerships — 43 percent were interested, compared to 46 percent of Big Pharma companies. Although emerging pharma and emerging biotechs’ allocation of projects to strategic partnerships was smaller than that of their larger counterparts (Big Pharma and Biotech), and perhaps there was some apprehension with respect to forming strategic partnerships, there were significant advantages for emerging pharma and emerging biotech companies in forming these partnerships, especially with global CROs. Partnering with a CRO enabled these businesses to quickly and easily expand their expertise and gain access to the latest equipment, methodology, and technology.
Survey Methodology: The Nice Insight Pharmaceutical and Biotechnology Survey is deployed to outsourcing-facing pharmaceutical and biotechnology executives on an annual basis. The 2014-2015 report includes responses from 2,303 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 ~125 CMOs and ~75 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.
If you want to learn more about the report or how to participate, please contact Nigel Walker, managing director, at Nice Insight by sending an email to email@example.com.
*TACTICAL SERVICE PROVIDER
The primary focus of these relationships is to meet the particular development needs of individual drugs as they move through the development continuum. Tactical service providers offer operational cost benefits, but are not designed to drive competitive advantage or shareholder value.
A group of carefully selected providers that have been thoroughly evaluated through due diligence. These relationships frequently offer shorter setup times and higher quality deliverables because the CMOs are thoroughly versed in the specifications of the sponsor.
A long-term, win-win commitment between two organizations for the purpose of achieving specific business objectives by maximizing the effectiveness of each participant’s resources.
2015 Pharmaceutical and Biotechnology Outsourcing Survey, Nice Insight, January 2015 www.niceinsight.com
2014 Pharmaceutical and Biotechnology Outsourcing Survey, Nice Insight, January 2014 www.niceinsight.com
Emerging Pharma and Emerging Biotech Value Different Traits in CROs, Life Science Leader, August 2014