Challenges Of Transformation And Balancing An Internal And External Network From BMS's Lou Schmukler

By Rob Wright, Chief Editor, Life Science Leader
Follow Me On Twitter @RfwrightLSL

When sitting down to speak with Lou Schmukler, president of Global Product Development and Supply at Bristol-Myers Squibb (BMS), we discussed his approach for transforming his company’s product development and manufacturing operations away from Big Pharma to that of a specialty biopharmaceutical company. And while much of this will be discussed (in detail) in the October issue of Life Science Leader, I thought some might enjoy having a preview of some of the key points as to how he approached the transformation along with his insight into the world of biopharmaceutical outsourcing, which we decided to publish here in our exclusive, Beyond The Printed Page.

Enjoy.

What are some of the basic steps to repositioning a product development and manufacturing organization at a Big Pharma to be more of a specialty drug operation?

The process needs to begin with the company’s business strategy. Without a clear business strategy, you cannot have an effective operations strategy. The company’s business strategy provides the guidance (e.g., the future product portfolio, technologies and markets) by which the future requirements and capabilities are determined. From this, the operations group can identify the best operating model that will align with and support the business. This process leads to a set of strategic choices around things like geographic footprint, level of vertical integration, organization structure and additional other key considerations. When it comes to strategy, I believe being deliberate about what you are not going to do is essential. When everything is a priority then nothing really is. In developing your priorities, it is important to focus on near term deliverables while maintaining the emphasis on the long-term vision of the company’s strategy as well. Also, describing the culture of the new organization is paramount. That said, it’s important to recognize that biologics and pharmaceuticals historically have different cultures. In bringing these together, you want to take the best of both. Two examples here include the integrated model of biologics along with the rich operational excellence legacy of pharmaceuticals. The use of other industry analogs is also helpful. Here you can learn from what has worked and not worked and benefit from those lessons learned. It’s interesting to note that 75 percent of major transformations fail. There are various reasons for failed transformations. For the successful transformations, it is clear that flawless execution is a strong contributing factor. Further to ensure success, it’s essential to have strong program management, governance, clear metrics and targets. Lastly, senior management must be fully engaged and own the change effort. Investment in overall manager capability is also integral.   

What are some of the challenges and special considerations executives need to pay attention to?

The planning phase for transformation is paramount. A significant amount of analysis and benchmarking is done during this phase. It’s important to move from planning to implementation as quickly as practical. Decisions will need to be made with the best information available knowing that things can change. This can be challenging when making sizable investment decisions years in advance based on a set of current day assumptions. R&D pipelines, sales forecasts and the competitive landscape are quite dynamic, and all can have major implications to your plans. One hedge to this uncertainty is to build optionality and flexibility into your plans. Some considerations here are the creation of more agile and scalable operations (i.e. single-use small-scale verses large-scale stainless-steel bioreactors), incorporating yet to be determined productivity improvements into projections (i.e. bioprocess optimization of titers and yields post approval) and forward-looking talent/workforce planning (i.e. new skills like the need for more data scientists and having a sustainable talent pipeline). The last point I would emphasize is the need for close collaboration with commercial and R&D at the most senior levels within company, as the big decisions and choices that need to be made could have major financial and business implications.

What are some key learnings you had regarding the BMS transformation?

I would highlight four in particular. The first is with regard to variablization and outsourcing initiatives. We initially selected some CMOs and suppliers not aligned with our vision, strategies, and values. We later made changes and selected some new partners, while also putting in place stronger relation-management and risk-mitigation strategies. A key lesson learned is to select partners with a vested interest in your company’s success. This means CMOs that not only have the right technical, quality and manufacturing expertise and capabilities, but also who understand the impact of your company’s products on patients’ lives, sharing your same passion and commitment.

Second, be sure to pressure test timelines, as you want to both move with speed and meet the commitments to the enterprise. That being said, the regulatory process is an example of something that tends to be extended and worthy of paying close attention to. Third, in considering geographic location for operations it is crucial to consider several factors around access to various resources. For example, if constructing a plant, key contractors may be in short supply if other plants are being built in the area. This is a common issue when interested in building in a popular bio-cluster region. The same supply limitations apply when trying to find the needed workforce and skills in these bio-clusters as well. Finally, building on the prior point it’s all about people. Don’t under estimate the time, energy and investment for the people and culture elements of your strategy. They are the most critical success factors and, in some way, the most challenging. It’s also the key differentiator between mediocrity and greatness.

On the BMS operations scorecard, what are the leading and lagging indicators you pay closest attention to?

On the Global Product Development and Supply (GPS) scorecard we have both leading and lagging key performance indicators (KPIs). Below are listed some of these. We do take a balanced approach, making sure we are looking at metrics covering the major aspects of our business, i.e. not just financial measures.

Examples of Lagging KPIs include:

• Supply Reliability - customer service line fill rate
• Quality Performance - batch rejections, regulatory-inspection performance and recalls
• Safety & Environmental - incident rates, energy and water usage, greenhouse gases
• Financial Results – expense, capital, inventory and productivity savings
• Priority Operational - strategic-program milestone completion
• Product Development Milestone Completion – staying off the critical path for a R&D program

Examples of Leading KPIs include:

• Innovations and patents filed
• Supplier performance metrics
• Days of supply in inventory
• Process capability indicators
• Audit item completion
• Operational risk mitigation
• Corrective and preventative action (CAPA) completion
• Equipment maintenance on-time completion
• Organizational surveys (e.g., engagement, manager capability, culture change, and diversity and inclusion)

What is some information about the biopharmaceutical industry’s outsourcing sector that people might find interesting?

The industry has long predicted a consolidation of the CMO/CDMO sector. The rate of consolidation has been happening at a relatively slow pace with only a small percent of the total sector held by the major players. Collectively, biopharma outsources about a quarter of its business, but this is increasing annually. Small molecules and generic products are a major component. Outsourcing for biologics, including biosimilars, is increasing at a high rate and should continue to drive sector growth. I think many major biopharma companies have a bias toward internal manufacturing but there is a trend toward greater externalization. There is a move over the past few years for CMO companies to adopt and pivot toward a more end-to-end CDMO model that provides a complete service offering to companies. Where there was once a main focus on volume and utilization now there is an additional emphasis on flexibility, smaller-scale operations, innovative technologies and tailored solutions. Primary drivers behind this evolution and ongoing consolidation is the need to grow, achieve economies of scale, capability expansion and increasing access to new customers. One of the enablers to accomplish this has been the acquisition of sites that big pharma has been divesting.