By Jennifer Murphy, Erin Stanley, and Nikki Cammarata
While mergers and acquisitions (M&As) are common in the life sciences industry, CRO-related M&As are happening at an accelerated rate, with at least five occurring in the past couple of years alone.1,2,3,4,5 While the reasons behind these M&As are variable, the common effect is a restructuring of the existing and future partnerships with sponsors.
While the impact of CRO M&As on large pharmaceutical companies may be less severe, the impact on small, emerging biotechnology companies may be profound, since these smaller companies require an approach that is equal parts customized, flexible, and efficient. The smaller companies need a CRO partner who is actively invested throughout the clinical development process, and they can’t afford to lose pace when their CRO partner goes through a lengthy and complex M&A.
This current environment has presented the following question: In the golden age of biotech, how can small biotech companies successfully partner with “mega CROs”?
While small biotech companies may face short-term challenges if their current CRO partner goes through an M&A, there are ways to mitigate the impact. Within this article, we’ll provide recommendations for navigating this new partnership landscape.
Preparing For A Potential M&A
CRO M&As can happen without warning to a CRO’s sponsor partners and when they do, can lead to project team turnover and disruption in operational services and timeline delays – none of which are favorable when progressing through the drug development process.6 Proper planning and qualification support a measured, non-reactive approach to an M&A and save you from playing defense later when a CRO may be less willing or able to accommodate your requests.
Before committing to a CRO partnership, we recommend the following to prepare for a potential M&A.
Conduct A Thorough CRO Selection
A proper CRO selection will include quantitative and qualitative measures of CROs’ suitability for your clinical development plans. And while clinical operations may own this process, we recommend involvement of all relevant functional area leads (e.g., medical affairs, regulatory, data management, pharmacovigilance, quality assurance) in the overall analysis and selection.
Quantitative measures may include the proposed structure of the project team and services (including if any are subcontracted), overall cost, and audit and inspection performance history.
Qualitative measures may include the CRO’s company culture, as well as the working style compatibility between the sponsor and proposed CRO project team.
Qualify Your CRO
Leverage support from your quality assurance department or designee to conduct a vendor qualification audit. At a minimum, the audit should include a review of the CRO’s standard operating procedures (SOPs) pertinent to the functional area services being outsourced to the CRO. The objective of this review is to confirm that an appropriate quality management system (QMS) is in place and that your trial(s) will be conducted in compliance with local regulatory requirements and applicable guidelines. The audit should also include an assessment of the CRO’s project team, to include a review of CVs, job descriptions, and training records, as well as interviews of CRO senior management and project team members. Review of this information helps identify skill gaps across the proposed project team and can provide the foundation to produce formal support and oversight plans.
It is also important to investigate the CRO’s information technology (IT) infrastructure and processes that ensure data integrity, such as electronic systems validation, especially if responsibilities for services such as trial master file (TMF) management, data management, and investigational product (IP)/interactive response technology (IRT) management are delegated to the CRO. CROs must be able to communicate their data transfer agreement methods, software development, and computer system validation process flows, as well as IT disaster recovery plans and their backup and restore procedures. Sponsors should know what electronic data capture (EDC) and TMF vendors are being used by the CRO and what plans are in place at the company-level and study-level that document the use of these systems. If statistical programming services will be provided by the CRO, sponsors will want to review the CRO’s procedures regarding statistical analysis plans.
Just as we recommend that sponsors qualify CROs, we also encourage sponsors to verify the CRO’s qualification process for any vendors that they will be managing. Project management plans should clearly define the key vendor deliverables, and the CRO should ensure that they have processes in place to escalate subcontracted vendor issues to the sponsor.
Optimize Your Contract And Other Written Agreements (e.g., Master Service Agreement)
Understand your own comfort level with potential instability and build out the contract, accordingly. Such provisions may include:8
- penalties for turnover in key project team roles
- bonus and penalty clauses around timelines and deliverables
- risk and cost sharing for issues (and successes) that arise over the course of the study
Formalize Your Oversight Of The CRO
Early in the partnership, it’s important to establish a vendor management plan. Not only is vendor management critically important to FDA,7 but in case of an M&A, a plan supports the ongoing performance assessment of the CRO and can easily be updated if additional oversight of a functional area or service is needed.
Governance & Relationships
Equally important to legal agreements and project plans is your ability to establish and maintain an open, transparent partnership with your CRO. We recommend that you establish frequent touchpoints (e.g., monthly) with senior management at the CRO. These meetings should serve to review the progress of your own study, as well as any CRO-level activities that may impact your milestones. The more you put into this relationship up front, the more you will get back – in the form of open and honest communication – should an M&A occur.
Responding To An M&A
First, acknowledge that despite the short-term complexities and challenges of an M&A, the long-term outcome may be positive. The consolidation of services from two or more CROs may provide sponsors with the benefits of reduced or consolidated budgets, less complex vendor management and oversight, access to additional services and capabilities, expanded global reach, and improved technologies.6
As an M&A progresses, leverage your preparations and request information regarding your CRO’s current status, stability, and what the changes mean for your company. We suggest that you establish an internal point person and/or task force that can be focused on navigating and assessing the impact. Involvement of your quality assurance department or designee is strongly recommended.
Here are some questions we recommend you ask of your CRO:
- Is your organizational structure changing? If so, what does it look like, and does it impact our project team?
- Will there be a change to your company SOPs and/or quality management system?
- Have there been changes to any services that are essential to our trial?
- Will there be a pause in study activities at some point to complete the M&A?
- What are the geographic service impacts?
- Does this M&A involve the addition or subtraction of vendors subcontracted by the CRO for our trial (e.g., central laboratory)?
Depending on the anticipated future state, a risk assessment should be performed to determine impact on all facets of the study (or studies). This assessment could be based on the overall study timelines toward key milestones, complexities of the study relative to the services expected from the CRO, and any potential impact the M&A could have down the road. You should use this risk assessment to inform updates to your vendor management plan, thus ensuring appropriate oversight and mitigation of anticipated issues.
It’s important to revisit your original vendor qualification audit and verify that it retains coverage of all outsourced services and processes. If the M&A introduces new SOPs, for example, then it’s in your best interest to conduct a targeted vendor requalification audit of applicable services and/or departments of the CRO. Several study-specific plans, like the project management plan and clinical study oversight plan, may be impacted and require updates due to the M&A. You should also request to review any transition plans that were put in place because of the M&A. The requalification audit should cover any CRO services and processes that have changed due to the M&A to ensure that the transition has not caused any new issues or gaps for your study.
Don’t underestimate the importance of recurring requalifications of the CROs – that process is equally as important as the initial qualification and the requalification post M&A. The type of requalification activities and frequency of requalification should be made by your quality assurance team (or team member) using risk assessment methods. Sponsors should obtain cross-functional alignment to ensure that all internal functional areas agree on when CROs should be requalified. This process enables sponsors to continuously assess the progress and impact of the M&A.
Our last recommendation is to review your contract and hold the CRO accountable to all previously negotiated protective language. If the appropriate penalty clauses were included in the contract up front, you should be covered financially should there be a delay in key milestones due to an M&A.
As a small biotech company, it is natural to be concerned about getting lost in the shuffle at large CROs, especially when a CRO goes through an M&A. These smaller sponsors need trial management to be customized, flexible, and efficient, which can seem unachievable with the mega CRO model that is taking over our industry. Sponsors should recognize the significant impact that thorough CRO selection and qualification steps can have on their studies and should prioritize these tasks, while also optimizing their contracts and relationships with the CRO once selected. Investing up front in these activities can minimize any negative effects of a CRO M&A on your study, and don’t forget that it is possible for M&As to produce positive effects for the sponsor and your study. With a little optimism and a lot of preparation, smaller biotech companies can minimize operational disruptions due to CRO M&As and successfully partner with these emerging mega CROs.
- Spinner J. Syneos Health to acquire Synteract. Outsourcing-Pharma Web Site. Updated October 29, 2020. Accessed August 29, 2021. https://www.outsourcing-pharma.com/Article/2020/10/29/Syneos-Health-to-acquire-Synteract
- Vinluan F. CRO consolidation continues with ICON buying PRA Health Sciences for $12B. MedCity News Web site. Accessed August 29, 2021. https://medcitynews.com/2021/02/cro-consolidation-continues-with-icon-buying-pra-health-sciences-for-12b/
- CenterWatch Weekly Web Site. CRO Acquisition Trend Continues as Thermo Fisher Snaps up PPD. Accessed August 29, 2021. https://www.centerwatch.com/articles/25558-cro-acquisition-trend-continues-as-thermo-fisher-snaps-up-ppd
- PR Newswire Web Site. CROs dMed and Clinipace Merge to Accelerate Customer Success. Accessed August 29, 2021. https://www.prnewswire.com/news-releases/cros-dmed-and-clinipace-merge-to-accelerate-customer-success-301278994.html#:~:text=SHANGHAI%20and%20MORRISVILLE%2C%20N.C.%2C%20April,
- PR Newswire Web Site. Premier Research Acquires Camargo Pharmaceutical Services. Accessed August 29, 2021. https://www.prnewswire.com/news-releases/premier-research-acquires-camargo-pharmaceutical-services-301293731.html
- Morgan C. The emergency of the few: M&A in the CRO industry. Applied Clinical Trials Web Site. Accessed August 29, 2021. https://www.appliedclinicaltrialsonline.com/view/emergence-few-ma-cro-industry
- U.S. Food and Drug Administration. Bioresearch Monitoring Program (BIMO) Compliance Programs. Compliance Program No. 7348.810. Effective September 15, 2021. Accessed January 4, 2022. https://www.fda.gov/media/75916/download
- Ivey R. Addressing CRO Consolidation Risks: How to Protect Clinical Trials. KO Business Law Firm Web Site. Accessed August 29, 2021. https://kofirm.com/addressing-cro-consolidation-risks-how-to-protect-clinical-trials
About The Authors:
Jennifer Murphy is a senior consultant at Halloran Consulting Group. She is a research professional with more than 20 years of experience in clinical operations and development spanning a wide range of study phases and therapeutic areas, with expertise in project and program management, vendor management, site management and monitoring, and process and quality improvement initiatives.
Erin Stanley is a senior consultant at Halloran Consulting Group. She has more than 16 years of experience in clinical operations, quality management, and project leadership. Erin’s therapeutic experience primarily covers neurology, psychiatry, cardiology, rare disease, and oncology, and her product knowledge includes small molecules, gene therapy, monoclonal antibodies, and digital therapeutics.
Nikki Cammarata is consultant at Halloran Consulting Group. She has more than 7 years of experience in conducting early- and late-phase clinical trials. She uses her experience within clinical operations and clinical systems to to act as a clinical trial manager for global studies and to lead CTMS and eTMF implementations.