By Nigel Walker, managing director, Nice Insight
A little over a year ago, I was out to dinner with a group of participants after a JP Morgan investment conference. I was sitting with a friend whose San Francisco-based emerging biotech had recently won Series C funding. He told the group that with the funding, the company acquired an animal health start-up, and the business was now looking for a U.S.-based CMO for a cell line product they planned to license to big pharma. The COO of the emerging biotech relayed that one of its board members, who also happened to sit on the board of a large cap pharmaceutical company, had recommended Lonza for the project. I questioned, “Why Lonza?” knowing that they are one of the largest global CMOs and thinking that this small project might not be viewed as a priority.
I suggested he also consider KBI Biopharma, a much smaller CMO that would treat the emerging biotech as a key account. However, the COO of the emerging biotech had previously been warned of smaller CMOs, citing capacity issues. While scale-up capability is a legitimate issue when selecting a CMO, part of the landscape of change within the drug development industry is that small CROs and CMOs are forming partner networks with harmonized operations so that the ability to scale up exists within the network and poses less of a concern for technology transfer.
The dinner conversation highlighted some confusion and misinformation that pharmaceutical and biopharmaceutical companies face when trying to find the best contract organization for a project or long-term partnership. This is a challenge I believe is, in part, fueled by how these businesses market themselves. Researching and finding the correct CMO for a project can be tricky with so many CMOs using the same voice — and oftentimes the same clichéd terms — when marketing their services and capabilities in customer messaging. To further complicate things, bias emanating from Big Pharma regarding partner selection tends to influence this process even when the sponsor is not Big Pharma, as illustrated above.
A New Research Tool
I saw an opportunity to bring a new research tool to the market that would transcend some of the misinformation in the industry and at the same time help both sponsors and contract manufacturers in the partner selection process. This was when I started laying the foundation for Nice Insight. By conducting primary research on outsourcing, we could help save time and money spent on the partner selection process by enabling knowledge sharing among peers on the sponsor side of the industry — as well as provide valuable feedback to CMOs on how their businesses are known and perceived by customers.
Developing the research tool started with identifying the drivers and constraints regarding outsourcing by reading up on existing research, drawing on our extensive trade show experience, and conducting in-depth conversations with industry thought leaders. I enlisted a team to start building profiles on the services, capabilities, and regions of operation and an evaluation of marketing communications for 300+ CROs and CMOs. Next, the team created a quarterly survey to deploy among 40,000 members of the pharmaceutical and biotechnology industry who actively outsource aspects of the drug development process.
Details Of The Survey
The survey randomly presents approximately 30 questions to each respondent in order to collect baseline information with respect to customer awareness and customer perception. 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 key drivers in outsourcing: quality, accessibility, regulatory compliance, pricing, productivity, and reliability. These are ranked by respondents to determine weighting applied to the overall score.
The value of the information available through Nice Insight lies in users’ ability to quickly identify potential partners, in addition to establishing industry benchmarks that show where each CMO is positioned relative to industry averages and its direct competitors. We’ve learned in this short time since publishing the first report in March 2011 that entry into the CMO market has become a lot more difficult with the proliferation of strategic relationships between CMOs and Big Pharma. Consequently, it is essential for contract service providers to differentiate through messaging and targeted marketing efforts focused on the right audience. With this approach, it becomes clear that customer perception serves as a short-term measure for maintaining clients, and customer awareness serves as a long-term measure of sustainability.
During the BIO International Convention this year, I had the chance to meet with the CEO of KBI Biopharma, and I recounted the story of that dinner conversation. The KBI executive concurred that the outcome — the project was ultimately awarded to Lonza — is all too common. My hope is that Nice Insight’s research works to change the process over time to ensure that a wider range of appropriate partners is considered, which will optimize collaborations and help sponsors identify the perfect match.