By Jean-Francois Denault, Life Sciences Consultant
The ecosystem around biotech and small pharma company has evolved in the last twenty years. In the early 2000s, biotech and small pharma were building fully integrated companies, internalizing as many activities inside the company as possible. This meant creating larger company, which required significant financing rounds, leading to high-risk situations if one of the key compounds failed during development.
Fast-forward today, where the virtual company model is favored by many as a way to reduce risk. For those unfamiliar with the model, a virtual company is built around a condensed organizational model, where operations are contracted to external third parties to reduce the need for large investments and to minimize risks. This is done for most company operations, including both pre-clinical studies (toxicology, animal models and so on) as well as clinical studies (phase I, II and III). As such, it is not uncommon for a biotech / small pharma company to have only a handful of full-time and part-time employees, and externalize most of its operations to third parties.
This has led to a phenomenal growth in the CRO sector, as well as the emergence of specialized service providers. We have today a number of disease or condition specialized CROs, as well as regional specialist as well as providers who specialized in on part of the development chain (a CRO that specializes exclusively in toxicology, for example). This has also increased the importance of collaboration in the client-supplier relationships. In the next few pages, we will go over four lessons in outsourcing in life sciences, as shared by three experienced key opinion leaders in biotech.
One of the most motivating parts of working with a CRO is the opportunity to delegate duties and functions to a third-party, a partner that most likely has more experience in clinical research than the company has internally. As such, expectations are that the CRO will be able to handle the project going forward.
But companies should remember they are delegating a responsibility, not divesting it, and as such should allocate the time and effort needed to ensure the project is successfully understood by the CRO performing the research.
This is something Dr. John Gillard emphasised in our interview. Dr. Gillard is Vice President Drug Development at KalGene Pharmaceuticals, a small virtual biotech company specialized in the Alzheimer space. Favoring the virtual model, the company has utilized a number of CROs for pharmacology, animal studies, toxicology and more. He emphasized that biotech companies have to first properly define their project scope before they work on outsourcing it. “You need to know what you have and what you want” mentions Dr. Gillard.
Companies engage in the outsourcing of their clinical operations to CROs as they expect these companies will have all the tools in place to conduct clinical trials properly. They expect the companies will have the necessary expertise in project management, collaboration and clinical studies, which will save significant time and money for smaller companies. This is where going beyond costs is key. As a small company, you cannot afford to fail with a misaligned clinical trial.
As such, don’t hesitate to work in-depth during your evaluation phase, and ask for examples of how the CROs experience and expertise addresses your needs. This might also mean conducting a pre-qualification audit to ensure that the CRO can provide the services needed, with the necessary skills.
Sophie Chapelle is a serial entrepreneur in the life science space, with extensive experiences in outsourcing. She has played a key role in selecting CROs for the start-ups she built. Having managed the process more than once, she follows a simple three step process to choose her CRO:
1) Do your homework prior to outsourcing
This includes understanding the patient journey, doing the necessary prep work and talking to Key Opinion Leaders (KOLs) to build your study synopsis. This will ensure you stay in the driver’s seat throughout the outsourcing process and are able to make decisions effectively.
2) Conduct a comprehensive Request For Proposal (RFP) process
Reach out to multiple CROs and invite both big and small CROs; this will be key in giving you ideas around implementation, and help you in evaluating the best approach, while giving you a good idea around costs. Also, when you send out your RFP, give participants a week to send you questions about your project. Then build a Q&A with the accumulated questions, which you will share among all participants. This is important to ensure consistency among all the bids you receive.
3) Hold a bid defense meeting (preferably in person) with two to three shortlisted candidates
Here, its important to keep it real: set the agenda for the meeting, and don’t be scared to ask gritty questions and discuss real-life problems. Who will the team members handling my project be? What are they currently doing? What happens if one (or more) individuals are not available? Go into the details to really assess competence, to make sure the CRO understands your project, and to insure they are allocating the proper resources to your project.
Flexibility remains a big aspect of selecting your CRO. By the nature of their work, biotech and small pharma companies are very flexible organizations, especially those using a virtual model. As such, biotech and small pharma should keep an eye out for organizations that are more flexible in their internal processes.
Ms Chapelle recalls a case where she had just started a project with a new CRO, and during the set-up phase, she discovered that the data management system used by the CRO was inflexible and rather dated. “After multiple conversations, we realized that the system was not a fit for smaller studies like ours. As such, we had to terminate the contract and move onto another CRO”.
Dr. Garth Cumberlidge, Semathera’s president and CEO, is a serial biotech entrepreneur with multiple successful virtual biotech exits. He also emphasized the importance of the CRO selection process, as it gives the small biotech company the opportunity to define the relationship with its potential CRO.
“During negotiations, you both define your expectations, and build that into your contract. This should take the form of a formal timetable, and you should include definitive timelines and potential penalties if timelines are not met. Remember that respecting the timeline is critical for smaller companies, and that missed milestones can not only hinder your ability to continue the trial, or your ability to raise future funds, but could also hinder your ability to function as a company as you burn through your cash reserves.”
Working with a large “blue-chip” company can give investors and stakeholders a sense of security. These larger players often have scope and resources that the smaller companies cannot compete with. Often, working with a big CRO can be beneficial to a start-up, especially for clinical studies: big CROs can provide regulatory guidance and advice as part of their overall service offering, something small CROs don’t always have experience in.
Furthermore, if your plan is to partner your product with a big pharma down the road, there might be some additional value in working with a big CRO: when big pharma starts its due diligence, its been known to give more value to studies performed by CROs they know then those performed by companies they are not familiar with. As such, the decision on commercialization or partnering is crucial when selecting a CRO.
But there are some downsides to working with a large CRO as well. Some companies hiring large CROs mention they had to struggle through their study as their main point of contact became inaccessible when they needed them, suffered through high turnover in the study team or budgeting issues. These companies found themselves struggling just to get attention, while others had to struggle just to start the project, as various resources that were promised to their project were re-allocated to more high-profile projects. In general, larger CROs prefer to work with larger pharma as there is the implied possibility of recurring projects and higher revenues. As such, smaller CROs might be well adapted to work with smaller life science companies.
Kalgene Pharmaceutical is one a company that prefers collaborating with smaller specialized CROs. While at first, it was a question of cost, Kalgene quickly found that working with smaller CROs let them have better oversight of their partner’s capabilities and enabled a closer working collaboration.
“For us, the evaluation came down to developing a collaborative process (with a smaller CRO) versus using a more turnkey solution (with the larger CROs). We found that entering a collaborative process enabled us to have direct access to technical resources, which is reassuring when you can spend time with a specialist who will truly understand what you are trying to do, not just a project manager.”
It might be tempting to delegate a lot of responsibility and ownership around the project to your CRO, but in the end, the sponsor ultimately remains responsible for conducting and completing its clinical trials.
For Dr. Cumberlidge, this means almost daily communications between the person responsible for the clinical trial in your organization end and your CRO’s project manager: “It is crucial to address issues and difficulties as soon as they occur, and not let them pile up. This means hiring a strong project manager, who has in-depth knowledge of the process, and who is comfortable almost micro-managing it. This is the person on the front lines, who will be the first to raise flags if there are any issues”.
Outsourcing clinical activities is often a necessary process for biotech and pharma. When done correctly, it not only advances their compounds in the clinical approval process, but it can also increase the expertise and knowledge of internal resources.
If there is one thing to remember, its that outsourcing should not be seen as an opportunity to divest an activity or a responsibility, but should rather be perceived as an opportunity to learn and build expertise as well. The more hands on you will be, the more you insure success in your outsourced activity, and the more you bring back in your own organization.
Jean-Francois Denault has been working in life sciences as a consultant for over 15 years. He has worked with over 50 clients including larger companies such as J&J, P&G, ABBVie and Novo Nordisk. He has written articles for various publications, and is the author of the “Handbook of Market Research for Life Sciences” and the “Handbook of Marketing Strategy for Life Sciences”.
“In the last few years, several of the larger CROs have developed a targeted group within their organization to focus on clinical trials with biotechs. While offering more focused therapeutic experience and a larger geographic footprint, these groups are governed by corporate level systems and processes that may not be conducive to the flexibility required when working with biotechs. There also continues to be a higher level of CRO staff turnover which may result in team members being assigned who lack the expertise in managing adaptive design trials.”
Megan Liles, M.S., Executive Director, Operational Strategy and Feasibility, Precision for Medicine, Oncology and Rare Disease
