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Changing Paradigms in Outsourcing, Liz Stoner


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Changing Paradigms in Outsourcing, Liz Stoner

  1. 1. Changing Paradigms in Outsourcing An Investor’s Perspective Elizabeth Stoner, M.D. MPM Capital, Managing Director January, 2012
  2. 2. Outsourcing in BiotechTRADITIONAL• Command and control from Headquarters – Strong oversight and project management – Internal staff with redundant expertise to manage CRO – No leverage, due to small size of contract – CRO choice based on limited data (e.g. cost and experience)
  3. 3. New Paradigm for Outsourcing• Capital efficiency is key – Choose a CRO with expectation for volume-based discounts and appropriate management focus – Relegate functions to trust-worthy CRO • CROs providing temporary experienced staff – Minimize oversight from HQ: • but must retain key decisions internally – Explore potential to increase leverage • ?consolidate with other portfolio companies
  4. 4. VC Investing StrategyVCs seek VCs provide VCs expect• Novelty (with IP • Funding for research • Return to investors protection) and infrastructure to leverage history• Potential to meet medical needs • Experience in drug • Sharp focus with• Rational health development clear goals economics• Risk sharing • Engine for biotech • Lean organization innovation Build companies to fill large-pharma pipelines
  5. 5. CRO Strategy in the Consolidated MarketCROs seek CROs provide CROs expect • Clients committed to • Experience in drug • Repeat customers outsourcing development • Clients with pipeline • Client “partners” with of quality products • Talented active involvement in scientists, technician • Experienced, VC- R&D strategy s, state-of-the-art validated clients facilities • Clients with sufficient • Capital efficient R&D • Clarity of needs of cash flow to support clients contracted work VC partnership can help develop growing and lasting customer base
  6. 6. New Paradigm- Off-Shore Solutions• ? Which region of the world• Cost vs. Quality, patient access considerations• Ethnic diversity needed for ultimate regulatory approvals• Important to link to prevailing epidemiologic/medical practice
  7. 7. Key Drivers for Investors to Minimize Risk• Quality Highly linked• Cost• TimelinesNo tolerance for variability in quality ofdeliverables
  8. 8. Models to Consider• Outsourcing trial management & execution is strategy of choice• Design and decisions must reside with company• Can pool of portfolio companies provide leverage? – Pre-clinical services amenable to single partner – Experiment not very successful for clinical • Therapeutic diversity is a challenge • CEO endorsement • CMO resistance – Company must remain the client
  9. 9. Venture Capital Institutional money invested with the sole focus of aiding thegrowth and success of the company with an eye on an lucrative exit.• Venture Capital players have become increasingly more sophisticated ― Industry “mature” veterans are being recruited into smaller companies ― Willing to take on complicated development paths ― V C’s have evolved from investment to investment/operational management
  10. 10. The Virtual, Capital Efficient Company of Today• Deep expertise in key functions• Dependable outsourcing partners• Internal personnel with broad experience• Strong project management• Support functions provided by fractional-time experts (e.g. Finance, etc.)
  11. 11. New Paradigm for Outsourcing Conclusion• Companies need to stay lean to survive• Relegate control• Trust
  12. 12. New Paradigm for Outsourcing Conclusion• Companies need to stay lean to survive• Relegate control• Trust…VERIFY