1. Service providers: specialism vs
the one-stop-shop approach
Frédéric Gaussens, vice president, business development & strategy for SGS Life Science Services,
reviews the various business models adopted by life science services companies, looking at how
providers can be flexible in meeting the different needs of the small to mid-size biotech and large
multinational pharmaceutical sectors.
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T
here are various business models that
can be adopted by service providers
ranging from a very specialist
company to a broader-based one, up
to a full ‘one-stop-shop’. On the simplest
level, companies perform their services on a
transactional basis. Such is the case for
smaller, highly specialised, niche providers.
However, as service providers expand their
service offerings to include more routine
analyses as defined by the major
pharmacopeia (eg USP, EP, JP) or other
support services along the drug development
pathway, their offers have evolved into a
one-stop-shop approach. Here a company
positions itself to provide ‘everything’ to a
client, with the idea that if it can engage a
customer with a project early in the
development cycle, the customer will continue
with it throughout. Intermediate approaches
include looking at related services and
bundling these together as a value-added
service offer. One other model that has
developed in recent years involves dedicated
resources (personnel and/or facilities) to a
specfic client and project.
It is often assumed that different types of
models appeal to different customers and that
pharmaceutical companies ‘never’ opt for the
one-stop-shop supply option, but the
distinctions are not that black-and-white. While
smaller companies generally prefer the
one-stop-shop concept as it reduces the
number of vendor contacts and reduces cost,
one can encounter mid-sized and larger
companies that are looking for either speciality
or a one-stop-shop business relationship
model. Some of these strategic alliances of
the one-stop-shop type have been publicly
announced. For example: Covance/Sanofi for
the entire bioanalytical service offering, and
MSD/PPD when PPD (Pharmaceutical Product
Development, LLC) purchased the MSD
(Merck Sharp & Dohme) vaccine facility in
Wayne, PA, USA.
Satisfying operational needs
The-one-stop-shop concept is a fantastic way
for the procurement department from
bio/pharmacuetical companies to negotiate
substantial discounts in the Master Sercive
Agreement during global negotiations, but it
does not always satisfy their operational
needs. Indeed, one of the main reasons for
outsourcing work to a third party is to get a
service that they cannot provide internally for
either a lack of resources, missing expertise
or a strategic upper management decision
(eg no additional internal new hires or
investments). However, solutions cannot be
disruptive to the progress of a product in the
development pathway. As a consequence,
bio/pharmaceutical companies need to be
sure their outsource service provider is a
specialist, niche player that knows perfectly
how to handle the technical and regulatory
specificities and intricacies of their request.
The one-stop-shop provider, despite offering
critical mass through a large spectrum of
services, will be more a ‘generalist’ than a
specialist. However, selection criteria can
certainly differ. If, for instance, a company is
looking to outsource a routine test, then the
service provider simply needs to be
‘acceptable’. However, if the company is
looking for a specific test or assay, then it is
looking for the ‘best-in-class’ provider.
Additionally, having multiple niche players per
type of outsourced service helps to achieve
better pricing through intense price
competition, which at the end is a benefit to
the client company.
The one-stop-shop option is particularly
appealing to smaller biotechs because unlike
large companies, small biotechs do not have
vast departments and capabilities, and
outsourcing is more essential. Additionally,The microbiology laboratory within the SGS QC lab located at Wavre, Belgium.

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smaller biotech companies have a very limited
number of internal decision makers, thus
creating the unique point of contact for the
service providers. They find the
one-stop-shop concept attractive as it allows
them to establish a one-on-one relationship,
where the service provider can differentiate
itself by bringing value-added consulting
services. Futhermore, having limited
resources, the smaller biotech companies will
find it more secure to deal with a unique
counterpart, helping to speed up their access
to the market – time is money.
Service providers: deciding
which model to adopt
Service providers must be flexible and tailor
their service offerings in order to satisfy the
clients’ needs: clearly the small biotech’s
needs will differ from those of a multinational
pharmaceutical company’s. It really depends
on the size and related outsourcing provider
organisation, but it is true to say that often the
largest service providers are perceived as less
flexible and not proactive, so are they too big?
At SGS Life Science Services, we have the
ability to address the needs of both large
multinationals and smaller biotechs. Firstly, we
have a network of 21 laboratories in Europe,
North America and Asia. The service portfolio
is diversified and covers small- and
large-molecule testing, bioanalysis and a
clinical research service. Within this portfolio,
we also have specialised tests such as
extractables and leachables, higher-order
analysis of biologics, and biosafety. Through
our geographic coverage, we can address
large multinationals with routine analysis in
regions where they have acitivities. However,
the network allows clients access to the
specialised testing services, regardless of
where they are located.
For smaller biotechs, we can offer the
one-stop-shop concept. However, for larger
clients, we can also provide those highly
technical, specialised services in addition to
the routine analysis which are often performed
locally. So, because of our global geographic
coverage and broad service protfolio, SGS
has greater capability to customise an offering
that encompasses both specialised or niche
and routine testing services. Therefore, we
would not categorise this as a one-stop-shop
approach. This approach is more customer-
centric and does not force a customer to take
an entire offering.
Additionally, it is important to highlight the
increasing trend of the full-time-equivalent or
FTE outsourcing model alluded to at the
beginning of this article. In this model,
services are provided either on-site at the
client’s facility or at the service provider’s, and
the FTEs can be fully dedicated to a client’s
project. This model can be applied either to
niche services or to routine services. It
simplifies the customer/provider relationship
compared to a fee-for-services concept
because it allows for traceability on
productivity, a well-defined scope of work,
and a predetermined pricing level.
Current practices and
future opportunities?
The life science sector is on the verge of a
paradigm shift. Up until the past five years,
the outsourcing market had been extremely
fragmented, with a variety of players from
niche to multi-industry players, companies
such as SGS, Intertek and Eurofins. In the
past five years, there has been the beginning
of a consolidation of service providers and
this trend is expected to continue, similar to
what transpired in the mid-2000s within the
Clinical Research Organisation sector. While
niche players will always exist, M&A deals are
increasing with the outcome being the market
leaders of tomorrow. The ‘Big is Beautiful’
approach is still alive and SGS Life Science
Services will not miss any opportunities to be
part of it.
Further information
Frédéric Gaussens
VP, Strategy and Business Development,
Laboratory Services
SGS Life Science Services
1, place des Alpes
PO Box 2152
CH 1211 – Geneva
Switzerland
Tel: +41 22 739 9548
Email: frederic.gaussens@sgs.com
Web: www.sgs.com/lifescience
Meet Frédéric Gaussens of SGS Life Science Services
Frédéric Gaussens received Bachelor’s and
Master’s Degrees in Economy & Management
from the University of Economics, Toulouse
and a Master’s Degree in Banking & Finance
from the University of Dauphine, Paris. From
1997 to 2003, he held various positions in
finance and auditing. He joined SGS in 2004
as an international internal auditor. During his
tenure, he has had increasing responsibility
over the years from business controller to
business planning and marketing for the
Life Science Business. Frédéric was also in
charge of supporting SGS Life Science
Services’ global expansion by identifying
relevant acquisitions. He is currently the Vice
President of Global Business Development
and Strategy for SGS Life Science Services.
Case study: Vaccine development
SGS was approached a few years ago by a
biopharmaceutical company looking for a
partner for development of a vaccine.
Throughout the bidding process, the key
selection criteria were the following: a full time
equivalent (FTE) outsourcing model at an SGS
facility, a geographic proximity with the
biopharmaceutical company’s laboratory (for
project monitoring, training, and reporting
purposes), a single point of contact for a
one-to-one relationship, and a dedicated GMP
laboratory with strong analytical expertise.
Main challenges encountered were to:
• Design and build a new state-of-the art
laboratory that satisfied 100% of the
customer’s expectation. Furthermore, the new
lab needed to be fully dedicated to the
customer and be within one of the SGS
facilities.
• Define a productivity ratio and related
pricing for the related services.
• Manage fluctuating sample workload at the
inception of the project, by planning the
adequate number of FTEs based on the
pre-defined productivity ratio.
The proposed and implemented solution
was that:
• The client participated in lab layout/design
and in dedicated FTE training. While the new
SGS lab was initially used as a backup lab,
the FTE lab eventually became the primary site
for the client’s sample processing (during
peak periods, SGS had 12 dedicated FTEs).
• In order to anticipate peak activity, a steering
committee was formed for the project and a
yearly production plan was developed and
agreed upon between the two partners to plan
resource accordingly.
As a result:
• The long-term partnership has now been
in place since 2008, without any disruption,
with full testing granted exclusively to SGS and
complete client satisfaction.