Presentation covering the drivers for outsourcin change in the Pharma industry. Why the there is a need for strategic partnerships, the value they create and examples.

1. Transforming from a
Service Provider
to a Strategic Partner
Paul Overton, PhD
Group Director, Corporate Development
Outsourcing Preclinical Development
Conference, Zurich
30th November 2011

2. Overview:
 Are procurement and sales speaking
the same language?
 Defining terminologies
 Defining value and relationships
 Drivers for a strategic partnership
 Tools of a strategic relationship
 Examples of value creation
 Partnering for patients
 Integrated risk managed solutions

3. Are we talking the same
language?

4. Are we talking the same
language?
 Sales and procurement
 Perception of supplier/customer
relationship
 Buying process terminology
 Evaluated this further:
 I asked selected customers and then
the appropriate Sales and Account
Managers for their comments/thoughts
on two topics

5. Are we talking the same
language?
 Q1: How would you best define
value, benefit, cost and price?
 Broad mixing of terminologies
 Value seen as “cheapest option” “good
value”, “value for money”
 Cost and price were interchangeable
 Sales people financially less astute than
procurement
 Benefits seen as free “nice to have”
 Benefits seen as “differentiator”
 “Price is measureable, value is not”

6. Are we talking the same
language?
 Q2: How would you best describe the
relationship you currently have with the
supplier in question.
 Is it tactical, consultative or strategic?

7. Perception of relationship:
Customer CRO Perspective
Perspective
Strategic
Consultative
Tactical

8. Defining value:
What is value?

9. Defining value:
Value = Benefits – Costs
Strategic Consultative Tactical
Enterprise Problem Solving Transactional
(Neil Rackham, Malcolm MacDonald)

10. The Priceberg:
Total Value of Service
Price
Quality systems
Management
Downtime Hidden costs
Servicing costs
of service
Training
Re-work
Governance
Waste
Performance Acknowledgement: Todd
Snelgrove SKF

11. The value pyramid:
Co created
Value
Value ($)
Solution
Offer (packages)
Component or
Transactional

12. Drivers for strategic
partnership:
 Drivers to develop better drugs faster
and more efficiently
 Procurement maturity
 Supplier Segmentation
 Focus on high strategic value and high
supplier dependency accounts
 Strategic supplier development
initiatives
 “Joint value creation” to drug
development

13. Value in supplier relationships
High
Strategic
Strategic Value
Transactional
Consultative
Low
Low Supplier Dependency High

14. Value in supplier relationships
High
Strategic
Strategic Value
Transactional
Consultative
Low
Low Supplier Dependency High

15. Relationships:
Tactical Consultative Partner
Philosophy Customer is The service is We jointly agree
always right customer led the service to be
provided
Response Yes Yes but… What we could do
is…
Horizon Do what were told Fixing failures Continuous
and problems improvement
Acknowledgement Rob Maguire, Procurement
Consultant

16. Ground rules for embarking
on strategic relationship:
 Both parties should understand and
agree what success looks like
 Joint commitment to achieve it
 Requires excellent communication
 Investment in time…
 Honesty and openness
 A focus on continually challenging
conventions

17. Tools of a strategic
relationship:
 Mutually agreed quantifiable success
plan defined by an MSA and price
models
 Formal governance structures
 KPIs
 Performance assessments
 Challenges processes and continuous
improvement
 Reward system
 Share rewards of great performance

18. Importance of governance
structures:
Executive
leadership
team
Joint
operational
team
Study
management
team

19. Governance structures:
Executive
leadership
team
Annual Meetings
Joint •Top level direction and
future plans for both
operational
parties
team •Discussion of future
needs
Study
management
team

20. Governance structures:
Executive
leadership
team
Regular meetings
Joint (quarterly)
operational
team •Ensure ensuring
compliance and delivery
•KPI reporting and
evaluation
Study •Process improvements
management •Challenge resolution
team

21. Governance structures:
Executive
leadership
team
High level
communication
Joint
operational •Ensuring adherence to
team specific KPIs
•Milestones
•Real time management of
study challenges
Study •Feedback on a study by
study basis
management
team

22. KPIs: managing performance

23. KPIs: managing performance
 “The aim of KPIs is to manage
performance not manage failure” Rob
Maguire, Procurement Consultant
 Demonstrate that the relationship is
working
 Effective metrics can be incisive and
help drive the relationship forward
 Challenge work flow and bottle necks
 Metrics should be useful and easily
measurable for both parties activities
 Challenge the KPIs

24. KPIs: managing performance
 Metrics should constructive and positive
in nature
 Positive outcomes, “number of days
saved”, “costs saved”
 Negative metrics
 100% on time..creates a could do better
mentality
 A retrospective focus rather than a
going forward approach

25. Example 1:
Partnering for Patients

26. Partnering for patients:
 Consultative relationship with US based
Pharmaceutical Company
 Providing safety
assessment, bioanalytical and clinical
support...
 Governance Structures, MSAs, KPIs etc
 Long term relationship...

27. Partnering for patients:
 Orphan designated drug candidate for
genetic disease
 Phase III studies ongoing...
 Carcinogenicity studies were on plan
and still in life-phase
 Board level decision “Do what it
takes”
 Establishment of joint partnership
committee of senior scientists

28. Micro-
Scheduling
Statistical
Parallel
Evaluation
Activities
Transferred
Near Co Collapsing
Contemporaneous Created Serial
Peer Review
processing
Pathology
Value
Novel Shift
Joint Process
Work re-mapping
Approaches
Joint QA
Teams

29. Co-created solution:
 Agreed strategy to reduce post life
reporting by 30 days
 This at a time of peak workload
 Already with challenging KPIs
 Establishment of strict and newly
defined service-level agreements and
governance
 Micro scheduling and pro-active
vigilant monitoring of timelines
against the new plan

30. Co-created value:
 The partnership delivered the final data
set 54 days early!
 NDA submitted 63 days early
 Drug launched successfully launched
90 days early
 Co-created solution brought drug to
market quicker
 Patient need for life enhancing therapy
 Faster revenue stream for both parties

31. The new value relationship:
 Game changing opportunity created a
new way of working and developing
solutions
 The joint value mapping exercises
opened up innovative ideas of a new
working partnership
 Consultative to strategic thinking
 Creating a “Challenger” culture in a
relationship that was mature
 Defined value creation ($) for both
partners

32. Example 2:
Integrated risk-managed co-
created solutions

33. Integrated risk-managed
solution:
 European Pharmaceutical company
 Described as a “strategic relationship”
 Integrated development services
 In reality a consultative model
 Governance, KPI’s, RAG reports, fully
defined service protocols and reporting.
 Shared pipeline & resource planning
 Open long term relationship

34. The Challenge
 Strategic steering Committee meeting:
 First into man packages were taking
between 12 and 15 months to complete
 Challenged to improve efficiency
 Nature of outsourcing approach too
restrictive and created “large time gaps”
 Could we co-create a new way of
working?

35. Traditional programme
development strategy:
Customer Touch Points
Late Stage Candidate Safety Regulatory
Phase I PhaseII
Discovery nomination Assessment Affairs
Timeline

36. Co created solution:
 Joint process team established
 Value mapped the milestones, decision
points in the development programme
 Aim to reduce customer touch points
and “stop zones”
 Risk transfer to partner

37. Integrated risk development:
Customer Touch Points
Late Stage Candidate Safety Regulatory
Phase I Phase II
Discovery nomination Assessment Affairs
Timeline

38. The new value relationship
 Integrated programmes now run with
reduced touch points
 Reduction in package time ($)
 Streamlined package ($)
 Improved scheduling ($)
 Reduced resource duplication ($)
 Next stage:
 Further value mapping
 Vertical integration into discovery, CMC
etc

39. Conclusions:
 Ensure partners are using the same
language
 Partners have the same vision
 Focus on value creation not cost
reduction
 Value has $ sign attached!
 Define what success looks like and
measure it
 Define governance structures and
role, and escalation procedures

40. Conclusions:
 Utilise positive KPIs to manage
performance
 Challenge the relationship
 Establish ways to continually improve
the partnership

41. Final Thought:
Trust, openness and a “challenger
mentality” creates value and sustainable
partnerships

42. Thanks for listening
Paul Overton, PhD
Group Director, Corporate Development
Tel: +44 1480 892174
overtonp@ukorg.huntingdon.com