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Driving Sourcing Initiatives
through Shared Savings Goals
Presented by
Matthew Weinberg, C.P.M.
Senior Manager, Strategic ...
Disclaimer
This presentation contains forward-looking statements within the meaning of the Private
Securities Litigation R...
Session Objectives

1. Provide a brief overview of Cubist
2. Introduce the Strategic Sourcing process used to
generate ann...
Cubist Overview

5
About Cubist







Cubist Pharmaceuticals is a public, biopharmaceutical
company (NASDAQ: CBST) focused on the resea...
Building Blocks of Growth
5 Year Goals

4 Product
$2 Billion in
Global

Candidates in
Late-Stage

Revenue

Clinical Trials...
Process Used to Generate Savings Target

8
Cubist Strategic Sourcing Tracks And
Measures Four Different Types Of Savings
Savings Definition

Examples

Purchase price...
Annual savings targets are based on budgeted
initiatives creating credibility with leadership





Sourcing participate...
Tracking and Reporting

11
Quarterly reporting allows functional leaders to
review savings progress throughout the year


On a quarterly basis, savi...
Sample Q2 Savings Report: Commercial
Savings
Progress

Sourcing Initiatives Currently In Process

Forecast
Savings
100%
$X...
Results

14
Successful achievement of savings targets has accelerated
Cubist’s ability to deliver savings in complex categories
Priori...
2-Year Program has yielded significant results







Year-over-year savings increased 117% from 2012 to 2013

Number ...
Takeaways

17
Takeaways
1.

Develop a sustainable cost savings program that includes
■

Savings targets built on actual projects/budgets...
Thank You

19
Horizon 2013 Driving Sourcing Initiatives through Shared Savings Goals - Cubist Pharmaceuticals
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Horizon 2013 Driving Sourcing Initiatives through Shared Savings Goals - Cubist Pharmaceuticals

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CPOs today are aggressively & proactively working towards defining the performance criteria that will be used to measure procurements contribution to business objectives. Savings being one of the key performance attributes linked to procurement, in this session Matthew Weinberg, Senior Manager from Cubist Pharmaceuticals will be sharing his insights into the approach adopted by Cubist to track and report on the savings generated through different sourcing initiatives.

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Horizon 2013 Driving Sourcing Initiatives through Shared Savings Goals - Cubist Pharmaceuticals

  1. 1. Driving Sourcing Initiatives through Shared Savings Goals Presented by Matthew Weinberg, C.P.M. Senior Manager, Strategic Sourcing Cubist Pharmaceuticals Mary Kachinsky, CPSM, C.P.M. Senior Director, Strategic Sourcing Cubist Pharmaceuticals
  2. 2. Disclaimer This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. Any statements contained herein which do not describe historical facts, including but not limited to, statements regarding our plans to execute against our Building Blocks of Growth five-year goals through 2017, are forward-looking statements which involve risks and uncertainties that could cause actual results to differ materially from those discussed in such forward-looking statements. Such risks and uncertainties include: our ability to continue to grow revenues from the sale of CUBICIN® and ENTEREG®; the ability of our third-party suppliers to produce and deliver adequate amounts of our products and product candidates; the strength of, and our ability to successfully enforce, our intellectual property portfolio protecting our products and product candidates; competition from generic drug companies such as Teva, Hospira and Strides; our ability to successfully develop, gain marketing approval for and commercially launch ceftolozane/tazobactam and our other product candidates for their planned indications and on the timelines that we expect; our ability to discover, in-license or acquire new products and product candidates; our ability to achieve and manage our growth in our business; and those additional factors discussed in our most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission. We caution investors not to place considerable reliance on the forward-looking statements contained in this presentation. These forward-looking statements speak only as of the date of this document and we undertake no obligation to update or revise any of these statements.
  3. 3. Session Objectives 1. Provide a brief overview of Cubist 2. Introduce the Strategic Sourcing process used to generate annual savings target by functional department 3. Present methodology of how cost savings is tracked and reported 4. Share results of our cost savings program 4
  4. 4. Cubist Overview 5
  5. 5. About Cubist      Cubist Pharmaceuticals is a public, biopharmaceutical company (NASDAQ: CBST) focused on the research, development and commercialization of products that address significant unmet medical needs in the acute care environment Founded in 1992, company headquartered in Lexington, MA, currently employs ~ 900 people Recognized as a top-performing company: The Boston Globe’s Top Places To Work, Fortune’s 100 Fastest Growing Companies and Deloitte Technology Fast 500 Philanthropic efforts focused on supporting STEM education Cubist announced two strategic acquisitions that will bolster global leadership in the acute care/hospital environment, support the Building Blocks of Growth goals, and bring significant value to patients, shareholders and customers – Trius and Optimer 6 6
  6. 6. Building Blocks of Growth 5 Year Goals 4 Product $2 Billion in Global Candidates in Late-Stage Revenue Clinical Trials $700 Million in NonGAAP Adjusted Operating Income A Highly Differentiated Culture A Highly Differentiated Culture 7
  7. 7. Process Used to Generate Savings Target 8
  8. 8. Cubist Strategic Sourcing Tracks And Measures Four Different Types Of Savings Savings Definition Examples Purchase price reduction with historical price. 1 Cost Reduction Last Price Paid/New Price Purchase price reduction without historic price. Category specific. Savings generated by taking difference from bid averages, first bid/final negotiated price, comparable reference units, or industry benchmarks 2 • FedEx shipments • Rate card for Digital Agency Demand Management 3 Reduction in the consumption of a good or service through a Procurement-led initiative. • Restrict ability of employees to download smart phone applications that incur charges Process Improvement Savings from buying or managing goods and services more effectively. For Overhead impact: requires headcount reduction, not partial FTEs • Eliminating chemical waste through better management of chemicals inventory Cost Avoidance Avoiding price increases through negotiations or eliminating fees or charges that would have been incurred otherwise. Inflation management • Elimination of rate increase for certain CRO service providers 4
  9. 9. Annual savings targets are based on budgeted initiatives creating credibility with leadership    Sourcing participates in the annual budget planning process with Finance Planning & Analysis (FP&A) Sourcing colleagues, in collaboration with their functional leaders and FP&A representative, review high dollar, budget line items to identify savings opportunities Business Functional Leaders and Sourcing have joint ownership of the savings target The savings target is a performance goal shared by Strategic Sourcing and the Functional Leader 10
  10. 10. Tracking and Reporting 11
  11. 11. Quarterly reporting allows functional leaders to review savings progress throughout the year  On a quarterly basis, savings numbers are exported from iSave and rolled up at the business functional level Raw savings report extracted from iSave Quarter End  Day +3 Reports prepared and validated with Sourcing Team Day +7 “Thermometer Slides” prepared Day +15 Sourcing Leads share reports with Functional Leaders Day +30 Savings figures are socialized with business functional leaders prior to sharing the aggregate results at the Quarterly Business Review Meeting with Senior Executives 12
  12. 12. Sample Q2 Savings Report: Commercial Savings Progress Sourcing Initiatives Currently In Process Forecast Savings 100% $XXX Est. ‘13 Savings Comments Sales Training $XXX RFP due back mid august Marketing Agency – new product $XXX Direct negotiations focused on reduced rates and/or rebate Copay Assistance $XXX Reviewing vendor capabilities Initiative 75% 50% 25% 0% TOTAL $XXX $0 Realized Savings $XXX Top 3 Initiatives Contributing To The 2013 Savings Target Open Issues Related To Achieving 2013 Savings 2013 Realized Savings 2013 Forecast Savings Commercial exhibit booth staffing $XXX $XXX National Sales Meeting $XXX $XXX All Others (n=8) $XXX $XXX $XXX $XXX Initiative TOTAL Issue Recommendation Team is seeking a 4th supplier for printed materials RFP No action needed Key stakeholder on printed materials project has gone out on leave, delaying decision Escalate with Commercial management
  13. 13. Results 14
  14. 14. Successful achievement of savings targets has accelerated Cubist’s ability to deliver savings in complex categories Prioritization And Execution Of Identified Opportunities Fast Wave 1 Digital Agency Wave 2 Contract Labor Ease/Speed of Implementation Collaborations Market Research PMEs Meetings Lab Supplies & Maintenance Telecommunications Lab Services Relocation Creative Agencies IT Services Benefits Non-Clinical Studies International Wave 3 Legal Slow Low Scientific Agencies IT Software & Hardware Shipping Clinical Studies Business Impact/Potential Savings High
  15. 15. 2-Year Program has yielded significant results     Year-over-year savings increased 117% from 2012 to 2013 Number of Strategic Sourcing programs grew from 136 in 2012 to 200+ in 2013 Expanded Scope to include functional areas that were previously out of scope Strategic Sourcing is now called upon to deliver value beyond savings; e.g. sustainable supply chain, supplier performance management, risk and compliance
  16. 16. Takeaways 17
  17. 17. Takeaways 1. Develop a sustainable cost savings program that includes ■ Savings targets built on actual projects/budgets ■ Savings definition that are understood and accepted by the organization ■ User-friendly tool for tracking and reporting that can be easily audited 2. Socialize your savings program across all levels of the organization and get buy in 3. Communicate progress against savings targets regularly to functional business leaders and senior executives 18
  18. 18. Thank You 19

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