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IIR Partnerships- CRO Alliances in 2015

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This presentation describes what pharma-CRO partnerships may look like in 5-10 years, and how they will be different from today's outsourcing approaches.

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IIR Partnerships- CRO Alliances in 2015

  1. 1. Sourcing 2015: projecting Sponsor-CRO Relationships of the Future Ken Getz, Tufts CSDD [email_address] Dave Zuckerman, CIS [email_address] April 2009
  2. 2. The Traditional Sponsor-CRO Relationship
  3. 3. Agenda <ul><li>Brief overview of today’s operating environment driving demand for outsourcing </li></ul><ul><li>Evolving sponsor-CRO collaborative structures </li></ul><ul><li>Looking to 2015 </li></ul><ul><ul><ul><li>Insights from R&D –intensive analogs </li></ul></ul></ul><ul><ul><ul><li>Implications for biopharma sponsor-CRO relationships </li></ul></ul></ul>
  4. 4. Operating Conditions Driving Demand for Outsourcing <ul><li>Productivity declining and low success rates </li></ul><ul><li>Rising costs and inefficiency </li></ul><ul><li>Increasing volume and scope of development activity </li></ul><ul><ul><ul><li>Globalization </li></ul></ul></ul><ul><li>Capacity limitations </li></ul><ul><li>Tightening access to capital </li></ul><ul><li>Growing underutilization of infrastructure and assets </li></ul>
  5. 5. Driving Vertical Integration Preclinical Phase I Phase II-III Percent of total spending on outsourcing 15% 23.2% 34% Past 3-yr annual growth in outsourcing spending 10.2% 17.6% 14.9% How long has pharma been outsourcing? 1-5 years 5-7 years for ‘services’; 15 yrs for facilities 20 years Drivers of outsourcing Capacity needs, expertise Regulatory reform, capacity needs Globalization, capacity needs
  6. 6. Driving New Relationship Structures Transactional, Tactical Strategic, Partnerships I J H G F D A E B C Large Small Mid- Size Source: Tufts CSDD 2008 Study
  7. 7. What Constitutes a Strategic Partnership? <ul><li>Limited, select number of providers based on competency (not capacity) </li></ul><ul><li>Long-term commitments - minimum of 3-years </li></ul><ul><li>Integrated teams, responsibility, accountability </li></ul><ul><li>Periodic portfolio (not project-task) review </li></ul><ul><li>Shared governance responsibility </li></ul><ul><li>Senior and middle-management committees </li></ul><ul><li>Use of coordination SOPs </li></ul>
  8. 8. Competencies are Shifting from Internal to External QA & Regulatory Affairs Planning & Design Project Management Data Management Externally- Based Internally- Based Competency
  9. 9. Implementing Partnership Relationships <ul><li>Organization-wide commitment </li></ul><ul><li>In-depth assessment of core competencies best performed either in-house or by providers </li></ul><ul><li>Definition of partnership elements </li></ul><ul><ul><ul><li>Goals; duration; staff credentials and availability; funding mechanism; expected workload; transition-of-work strategy; governance and conflict resolution policies </li></ul></ul></ul><ul><li>Select providers </li></ul><ul><ul><ul><li>Rapid centralization of provider management to single partner </li></ul></ul></ul><ul><ul><ul><li>Gradual consolidation of tasks and function </li></ul></ul></ul><ul><li>Allow time and commitment to nurture and maintain partnership </li></ul><ul><ul><ul><li>3-5 years </li></ul></ul></ul><ul><ul><ul><li>Constant attention to collaboration; governance; problem resolution </li></ul></ul></ul>Source: Zuckerman, 2008
  10. 10. Collaborative Work Description <ul><li>Different from traditional Request for Proposal </li></ul><ul><ul><li>Emphasize: </li></ul></ul><ul><ul><ul><li>“ How do you operate & collaborate?” </li></ul></ul></ul><ul><ul><ul><li>“ How well do our cultures align?” </li></ul></ul></ul><ul><ul><li>De-emphasize: </li></ul></ul><ul><ul><ul><li>“ What can you provide?” </li></ul></ul></ul><ul><ul><ul><li>“ What are your technical capabilities?” </li></ul></ul></ul><ul><li>Key elements of a Collaborative Work Description: </li></ul><ul><ul><li>Leadership & Governance </li></ul></ul><ul><ul><li>Customer Focus & Collaboration </li></ul></ul><ul><ul><li>Strategic & Project Planning </li></ul></ul><ul><ul><li>Workforce Management & Retention </li></ul></ul><ul><ul><li>Process Management </li></ul></ul><ul><ul><li>Performance Results </li></ul></ul>Source: Zuckerman, 2008 Outsourcing fails due to relationship problems, not capabilities
  11. 11. Insights from R&D –intensive analogs <ul><li>Movie Industry </li></ul><ul><ul><ul><li>Decentralized development </li></ul></ul></ul><ul><ul><ul><li>No GC, just a director capable of sharing a common vision and motivating a highly decentralized yet coordinated set of collaborations </li></ul></ul></ul><ul><ul><ul><li>Long-term collaborations between “duos ” </li></ul></ul></ul><ul><li>Financial Services </li></ul><ul><ul><ul><li>Established fewer, more strategic global partnerships supported by Integrated, standardized global IT data sharing and communication </li></ul></ul></ul>
  12. 12. Analog Insights (continued) <ul><li>Aerospace </li></ul><ul><ul><ul><li>Focus on development risk reduction </li></ul></ul></ul><ul><ul><ul><li>Cost-plus risk-sharing, not risk shifting </li></ul></ul></ul><ul><li>Google </li></ul><ul><ul><ul><li>Flexible, open innovation infrastructure for third party collaborations and team-oriented integration </li></ul></ul></ul><ul><li>Pixar </li></ul><ul><ul><ul><li>“ Technology inspires art… art then challenges the technology” – continuous relationship improvements </li></ul></ul></ul>
  13. 13. Implications for Outsourcing 2015 Primary Characteristics <ul><li>Integrated structure </li></ul><ul><ul><li>Processes </li></ul></ul><ul><ul><li>Coordinated team approach </li></ul></ul><ul><ul><li>Shared governance </li></ul></ul><ul><li>Technology integration </li></ul><ul><li>Joint planning </li></ul><ul><li>“ Accountability” contracting </li></ul><ul><ul><li>Risk minimization </li></ul></ul><ul><ul><li>Risk sharing </li></ul></ul><ul><ul><li>Alignment of incentives </li></ul></ul><ul><ul><li>Pricing transparency </li></ul></ul>
  14. 14. What will disappear? <ul><li>“ Risk based” contracting </li></ul><ul><ul><li>Pure cost-plus fee has sponsor absorbing all risk </li></ul></ul><ul><ul><li>Fixed pricing shifts risk to CRO </li></ul></ul><ul><li>Ultra competitive landscape </li></ul><ul><ul><li>Reduced selection & startup costs </li></ul></ul><ul><ul><li>Elimination of redundant oversight </li></ul></ul><ul><li>Conflict resolution </li></ul><ul><ul><li>Shared risk/conflict planning and mitigation </li></ul></ul><ul><li>Scope changes </li></ul><ul><li>Slow execution </li></ul><ul><ul><li>Faster startup </li></ul></ul><ul><ul><li>Resources available when needed </li></ul></ul><ul><ul><li>Accurate planning </li></ul></ul>
  15. 15. Role of the Niche Provider <ul><li>Third party participant in large Alliance </li></ul><ul><ul><li>Sub to alliance CRO </li></ul></ul><ul><ul><li>Sub to Sponsor for specialty planning </li></ul></ul><ul><li>Alliance partner for small biotech </li></ul><ul><li>Status quo provider for Sponsors unwilling to develop an Alliance </li></ul>
  16. 16. 2015 Partnership Alliance Characteristics <ul><li>CRO becomes a true, trusted development partner </li></ul><ul><li>One – three selected providers handling all ‘non-core’ competencies </li></ul><ul><li>Long-term commitments - minimum of 3-years </li></ul><ul><li>Completely new pricing and compensation approach </li></ul><ul><li>Joint portfolio review & forecasting </li></ul><ul><li>Senior and middle-management committees and shared governance responsibility </li></ul><ul><li>Use of coordination SOPs </li></ul><ul><li>Integrated systems and processes </li></ul>
  17. 17. The Traditional Sponsor-CRO Relationship
  18. 18. Future Sponsor-CRO Partnership

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