This webinar covers preparation for, interactions with, and management of chemistry contract research, development, and manufacturing organizations (CDMOs) to ensure the best technical and cultural fit with smaller sponsor companies. Mitigation of the risks associated with chemistry outsourcing and building strong working relationships with vendors are critical to success. An effective stepwise approach to chemistry outsourcing addressing these issues will be presented.

1. Effective Chemistry Outsourcing for
Emerging Pharmaceutical
Companies
Stuart G. Levy, PhD
SGL Chemistry Consulting, LLC
Seventh Street Development Webinar
April 2, 2014

2. Background and Context
• Extent of Outsourcing is continuing to trend
upwards in all sectors of the pharmaceutical
industry
– Driven by increased outsourcing by big pharmas
– Causing ongoing reconfiguration of vendor
landscape
• Mergers, acquisitions, spin-offs to better accommodate
and served the largest customers
• What does this mean for emerging
companies?
SGL Chemistry Consulting LLC 4-2-14

3. Implications of Outsourcing Trends for Emerging
Companies
• Sufficient due diligence on prospective vendors is
necessary to ensure best technical, cultural and
relationship fit
• Emerging Cos must approach vendors as
collaborators, not overseers
– A high degree of sponsor participation is the best predictor
of success
• Transparent contracts
• High correspondence of work to sponsor needs and project
requirements
• Delivery of results of required quality within defined timelines
• Lack of attention to smaller customers by vendors is often self-
fulfilling prophecy
SGL Chemistry Consulting LLC 4-2-14

4. What Distinguishes Emerging Cos from Larger
Organizations?
• Goals are especially aggressive
– Survival hangs in the balance
• Budget and resources are very limited
– Judicious choice and prioritization of activities is always a challenge – “fit
for purpose” is a malleable concept
• Things change quickly
– Changes in direction and strategy can be abrupt, due to competing
priorities on multiple projects and limited budget or simultaneous
performance of studies that are interdependent
• e.g., dependence of production scale and API form on exploratory and /or IND-enabling
tox study data
– Communication of changes impacting vendors needs to be appropriately
managed
• Foresight and contingency planning are in short supply, but are
crucial to avoiding delays, failures and to minimizing difficulties
SGL Chemistry Consulting LLC 4-2-14

5. NCE Development at Emerging Cos is
among the highest risk endeavors in the
Pharmaceutical Industry
• Combination of contributing factors:
– High cost/limited budget
– Limited Resources
– Ultra-aggressive timing
– “Shifting Sands” of vendor landscape
• Entire Sector of Pharmaceutical Industry
Depends Critically on Early NCE
Development at Emerging Cos
SGL Chemistry Consulting LLC 4-2-14

6. Management of Inherent Risk
SGL Chemistry Consulting LLC 4-2-14

7. Stepwise Approach to Chemistry
Outsourcing - Outline
• Prior to Approaching Vendors:
– Identify and prioritize risks associated with
chemistry
• Technological Assessment
• Preparation of Technology Transfer Package
• Draft RFP
• Vendor Interactions
– Selection
– Engagement
– Relationship / Management
SGL Chemistry Consulting LLC 4-2-14

8. Technical Assessment
• Objective is to summarize what is known and to
identify gaps in knowledge of candidate molecule
that are crucial to proceeding with development
– Gaps are indications of potential work to be done by
vendors; gaps typically exist in:
• Extent of characterization
• Limitations and challenges of synthetic route
– Specialized or time-consuming operations
– Reagents or raw materials not available in sufficient quality or quantity
• Need for development of adequate analytical methods
– Plan to address gaps and limitations is part of
technical assessment
SGL Chemistry Consulting LLC 4-2-14

9. Technology Transfer Package Content
• Experimental procedures, analytical methods,
characterization data, observations
– Provide as much detail as possible
• Estimated OEL of target compound and key
intermediates
• Technical assessment should be provided to
prospective vendors
– Tech transfer package and tech assessment inform
scope and content of RFP
SGL Chemistry Consulting LLC 4-2-14

10. Value of Investment in Tech Assessment /
Tech Package Preparation
• Identifying what is not yet known – early risk assessment
– List of unknowns and risks informs vendor’s scope of work
• Time savings
– Communication with prospective vendors is enhanced
• Less time is wasted in defining goals and means of achieving them
• Less protracted, more transparent negotiation of contracts
• Advance notice to sponsor management
– Key risks and challenges, how they will be approached
– Strategic value, management of expectations
• Credibility conferred to sponsors in eyes of vendors
– Key to building productive relationship
• Enables preparation of effective RFP
SGL Chemistry Consulting LLC 4-2-14

11. Request for Proposal (RFP)
• Informed mostly by tech assessment and tech
package, along with preclinical and clinical supply
projection
– Formalize milestones and deliverables and means by
which they will be achieved
• Ultimate Objective of RFP:
– Communication of sponsor’s needs in clear,
unambiguous way
• Gives vendor something to work with
– Minimize number of iterations of draft proposals,
allowing efficient finalization of mutually acceptable
contract
SGL Chemistry Consulting LLC 4-2-14

12. Vendor Interactions - Selection
• General Tangible Criteria:
– Technical competence, capacity/facilities,
quality/compliance, reputation/track record
• Specialized Tangible Criteria:
– Solid state chemistry, Preparative chiral
separations, chemo/biocatalysis development,
HPAPIs
• Tangible aspects of vendor selection involve
matching project needs with best subset of
vendors meeting criteria for execution
SGL Chemistry Consulting LLC 4-2-14

13. Proposal Evaluation Criteria
• Correspondence to RFP
–Did vendor listen and pay attention during
previous communications?
• Level of understanding of issues
–Gives sense of initiative likely to be taken,
in the event of unexpected events
• Consistency of timeline, resources and
cost
–Does estimate realistically project
execution and delivery?
SGL Chemistry Consulting LLC 4-2-14

14. Intangible Aspects of Vendor Selection
• Sponsor’s experience of the process
– Was vendor responsive, interactive?
– Were proposals received in time frame promised?
– Were tcons to discuss RFP productive and cordial?
• Site visits for top vendor candidates
– Facility condition
– Interactions with staff and leadership during visit
• Indicates potential for creation of productive
relationship
• “Vibe”
SGL Chemistry Consulting LLC 4-2-14

15. Vendor Selection - Engagement
• Prerequisites:
–Alignment / agreement between sponsor
and vendor on scope, duration, cost and
approach
• Consensus on key risks and mitigation strategy
• Significant sponsor concerns must be raised
before contract approval
–Check on references for vendor(s)
• Find references not provided by vendor via
networking
SGL Chemistry Consulting LLC 4-2-14

16. Vendor Selection - Engagement
• Crucial Contract Content
– Performance
• What constitutes an out of scope activity?
• Timing of notice to sponsor of work that is out of scope
• What are terms and conditions (T&C) when problem solving goes
out of scope?
• Expect at least some out of scope work
– IP
• Customarily, sponsor owns all IP related to performance of scope of work
• T&C for technology proprietary to vendor
– Contract Exit/Termination
• What advance notice does sponsor need to provide to trigger
ramp down of work, ceasing of billing?
SGL Chemistry Consulting LLC 4-2-14

17. Vendor Selection - Engagement
• Risk-sharing (non-contractual)
– Sponsor bears brunt of risk, but:
• Vendor taking chance that drug makes it to later stages of
development, resulting in higher-revenue opportunities
• Kick-off meeting
– Preferably on site at vendor, at outset of project, with
assembled project team from both parties
• Review and confirm consensus on:
– Strategy
– Point people for both parties
– Frequency/nature of communication
• Opportunity to build relationship in earnest
SGL Chemistry Consulting LLC 4-2-14

18. Vendor Management
• Major activity is participation
– Pay close attention, ask questions, make
suggestions, track progress
– Communicate informally as well as formally
• Leverage trust and respect established in
preliminary stages of relationship
• Raise concerns and/or objections in a timely,
respectful manner
• Vendors enjoy working with sponsors that are
engaged and interested
SGL Chemistry Consulting LLC 4-2-14

19. Summary
• Small molecule NCE chemistry R&D and API
manufacturing are high-risk activities
• Errors, delays and failures likely to derail entire
programs
• To mitigate the high risks,
– Invest in technical assessment and technology transfer
package before drafting RFP, to facilitate a sound vendor
selection process
– Approach vendor selection methodically; Appreciate
impact of tangible and intangible selection aspects at
every stage
– Interact with prospective vendors as potential partners,
with the intent of building a relationship
SGL Chemistry Consulting LLC 4-2-14

20. Reference / Source Article:
Effective Outsourcing of Small Molecule
Chemistry R&D and API Manufacturing for
Emerging Pharmaceutical Companies – A
Stepwise Approach to Risk Management
http://www.pharmoutsourcing.com/Featured-
Articles/153810-Effective-Outsourcing-of-Small-
Molecule-Chemistry-R-D-and-API-Manufacturing-
for-Emerging-Pharmaceutical-Companies-A-
Stepwise-Approach-to-Risk-Management/
SGL Chemistry Consulting LLC 4-2-14

21. Thank You!
Questions?