Outsourcing

Strategic Partnerships with
Service Providers
Bonnie Mangold
Vice President, Head of Strategic Sourcing
November 2009
Novartis Pharmaceuticals Corporation

Agenda

Introduction Strategic Sourcing

Why to bring in new capabilities and strategic opportunities?

New model of partnerships

Active Benchmarking - what you measure is what you get

2 | 8th Annual Partnerships in Clinical Trial Conference | Rotterdam Nov 4-6 2009 | Strategic Sourcing | Bonnie Mangold, Novartis Pharmaceuticals | Business Use Only

Integrated Development Sourcing Strategy

Capacity Reactive Strategic
From Driven Outsourcing Sourcing

Alignment of core/non-core activities

Strategic involvement in demand planning

Implementing an outcomes-based approach with strategic partnerships

Innovative sourcing models

Maximum cross-Novartis spend transparency & volume leverage


Benefits Strategic Sourcing

Expected benefit: Competitive
advantage

Executive time/focus on the core activities
Executive time/focus on the core activities

Access to innovation and expertise
Access to innovation and expertise

Shorten development times, and accelerate patient recruitment
Shorten development times, and accelerate patient recruitment

Reduced costs, faster decision making
Reduced costs, faster decision making
Access to additional capital to fund more projects
Access to additional capital to fund more projects


What are the reasons to change now?


Changing Face of Pharma
Focusing on biologics and high-potency Oncology
Re-establish position in generics (biosimilars)
Big Pharma
Targeting emerging markets
Acquisitions/mergers

Emergence of
Japanese, Indian, Chinese companies expanding globally
New Players

Early development pipeline nearly doubled from 1998 to 2008
Smaller
However, major pharma making radical cuts in portfolios to improve R&D
Development efficiency
Pipeline
Increasing trial costs and complexity

Critical element of every biopharm and pharmaceutical company
More Handing off functions previously considered core competencies including
Outsourcing toxicology, clinical data management, manufacturing
Trend to favor CROs with greatest capabilities and financial strength

Source: PharmTech.com April 8, 2009


CRO Evolution: The world is changing

2006-Today

2000/2005 Partnership models
emerge with big pharma
1980/90s Biotech/specialty pharma Big pharma moves
use CRO’s strategically towards strategic
outsourcing
Tactical outsourcing by big Well-funded biotechs
pharma lacking internal Growth rate for CRO
capabilities rely on CROs industry increases
CROs are spill-over capacity,
used tactically CRO demand stabilizes, Recent large deals:
Volatility in CRO growth rates performance improves,
and profitability investments add scale

Source: Covance; Literature searches


Agenda






Why to bring in new capabilities and strategic
opportunities?
“Active Benchmarking”
“Active Benchmarking”
to bring in new capabilities, improvement and strategic opportunities through
expanded partnership with CROs

Provide alternative resources and approaches to drug development
Provide alternative resources and approaches to drug development

Define process and roles & responsibilities for extended CRO
Define process and roles & responsibilities for extended CRO
partnership on program level rather common trial operational level
partnership on program level rather common trial operational level

Benefits Provide external development expertise to Novartis
Provide external development expertise to Novartis
(i.e. integrated model-based approach, real-time data analysis,
(i.e. integrated model-based approach, real-time data analysis,
faster decision making with less patients)
faster decision making with less patients)

Provide alternative solution to manage portfolio risk, i.e. CROs to
Provide alternative solution to manage portfolio risk, i.e. CROs to
provide at-risk capital or services (risk-sharing model)
provide at-risk capital or services (risk-sharing model)


Agenda






Strategic approach via Active Benchmarking

Program Team CRO Program Team Sponsor

External team integrated into Company line functions
Program Teams via Sourcing generate learning about
relationship insufficient internal processes
Involved in strategic Results in reviewing own
development activities rather productivity and adapt as
than trial operations only New model needed
of CRO
Providing scientific Gain scientific learning from
opportunities and expertise partnership external partner
Uses a model-based Gain understanding about
approach including real-time integrated program team
data analysis sourcing model


Develop key principles of partnership…

Communication driven Establishing mutual trust
Monthly Progress Report of
through single-point of and partnership
performance metrics
contacts (fully integrate CRO team
(agreed upon the project
(fewest touch-points as members to the project
start)
possible) team)

Clearly define sponsor and Quarterly Review Meetings
Gain stakeholder support to
CRO roles and (F2F) with Program Team
overcome internal barriers
responsibilities and Clinical Team


Develop key principles of partnership…(cont.)

Face-to-Face Kick-off
Meeting essential
An understanding that not Willingness to allow
(define objectives, roles &
all partnership processes empowerment to the
responsibilities across
will be defined upfront strategic partner
departments and both
organizations)

Keep it simple and remain
Overcoming well- Establish infrastructure at
focused on key program
established cultures to the beginning of a project
questions
allow innovative (incl. legal, contracting and
(do not address too many
approaches quality assurance)
questions at once)


Extended responsibilities included…
Design and finalization of assigned trial protocols (one compound), including
Design and finalization of assigned trial protocols (one compound), including
data analysis and clinical study report
data analysis and clinical study report

Clinical lead of the studies, including medical and statistical consultancy
Clinical lead of the studies, including medical and statistical consultancy

Utilizing integrated, model-based development strategies focused on key
Utilizing integrated, model-based development strategies focused on key
decision points
decision points

Overall Program Lead (incl. regulatory, drug supply management, trial
Overall Program Lead (incl. regulatory, drug supply management, trial
operations, contract management etc.)
operations, contract management etc.)

Budget Management and support of invoice handling and negotiations with
Budget Management and support of invoice handling and negotiations with
other service providers
other service providers

Provide aacompletely transparent status of study progress through aasecure
Provide completely transparent status of study progress through secure
web portal
web portal


Were there any bottlenecks?
Novartis remained the lead for key
regulatory, drug supply release and
financial responsibilities due to New internal processes need to be developed to
established internal processes integrate external partner successfully

Difficulty to overcome internal barriers Benefits of change in complex
to give-up “core” activities & to deviate organization not always immediately
from established processes. understood

Open communication essential to
overcome bottlenecks


Feedback – Measurement of success

Monthly Traffic Light Reports on agreed metrics

CRO Feedback to Novartis

Novartis Survey Feedback to CRO


Established Governance Model
Monthly Program Meeting Updates with metrics in place

Quarterly Review Meetings with CRO and Novartis

Quarterly Surveys to assess overall collaboration


Clinical metrics: key milestones for reporting and
relevant performance benchmarks monitored
Milestones/
Description / Details Performance benchmarks
measurements
Time from assignment of CTH to
FP Final protocol signed (plan vs. actual)
FP
FPFV First patient first visit (plan vs. actual) Time from FPFV to LPFV
LPFV Study milestonesvisit (plan vs. actual)
Last patient first and progress reported on a(recruitment time)
Monthly
LPLV Basis topatient last visit (plan vs. actual)
Last core Novartis Lead None
FIR
Close collaboration between CRO Ops Lead None
First interpretable results
&
LDG Novartis Dirgenerated (Program and Sourcing) Time from LDG to DBL
Last data of Ops
DBL Database locked (plan vs. actual)
CRO joins Global Program Team meetings on monthly to CSR
Time from DBL
CSR Clinical study report available (plan vs. actual)
basis for project update and scientific input to
Expected cost (FTEs and external cost); total
developmentpatient
Budget & Cost and per Cost per patient (?)
Actual vs. expected cost
Number of patients
Other Number of sites None (?)
Total study duration


Actual versus Planned Milestones

Time Actual Milestone versus Planned

30

20

10

0
Working Days
-10

-20

-30

-40
FP FPFV – LPLV – FPFV – LPFV – LP LPLV –
Cohort A Cohort A Cohort B-1 Cohort B-1 Randomized Cohort B-1

Milestones


CRO Feedback – areas that worked well

Sponsor educated CRO partner to learn internal processes quickly
Project standards were kept (CRF’s, vendors) ensuring integration into program
CRO Feedback

Willingness and openness to integrate CRO partner into NVS Program Team

Investigator contracts: Inclusion of CRO into the approval process

CRO successfully managed vendor negotiations and contract execution

Open to working with new vendors at the CRO’s recommendation
Coordinated QA audits of new vendors

Leveraging expertise and relationships with KOLs

Safety reporting – process integrated with CRO


Survey Results 2009
66% satisfied/very satisfied in Q3 compared to 37% in Q1 Survey:
30% increase in overall satisfaction within 4 months

Overall Satisfaction Rate

Overall Satisfied

0% 20% 40% 60% 80% 100%

Survey Q1 2009 Survey Q3 2009

Response rate ~70%

Survey Results 2009
92% agreed that the Active Benchmarking 67% (21% increase from Q1) agreed that
Project provided useful insights/lessons that Active Benchmarking Project provided
may apply to future collaborations with effective external resources to the Novartis
external resources Development Team
42% increase in “strongly agree” Dissatisfaction rate decreased over time

100% 100%

80% 80%

60% 60%

40% 40%

20% 20%

0% 0%
Strongly Agree Neither Disagree Strongly Strongly Agree Neither Disagree Strongly
Agree Disagree Agree Disagree

Survey Q3 2009 Survey Q1 2009 Survey Q3 2009 Survey Q1 2009


Outlook: Main Questions to be answered

Costs: How efficient was resource utilization?

Speed: What was the speed to decision point?

Quality: Did the data produced enable confident and
informed decision-making?

Concept: What were risks of the specific approach?
What did we learn that could be brought into
our organization?


Agenda






Why Use Metrics?
Increase focus in a complex environment
Focus on what needs to be done to reach goals

Move down the “learning curve”

Work smarter, not faster

Reduce “ineffective” work

Source: David Zuckerman (2006), “Pharmaceutical Metrics” from Gower Press


Three Principles of Metrics

1 2 3

Metrics measure Metrics help us Metrics get us out
progress toward prevent failure of ruts/routine
our goals

Source: David Zuckerman (2006), “Pharmaceutical Metrics” from Gower Press


Metrics need to be defined and agreed upon…

Metrics for outsourcing

To provide information for evaluating our project
success, ultimately driving decision making for future
collaboration with CRO
Allow for consistent measurement and comparison of
internal vs. external/ outsourcing option


Summary – Productivity improvement needed

Constructive Change needed to make clinical trials affordable

Pilot innovative collaborations with less complexity

Reduce Bureaucracy and number of contracts

Implement sensible benchmarking

Increase mutual trust with external partners

Communicate success broadly to gain wide stakeholder support

Adapt risk-shared approaches


Outsourcing

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