Life Science Leader , August 2014

Much like when it comes to choosing a contract manufacturer, CRO selection practices and outsourcing needs vary. Whether it’s business size, like comparing Big Pharma to emerging pharma; or business type, in comparing a biologics focused company to a small molecule company; it is important to know which business traits contribute to a mutually successful partnership.

And on the seller side, it is important to know which sales tactics reach the audience in need of your business’s services.  In reviewing the results of Nice Insight’s annual outsourcing survey, the data shows that there are many differences in how emerging companies perceive outsourcing to CROs, depending on whether it is an emerging pharma company or an emerging biotech. 

Starting with how these businesses identify potential CRO partners, the methodologies differed.  Emerging pharma companies place a significant amount of importance on referrals from colleagues (71 percent) followed by industry research (66 percent) and consultants (56 percent), whereas emerging biotechs showed less reliance on referrals (29 percent, placing third in priority) and more on industry research and consultants (tied for first priority with 52 percent).  Emerging biotechs seek out CROs at trade shows and events (38 percent, and second most popular method for identifying a new CRO); however, it seems that their event focus may be more manufacturing centric, with more than half of emerging biotech respondents stating they attend trade shows to identify CMOs (53 percent).

Emerging biotech respondents indicated a stronger interest in forming strategic partnerships with CROs than emerging pharma respondents. 

Behavioral differences continued when it comes to allocating projects to different categories of suppliers.  Emerging pharma companies assign only 27 percent of their projects to tactical service providers, as compared to emerging biotechs that assign 35 percent of projects to tactical providers.  Interestingly, emerging pharma companies are less likely to use tactical service providers for contract research work than they are for outsourced manufacturing projects (27 vs. 32 percent). It was also surprising to find that emerging pharma companies allocated slightly fewer projects to strategic partnerships with CROs than with CMOs (29 vs 31 percent), and assigned the bulk of projects to preferred providers (44 percent). 

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Emerging Biotechs are much more interested in forming strategic partnerships with CMOs than CROs.

Meanwhile, allocation of projects to the different supplier types was more consistent among emerging biotechs. This buyer group tended to use the three provider types similarly for outsourced work to both CROs and CMOs, with a slightly greater tendency to use preferred providers for CRO projects (37 vs 35 percent) and strategic partners for CMO projects (29 vs 31 percent, respectively). Emerging biotech respondents indicated a stronger interest in forming strategic partnerships with CROs than emerging pharma respondents (52 vs 46 percent), however, these buyers were much more interested in forming strategic partnerships with CMOs than CROs (75 vs 52 percent).  Conversely, emerging pharma companies were slightly more interested in forming a partnership with CROs than CMOs (43 vs 46 percent).
 
Emerging companies continued to show differences in outsourcing behavior with respect to the level of influence different traits have on CRO selection.  For example, adaptability and a history of success tied for top influencer among emerging pharma outsourcers, while experience ranked first among emerging biotechs that outsource work to CROs.  Some of the greater differences appeared in viewing how emerging pharma companies prioritized the range of services offered by a CRO (#3) versus how emerging biotechs ranked the offering (#6).  Another area with strong differences in priority among these groups was using offshore contractors to save on costs—the lowest priority (#8) among emerging pharma businesses and fourth priority among emerging biotech companies. 
 
Differences among emerging buyers continued when reviewing the less tangible attributes that influence CRO selection. Interestingly, while emerging biotech companies were less likely to use referrals as a source of identifying new partners than emerging pharma companies, once a company has made it to the shortlist, references from colleagues became the highest-ranking trait for this group. Emerging pharma companies placed communication at the top of the list, followed by responsiveness and the rapport between teams — and references from colleagues came in seventh. Emerging biotechs also prized good communication and responsiveness, yet these attributes received a lower frequency of mention (by roughly 20 percentage points) and tied with other soft traits, such as willingness to go the extra mile and a company’s reputation for doing quality work (second and third, respectively).
 
As a buyer of contract services, this information is especially useful when engaging a business for both research and manufacturing work.  Be mindful of which traits are strongest for the services that your company will be engaging the provider for, and whether the contract service provider excels in the traits that matter to outsourcing peers who have formed successful relationships with CROs.