From Qualified to Ideal: The Importance of Partnership

Nice Insight's virtual panelists weigh in on what makes contract service relationships work best.

Outsourcing is often critical to the success of a product and partnership can be just as critical to the success of an outsourcing relationship. According to the 2016 Nice Insight CDMO Outsourcing Survey, nearly 70% of outsourcing projects were sent to a combination of preferred providers and strategic partners, with the latter being awarded 26% of the business. Further, 95% of survey respondents were interested or very interested in becoming involved in a strategic partnership in the next 18 months.

Strategic Ties An Imperative

According to Peter Soelkner, Vetter Pharma Intl’s managing director, there is a real distinction between what constitutes a “qualified” supplier versus an “ideal” supplier. “As we see it, the ideal supplier is differentiated by one very important term — ‘strategic partnership,’” says Soelkner. “That means an ideal supplier will put the customer first when creating the partnership, making almost every effort to see things from their perspective.” As Soelkner explains, Vetter is challenging itself to view the partnership through the lens of the customer, making decisions that are in the interest of the customer, while at the same time making decisions that make good business sense for the company.

Vetter is a contract development and manufacturing organization (CDMO) and a fill finish innovator of aseptically pre-filled syringe systems, cartridges and vials. With production facilities in Germany and the United States, Vetter serves the top 10 (bio-) pharmaceutical companies as well as a growing list of small and midsize companies. Its portfolio spans state-of-the-art manufacturing from early clinical development through commercial filling and final packaging of parenteral drugs.

An ideal supplier will put the customer first
When creating the partnership, making every
Effort to see things from their perspective.

Peter Soelkner – Vetter Pharma International

Narrowing It Down

There’s plenty of evidence to point to the fact that a primary goal of today’s pharma and biotech companies is to reduce the number of suppliers and contract manu­facturers that they partner with. “In past years [pharma companies] have come to realize that it is far better to develop part­nerships with only a few suppliers whom they deem to be strategic in focus, not simply tactical. This intent has led to the creation of programs by pharma and bio­tech companies alike on how to success­fully assess and choose partners.” In this process, says Soelkner, such companies are continuously screening suppliers, cre­ating databases and utilizing electronic bidding — all with the goal of creating a base of only a few qualified service provid­ers. “Over the last decade, they have also begun evaluating existing suppliers with scorecards and key performance indica­tors such as ‘adherence to cycle time’ or ‘supply plan adherence,’ explains Soelkner.

Any supplier wanting to play an impor­tant role in today’s strategically driven market must accept these and similar chal­lenges. Successfully doing so offers prom­ising opportunities to play an important part in any future outsourcing decisions.

An open, honest and transparent relationship is what i think will ensure long-term success between two organizations versus one trying to win.

Bill Pasek – Avara Pharmaceutical Services

Partners, Of Course

For Bill Pasek, Executive Vice President and CCO at Avara Pharmaceutical Ser­vices, partnership is key: “An open, hon­est and transparent relationship is what I think will ensure long-term success be­tween two organizations versus one trying to win.” A private, wholly owned subsid­iary of American Industrial Acquisition Corporation (AIAC), Avara Pharmaceutical Services provides bulk drug formulation and manufacturing, along with primary and secondary packaging capabilities for solid-dose drugs.

Avara’s manufacturing and packag­ing capabilities are focused on oral solid and includes a high-containment module. Equipped with the latest solid-dose manu­facturing technologies that include granu­lation, coating, blending, encapsulation, compression, tablet and capsule drying, Avara says its broad experience with sup­ply chain, commercialization, product launch and product transfer allows it to sustain exemplary levels of product qual­ity and regulatory compliance.

A contract services provider has to have the right tools and know how to use them, but it’s the quality of the relationship, the close collaboration, says Pasek, of what makes a supplier not only qualified, but also ideal. In fact, though Pasek stresses that quality is critical, he regards it more as “the price of admission” to even be con­sidered for outsourcing projects, further stressing the significance of partnership. For a CMO to be considered a quality busi­ness partner you must deliver on time, in full, at the agreed price and exceed cus­tomer expectations.

While we’re seeing movement toward partnership and overall risk sharing in deal structures, that movement is not universal.

Frank Sorce – UPM Pharmaceuticals

More Formal Collaboration

Although most in the industry are be­ginning to understand that more formal levels of collaboration between sponsor and contractor are desirable, when it comes right down to it, some drug owners aren’t ready for the kind of partnerships required to be successful in today’s phar­maceutical markets. “While we’re seeing movement toward partnership and over­all risk sharing in deal structures, that movement is not yet universal. We’ve had several potential clients approach us with potential partnerships, [but] a lot of po­tential partnerships and arrangements we felt would be very one sided,” says Frank Sorce, Vice President of Business Devel­opment at UPM Pharmaceuticals.

Based in Bristol, Tennessee, UPM Pharmaceuticals is an independent con­tract development and manufacturing organization serving the pharmaceutical and biotechnology industries. UPM pro­vides high-quality pharmaceutical drug development services that include formu­lation development, cGMP manufacturing and packaging, analytical method devel­opment and testing from concept through commercialization.

Derek Hennecke, CEO and President, Xcelience, a division of Capsugel Dos­age Form Solutions, finds clients — espe­cially small and virtual companies whose needs continue to evolve — must have a huge level of trust in their development partners. “Knowing that their projects will be handled on a case-by-case basis by a partner that has a range of technologies, depth in formulation know-how and inte­grated product development capabilities is an imperative. A partnership mindset is valued in the design and feasibility as­sessment stages — and often can entail working with clients in redefining prob­lem statements — as well as later stages of product development, clinical and com­mercial supply,” explains Hennecke.

Xcelience offers a suite of services enabling clients to partner with a single CDMO for all clinical outsourcing needs. Services include preformulation, analyti­cal services, formulation development, GMP manufacturing, small-scale com­mercial manufacturing, clinical supplies packaging and logistics. According to Xcelience, the company takes pride in de­livering the highest standards in science and service with an emphasis on quality, cost and speed.

Much has been learned about what drives customer satisfaction with out­sourced contract manufacturers post-engagement. For example, while a solid regulatory record and cost are critical in pre-engagement selection, we see com­panies being challenged with on-time delivery and tasked to meet project de­liverables high post-engagement. What’s important here? Soelkner agrees that a strong regulatory record and cost fac­tors can often times be important selec­tion factors for a contract manufacturer. “However, this is not always the case,” ex­plains Soelkner. “What must also be taken into consideration and properly differen­tiated since it decisively affects the selec­tion criteria, are the characteristics of the market in general, the form of administra­tion of the drug itself, the specific product characteristics and complexity, and many other factors.”

There is no longer a simple buy vs. Build choice in models but many options in between that can best fit a given situation.

Derek Hennecke – Xcelience

Technical acumen and a consistent policy of continuous improvement is cru­cial and something most CDMOs and contract services providers must provide to stay relevant and competitive. “A ser­vice provider must invest in high-quality materials, to achieve the high safety re­quirements and cGMP standards,” says Soelkner. “Technical expertise is also im­portant since today’s customers expect state-of-the-art equipment, laboratories and filling lines in aseptic manufacturing. And, of course, good performance in time­liness and reliability is crucial.”

“I think that the clients and suppliers are both much more sophisticated than they were in the past,” says Hennecke, “and deal structures have evolved in step with their developing relationships. There is no longer a simple buy vs. build choice in models but many options in between that can best fit a given situation.” Accord­ing to Hennecke, a transactional approach — the “old” model as he puts it — generally tends to result in poor outcomes for all parties in the pharmaceutical industry. If the drug does well, the pharmaceutical company will do well, but not necessar­ily the partner. And if the drug fails, both companies will suffer. It is encouraging that the industry has matured to look at a broader team collaborative approach, with sustainable risk and reward sharing.

Ultimately it is a two-way street and the partnership has to offer both sponsor and contractor the best structure to meet not only each party’s shared goals, but their individual business imperatives as well. In the end some of those opportunities aren’t right, says Sorce: “We’ve turned a lot of those down because it just didn’t make sense for us to do that.”

As market pressure continues to make a well-ordered supply chain and the need for competent contract services partners a guiding principle, it’s clear the necessity for new levels of collaboration and partnership will only continue to grow in importance throughout 2016 and beyond. In a constantly evolving market with rapidly changing demands, the stability that comes from solid partnerships can be a true differentiator, and a value proposition should not be ignored.

About The Panelists

Bill Pasek,
Executive Vice President, Avara Pharmaceutical Services

Frank Sorce,
Vice President of Business Development, UPM Pharmaceuticals

Peter Soelkner,
Managing Director, Vetter Pharma International

Derek Hennecke,
CEO and President, Xcelience, a division of Capsugel Dosage Form Solutions


Guy Tiene

Guy supports the success of life science organizations by identifying synergies across research, content, marketing and communications resources to drive value for clients. With over 30 years of education and marketing experience and 18 years in the life sciences alone, Guy leads our editorial standards for client content, Pharma’s Almanac and Nice Insight research-based industry content as well as external communications for clients. Having served as head of global marketing and communications for a CMO, he also brings critical insight and guidance to all communications. Guy holds a Masters degree from Columbia University.