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