Best Strategies for a Small Company Dealing
with CMOs:What to do when Money
is NOT a Motivator
Steve Pondell
29 Nov, 2006
S. Pondell29 Nov 2006
Overview
Encysive setting Relevance Unique aspects of small companies Types of contract manufacturers CMO operating strategies Interaction tactics
S. Pondell29 Nov 2006
Encysive Setting
Small company (250 people) In-house compound
Orphan drug, small volume, small molecule Commercialization planned and
underway
S. Pondell29 Nov 2006
Relevance
Small companies 1-2 products Limited staffing
Outsourced production, testing, logistics Tox mat’l to clinical supply to commercial
product Any or all aspects
S. Pondell29 Nov 2006
Unique Aspects of Small Companies
Limited resources Financial Priorities Technical expertise
S. Pondell29 Nov 2006
Unique Aspects of Small Companies
Limited Resources
Development and commercial team staffing tight
Some technical areas may not have expert personnel
Little or no support services Legal Business Development Regulatory
S. Pondell29 Nov 2006
Unique Aspects of Small Companies
Financial
Feast or famine Manufacturing costs generally not major
factor Cash flow will direct timing of decisions
S. Pondell29 Nov 2006
Unique Aspects of Small Companies
Priorities
Company success and survival Money Time to market Clinical results Big tasks can paralyze multi-tasking
S. Pondell29 Nov 2006
Unique Aspects of Small Companies
Technical Expertise
Experts may be limited in breadth of experience
Heavier use of consultants and increased reliance on them
No backup for key personnel
S. Pondell29 Nov 2006
Types of Contract Manufacturers
Specialists Exclusively third party manufacturer
Small Large
Legacy Big Pharma with capacity to spare
Multi-focused manufacturers Proprietary, generics, custom manufacturing
S. Pondell29 Nov 2006
CMO Operating Strategies
Technical competence Customer service Business-systems driven
S. Pondell29 Nov 2006
CMO Operating Strategies
Technical Competence
Hire and staff highly-qualified personnel PhD chemists, chemical engineers,
PharmD Procure top-of-the-line equipment with
enhanced capabilities Set premium pricing Deliver top quality solutions
S. Pondell29 Nov 2006
CMO Operating Strategies
Customer Service
Good client contact personnel Business development Project management
Understand customer needs Deliver expected results on time with few
surprises
S. Pondell29 Nov 2006
CMO Operating Strategies
Business-Systems Driven
Business processes dominate work activities Costing/pricing How things are done
Stay within the process Few feedback mechanisms
S. Pondell29 Nov 2006
Resulting impact of strategies
Technical Competence
Pricing/costing Fixed premium price
Systems Fairly rigid
Client contact personnel
Focused on scientific knowledge
Organizational structure
Centered on technical competencies
HeritageEx-Big Pharma, start-ups by technical experts
S. Pondell29 Nov 2006
Resulting impact of strategies
Customer Service
Pricing/costing Market-based
SystemsFlexible to customer needs
Client contact personnel
Focused on customer needs
Organizational structure
Project-based, flexible
HeritageSmall, independent company or conglomerate
S. Pondell29 Nov 2006
Resulting impact of strategies
Business-Systems Driven
Pricing/costing Cost-plus
Systems Numerous, rigid
Client contact personnel
Focused on fitting customer to system
Organizational structure
Functionally centered, divisional interface
Heritage Integrated, large company
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Interaction Tactics Visits Schedules Money Mutual success Project manager relationship Leverage points
Contracts Quality Agreements
Hammer
S. Pondell29 Nov 2006
Interaction Tactics
Visits
Regular team conference calls Periodic face-to-face meetings with team
members from both sides Strategize, plan, commit Technical observation Team building Personal interaction
S. Pondell29 Nov 2006
Interaction Tactics
Schedules
Project schedule Key milestones
Ideally developed by supplier If not, you develop
Joint buy-in Review progress regularly
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Interaction Tactics
Money
Sometimes it DOES work Premiums Depends on model Be creative
Change orders Credits in your favor
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Interaction Tactics
Mutual Success
Remind them of future business potential Offer joint press releases or articles Equity position or royalties
S. Pondell29 Nov 2006
Interaction Tactics
Project Manager Relationship
Key point person – customer and supplier Involved in every interaction
Change of personnel can be disruptive YOU may be continuity
S. Pondell29 Nov 2006
Interaction Tactics
Project Manager Relationship
Project manager takes many roles Facilitator
Schedule Scope
Enforcer Contract negotiations Schedule slippage
Communicator
S. Pondell29 Nov 2006
Interaction Tactics
Leverage Points - Contracts
Leverage is high when contract is being negotiated
Establish desired processes in contract Milestones Reporting mechanisms
After signing, use as fallback when issues arise
S. Pondell29 Nov 2006
Interaction Tactics
Leverage Points - Quality Agreements
Has greater leverage if structured as legal document
Up-front audit makes for less surprises Reputable suppliers are a key
Checklist or contract format Useful in reaching agreement before issues
arise
S. Pondell29 Nov 2006
Interaction Tactics
Hammer
Elevate in supplier’s organization Head of Site Head of Business Development CEO
Elevate in your organization Personal visit from your top
management
S. Pondell29 Nov 2006
Summary
Identify the business model Understand impact to your organization Different situations will require different
tactics Use tactics that best fit the CMO model,
your model, and the situation
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