best strategies for a small company dealing with cmos: what to do when money is not a motivator...

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

S. Pondell29 Nov 2006

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

Questions or Comments?

Contact Information:

Steve Pondellspondell@umich.edu

713-578-6549