The end of the blockbuster era, patent cliffs, high development costs, increasing regulatory and reimbursement issues, and a sluggish global economy have put enormous pressure on the bio/pharma industry. To remain competitive, large bio/pharma and medical device companies are increasingly focusing on generating more productivity from their R&D investments.

For the past five years, a wave of strategic partnerships between large bio/pharma companies and clinical research organizations (CROs) has been implemented to drive more flexibility, reduce costs and extend expertise. These partnerships have been shown to improve efficiencies, decrease internal oversight, accelerate cycle times, provide access to global patient populations, and limit overhead. In fully established strategic partnerships, speed-to-market can be accelerated by months and cost efficiencies can reach 25% to 30% relative to traditional transactional outsourcing. 

Small-to-mid-sized pharma companies that enter into strategic partnerships with CROs can also gain cost-saving benefits, increase efficiencies, and drive innovation. While the nature of the relationships between CROs and small/mid-sized pharma differ from those with CROs and big pharma, we will discuss specific advantages small-to-mid-sized companies can gain through CRO partnerships, as well as the commitment necessary to achieve the benefits.

Why Partner Strategically?
To stay viable in today’s competitive environment, companies need to focus on their core competencies. Outsourcing allows organizations to use only the resources they need at any given time and hire experts that they might not normally employ in-house. Historically, bio/pharma companies have engaged CROs in project-by-project or function-by-function activities. These transaction-based relationships could reduce costs and improve flexibility to a degree; however, they did not generate some of the more important operational efficiencies around speed and reduced internal oversight that more committed relationships can provide.
Compared to traditional outsourcing transactions where a pharma company would outsource a single study, strategic partnerships are based on a large amount of committed work, earlier engagement, a longer timeline, broader scope and often require the building of sophisticated partnership infrastructure to support delivery along the entire product development cycle.

Speed improvements mark one of the most important value drivers that can be addressed in strategic partnerships. By leveraging the knowledge of both the pharma company and the CRO, better protocols and associated operational plans can be developed to move studies forward faster and more efficiently. Investments in functional cycle time improvements driven by templates, libraries and technology integration can be made across a portfolio that could not be made for a single study. Finally, the more insight a CRO has into the sponsor’s company, pipeline and development strategy, the better the CRO can plan and respond to needs and avoid costly delays.

In a strategic partnership, reductions in internal oversight costs can be dramatic. The cost for a sponsor to manage a CRO can be reduced through partnership-level conventions that focus sponsor staff on the most impactful areas of oversight, provide the right data at the right time, and create concurrence on what constitutes an acceptable output. On average, these sorts of investments can increase the average sponsor oversight full-time employee (FTE) to CRO ratio from 1:3 to 1:8, or even 1:15 in more advanced partnerships. This reduction in internal cost can be a significant source of value — equivalent to saving as much as 20% of the CRO professional fees for a typical project.

In addition, with partnerships designed for multiple studies, CROs can generate cost savings from dedicated staffing, training efficiencies, and better utilization that can be passed through to the sponsor in fewer hours per task or lower rates.

Key Advantages to Small/Mid-Sized Bio/Pharma
There are a number of benefits specific to small- and mid-sized companies in these partnerships. First, the sponsor can extend its expertise. By working with a strategic partner, the sponsoring company gains technologies, processes and access to expertise that it may not possess in-house. With small-to-mid-sized companies, the need for geographic coverage, indication-specific regulatory or medical expertise, or operational capabilities may be higher than at a large pharma company. Strategic partnerships can provide easy access to relevant individuals in either an ad hoc manner or as part of a structured approach such as a ‘compound team’ that follows a given molecule through its lifecycle.

Second, partnership benefits can accrue faster than at larger companies. Small-to-mid-sized pharma sponsors are typically able to make decisions about how to best use or engage with strategic partnership processes, technologies, or capabilities more rapidly due to fewer stakeholders and less interdependencies. Small and mid-size sponsors can typically move more rapidly to a partnership approach and, in doing so, can begin to generate speed and cost benefits more quickly.  This type of nimbleness is less common at large companies, where decision-making requires broader engagement and where there are more fixed investments that need to be understood and managed.

Third, the approach can be more efficient. Most small companies are not burdened with legacy systems nor processes built over decades or as a result of several mergers. This enables partnership infrastructure — technology systems or portfolio approaches to be implemented with much less complexity, time and cost.

Fourth, global reach can be achieved faster. The bio/pharma industry is global, yet many small-to-mid-sized companies remain focused locally because of bandwidth issues and lack of expertise. Through a strategic partnership with a global CRO, a company can get the expertise and coverage required for activity and entry into multiple markets. That means the company can think bigger, access global patients and consider global markets sooner.

It should also be noted that CROs benefit from strategic partnerships with small-to-mid-sized bio/pharma companies. CROs seek strategic partnership relationships to enable better management of resources and a solid, predictable revenue stream. However, strategic partnerships with smaller companies also provide an opportunity for more rapid innovation and senior management engagement that can enable the CRO to expand its own capabilities. As a result of these factors, both sponsor and CRO benefit mutually from strategic partnerships.

Designing the Ideal Strategic Partnership
How does a small-to-mid-sized biopharmaceutical company assure the success of its partnership with a CRO?

Define goals, methods and what to measure. Top management at both companies should agree upon a clear definition of what constitutes success and prioritize key value drivers — whether those are focused on CRO professional fees, improved flexibility of internal resources, reduced oversight, better speed to market, or a combination of the above. These need to have clear metrics, be explicitly represented in governance and be supported by the partnership commercial terms. Furthermore, careful prioritization and staging of the benefits is critical — attempting to maximize all of the value drivers at once increases the potential that none of them will be optimized.

Prepare for upfront and ongoing investment. To be successful, strategic partnerships require a significant amount of mutual investment, trust, and alignment of expectations. For example, while it is easy to simply state that the partnership will ‘use the CRO’s process,’ in reality there will inevitably be many points of interaction — whether they are drug supply management, medical/safety, third party vendors, etc., that will require upfront agreement on the best approach. Developing common standards across studies to define appropriate oversight and acceptance criteria requires a function-by-function review that is taxing for both the sponsor and the CRO. However, without this upfront investment, many of the benefits will only accrue slowly over time as study teams individually develop approaches that are then disseminated across the partnership. Working with a CRO that is experienced in partnership development can minimize the time required through the use of partnership templates.

Develop full governance early to ensure issues can be quickly managed. Good strategic partnerships begin with an understanding that there will challenges along the way. When a challenge arises, the partners have already defined how to address them. One consistent element of failed partnerships is a lack of engagement from senior management and the development of a clear and effective governance structure. Governance should be at executive, functional, and study team levels to enable relationships to be built prior to issues becoming critical. Furthermore, detailed charters for each governance group — including frequency, personnel, metrics/reports to be reviewed and escalation pathways — are necessary to ensure that the time spent is effective.

Avoiding Partnership Pitfalls
Employees of smaller companies may have limited experience with outsourcing and may take a very tactical view of the services offered by a CRO. Successful partnering requires better communication and an understanding that a strategic partnership will not make all clinical development challenges go away. Among the risks specific to small-to-mid-sized bio/pharma-CRO strategic partnerships are:

Sourcing Risk. To achieve the critical mass required for either the sponsor or CRO to make the substantial investments in partnership infrastructure, a sponsor may need to bundle more outsourcing — perhaps all of it — with one CRO partner. This risk can be mitigated by working with CROs with enough stability and breadth to support the sponsor in the vast majority of circumstances.

Investment Risk. The amount required to invest in a partnership can be substantial. A company needs to define the results it expects from the partnership and how those results will be achieved and measured. A good CRO will work closely with the sponsor to create a partnership plan and assure the proper infrastructure is in place when the relationship begins. The CRO will help the sponsor understand the amount of effort required to achieve desired outcomes.

Relationship Risk. Building a successful partnership can take 12 months to reach an initial steady state and two years to see definitive benefits across an entire product portfolio. This is due to the complexity of partnership infrastructure development and the time it takes to generate meaningful clinical development experience where two years is the average “Final Protocol to Last Patient In” timeline. Prematurely determining that the partnership is not working — based upon too little data or inappropriate anecdote — risks both the sponsor’s and the CRO’s investment and can drive turmoil within both organizations. Implementing an explicit set of quick hits combined with commercial terms and internal expectation-setting that are longer term can mitigate this risk and create a steady cadence of strategic partnership value generation to internal and external stakeholders.

In many cases, the risks associated with a partnership can be overcome by anticipating potential threats and opportunities, having a defined governance structure in place, defining success metrics, and communicating openly and frequently. Stakeholders need to be educated that optimal levels of efficiency, cost savings and timeline acceleration cannot be achieved if the CRO is not able to function with some level of autonomy. Stakeholders also need to understand that a successful strategic partnership requires full collaboration and transparency.

The benefits of engaging in a strategic partnership for a small-to-mid-sized bio/pharma company can be significant but are not without cost. However, the risk of inaction or relying upon outdated outsourcing models is greater. Small-to-mid-sized sponsors can use their size as an advantage to rapidly implement custom partnerships. Given this dynamic, the future is likely to see more strategic partnerships between small-to-mid-sized companies and CROs as a way to overcome challenges and accelerate success. 

Reference

1. Speed-to-market statistic from PAREXEL’s brochure, When Does a Strategic Partnership Become a Strategic Advantage? Cost efficiency statistic is from Building Effective Governance Structure for Strategic Partnerships, a conversation with Ken Dhimitri.