Lisa R. Sanders, Ph.D., R.A.C., Sr. Clinical Scientist II at Cato Research
No matter what you call it–outsourcing, contracting, partnering–for a virtual biotech, partnership is vital to success. Virtual companies face specific hurdles such as the lack of a central office and infrastructure, a small and often geographically dispersed workforce, undercapitalization, small pipeline, and a lack of corporate SOPs. And while a good product is necessary for success, it is not itself an assurance of success. Driving product development with efficient, effective partnerships translates to a more efficient, effective development program. Let’s look at the tale of two companies…
Slam Dunk Turned Airball–
- Virtual company comprised of a handful of very experienced, geographically disbursed pharma professionals, all in the US. Most had 10-20+ years of product development experience in large pharma, but no prior experience in a virtual company.
- Company acquired a product with demonstrated safety and efficacy to carry through a final pivotal Phase 3 study and submission of a marketing application.
- Company had strong milestone-based financial agreements to support the remaining development activities.
- Company outsourced most key development activities (CTM production and distribution, non-clinical studies, assay development and sample analysis, clinical trial management, and regulatory submissions.)
The result: Despite very experienced personnel and a product far down the development pathway, the company dissolved within about 2 years with the product still in Phase 3 testing.
What went wrong? Time was an enemy that could not be overcome–inefficiencies and disorganization was endemic. Time delays meant they were unable to attain key milestones, and the money ran out. Key contributors were:
- Partnerships: Partners were well-chosen and solid, but not given autonomy. Outsourced activities were “siloed” within the company with inadequate communication on intersecting activities, and the partners were allowed virtually no interaction with each other. Over-management of outsourced activities was time consuming for already very busy individuals. There was no high-level, coordinated oversight of the development activities.
- Geography: Company was spread over home offices from coast to coast. No central office, no office-based staff, very limited personal interactions within the company or with outsourcing partners.
- Communication: Company relied almost exclusively on email for internal and external communications. While this allowed information to be shared across all relevant parties, it came at a significant time cost. The resulting email load proved too impossible to manage and the company’s team was often not up to date on overall development activities. Important requests or updates from partners were lost in the email overload and important decisions were delayed or never made.
- Standard Processes: The company had no internal standard operating processes. They relied entirely on their partners’ SOPs, which is not unusual. But where there were conflicts between partners’ processes, decisions regarding which would be followed were often long in coming, slowing progress.
- Infrastructure: The company lacked infrastructure outside of what the company personnel had in their home offices. There was no central administrative support to coordinate meetings, track schedules and travel, and track outstanding action items. There was no company IT support and no centralized file storage. Unless in an email, documents appeared to be unavailable to individuals in the company.
- Workload: All company employees were regularly working 70+ hour weeks for >2 years. They had no back up plans in place for vacations and travel times. Outsourcing partners often had to wait for weeks or sometimes months for decisions or attention to issues. Together with poorly defined decision making processes within the company, inaction on important issues was common.
A Happier Tale–
- Virtual company was a university spin off developing a single product from the discovery phase
- Three full time employees, with the vast majority of day to day work done by one person
- Funding was primarily grant-based
- Company had a small office with administrative and IT support, where personnel could meet internally and with partners
- All development activities were outsourced with one full service CRO coordinating activities
Result: The product moved steadily from concept through a successfully completed Phase 2 study. A collaborator is now being sought for further development.
What was different here? With fewer people, less money, and a completely unproven product, they efficiently moved the product through CMC development, pre-clinical testing, and three clinical studies.
- Partnerships: Importantly, they utilized a full service CRO to coordinate most of the outsourced activities, giving a layer of consistent project management for the development program. The key individual at the company had adequate time for higher level planning. They managed outsourced activities at a high level, leaving the day to day details to the CRO. Also, they tended to focus on local partnerships and source activities to smaller partners. This allowed more face to face interaction and relationship development while giving their project a higher profile than it would have had with larger partners. Finally, they conserved cash by negotiating some equity for work agreements into their contracts.
- Geography: The company had one small office and all personnel were based in that office. This facilitated communication, interactions, relationships, and decision making. The ability to easily talk to one another reduced reliance on email.
- Communication: Email was used, but a significant amount of communication took place by phone and during regularly schedule meetings. This freed time for the company and its partners, and it prevented the email overload that leads to important communications being overlooked. Important requests were attended to quickly, allowing development to progress efficiently.
- Standard Processes: Having a single coordinating CRO allowed that group’s SOPs to be the primary procedures followed during the development program. The CRO reviewed SOPs from other vendors that they were overseeing to ensure they were in line with the existing procedures.
- Infrastructure: Company chose an office location that included reception, basic administrative support, and office equipment. The single office location meant everyone had access to scanning, copying, faxing, and shipping.
- Workload: Aall company employees were still regularly working well over 40 hours per week. But, the work being done was not redundant with what was outsourced and there was time for the high-level planning activities.
The Take Away–
So what do we take away from these examples? Here are some strategies that support effective and efficient partnering relationships:
- Partners: Choosing the right partners is key.
- Start with a realistic assessment of what the company can really do and where help is needed. Overwork leads to a loss of focus and mistakes–sometimes lots of them.
- Look for a good “fit”–partners experienced and interested in your product and therapeutic area whose company culture meshes well with yours. You might find cheaper services, but if they are not invested in your product, you might not get the attention you need.
- Once you choose, trust your choice and don’t micromanage. Let them do the work you are paying for.
- Intellectual Property Protection: IP may be the only tangible asset a virtual biotech has. When looking for a manufacturing partner, keep IP protection as a priority. Cost is important, but look also at a country’s laws around IP and the history of manufacturers in that country. Is there a history of piracy or divulged secrets? Manufactures in other geographies might be more expensive, but offer better protection for your most valuable asset.
- Contracts: Negotiate contracts carefully—consider risk sharing, milestone bonuses, and alternative financing (e.g., payment in equity). Smaller partners may be more likely to consider these arrangements in return for a lower bottom line contract cost (plus better attention to your product).
- Communications: Streamline your communications (internally and with partners). Overreliance on email is tempting–you can update everyone at once. But this is usually done more efficiently in routine update meetings. Document when you need to, but use the phone to save time. Don’t meet if you don’t need to–pass on the standing, weekly meeting when there is nothing important to discuss.
- Oversight and Relationships:
- Good relationships are motivating for your outsourcing partners. Along with appropriate oversight (including on-site visits), strong relationships help ensure the quality and efficiency of your outsourcing partner’s work and will get your project the attention it needs.
- Be sure that all outsourced activities are overseen by an in‑house manager—while your partners will generally include project management in a contract, oversight by an in-house resource will help ensure your partner stays on track. Plus your 30,000 foot view across all development activities requires up to date progress reports.
- Focus on program management rather than operational management–you are paying someone else for that. Micromanaging your partners is a time sink for them and for you.
- Get to know your primary contacts. Schedule a face to face kick off meeting. Acknowledge good work when you see it; a little praise goes a long way to motivate future efforts.
- Incentivize your partners–relationships are a primary way to do this. When they know you, your partners are more accountable for the project and your needs. Incentives can also include a bonus for attaining a key milestone–whether a contractually-specified bonus to the company, or a personal thank you with a gift card to your key contact (or both).
And if You are a Partner to a Small, Virtual Company??
- Know your client: Who you are working with? Evaluate the company and the product before you partner. Is it a viable product with adequate funding? Meet face to face at least at kickoff to develop good relationships. For longer projects, at least annual face to face meetings are a good idea. Consider paying your own way to visit your client–the efficiencies gained in the long run will outweigh the short term expense.
- Careful contracting:
- Make financial risk reduction a priority
- Consider “pay as you go” rather than milestone payments to recoup your costs in real time.
- Consider a risk/reward arrangement to capitalize on milestones achieved. If you beat a key milestone, you receive a bonus. If you miss one, they get a discount.
- Scope: Small companies have big needs and often push the envelope when it comes to scope. Define scope carefully and make sure you have a work order in place for all activities. Discuss upfront how out of scope activities will be addressed and who needs to approve new work.
- Communications: Email overload kills efficiency. Use the phone for day to day issues and save the email for times when formal documentation is needed. Stop the crazy email chains by scheduling a short teleconference to discuss issues with all stakeholders at the same time. Virtual employees can be very busy–follow up until you get an answer and don’t let issues languish.
- Logistics and infrastructure: Virtual companies may lack administrative or IT support. Be ready to act as the coordinator for meetings and teleconferences, to set up a secure portal to house documents, and provide other administrative support (e.g., shipping, document compilation) to keep things moving efficiently.
- Decision making: At the start decide who is responsible for what and write it down. Hold your client contact accountable to these decisions. Geographical dispersion can result in a lack of organization, slow internal communications, and delays in getting decisions. Don’t be shy in following up and asking again if you need information and consider providing a weekly “outstanding items” lists to your client to keep things on track.