Optimizing Partnerships with Contract Organizations

Table of Contents
Optimizing Partnerships with Contract Organizations Executive Summary 10
Pharmaceutical outsourcing today 10
Contract research partnerships 11
Contract manufacturing partnerships 12
Offshore outsourcing partnerships 13
Future trends in partnerships with contract organizations 14

Chapter 1 Pharmaceutical outsourcing today 18
Summary 18
The concept of outsourcing 19
Pharmaceutical vs. biotech outsourcing 19
Approaches to outsourcing 20
Outsourcing research and development 22
Services offered by CROs 23
The role of CROs in clinical trials 26
The role of CROs in pre-clinical trials 27
Outsourcing manufacturing 28
Services offered by CMOs 30
Degree of outsourcing 33
Level of utilization 33
How outsourcing decisions are made 37
Usage of preferred vendors 38
Virtual drug development companies 42
Non-profit virtual drug development groups 44
Big pharma virtual drug development groups 46
Case study: GlaxoSmithKline 46
Strategic management of outsourcing 47
Selecting outsourcing partners 47
Managing partnerships 48
Timelines and preventing overruns 50
Continuous improvement 52
Conclusion 52

Chapter 2 Contract research partnerships 56
Summary 56
Introduction 57
Drivers of outsourced R&D 57
Advantages and disadvantages of using CROs 60
Level of R&D outsourcing 65
Reasons for R&D outsourcing 65
Contract R&D partnerships 66
Types of relationships 67
Preferred vendors 69
Functional service providers 69
Risk sharing 70
Case study: Pharmaceutical Product Development, Inc. (PPDI) 71
Case study: Wyeth 73
Technology partnerships 75
Drug licensing 76
Pharmaceutical contract research alliances 77
Optimizing relationships with CROs 79
Risks and mitigation 79
Confidentiality and intellectual property risks 79
Personnel risks 80
Company volatility risks 81
Contract research agreements 81
Case study: Novartis 82
Pricing 83
Conclusion 84

Chapter 3 Contract manufacturing partnerships 86
Summary 86
Introduction 87
Outsourcing biotech manufacturing 87
Drivers of outsourcing manufacturing 88
Cost savings 88
Risk reduction 89
Shifting manufacturing requirements 91
Increased supply of contract manufacturing services 91
Biotech product approvals 93
Advantages and disadvantages of using CMOs 94
Fixed cost savings vs. high variable expenses 94
Lead time savings vs. relationship management time losses 96
Access to expertise vs. quality control 97
Escalating level of manufacturing outsourcing 99
Reasons for manufacturing outsourcing 100
Contract manufacturing partnerships 100
Types of relationships 100
Pilot plant production 101
Risk sharing 102
Capacity sharing 102
Optimizing relationships with CMOs 104
Risks and mitigation 104
Confidentiality and intellectual property risks 104
Production risks 105
CMO size 106
Contract manufacturing agreements 107
Site visits 108
Pricing 109
Selecting outsourcing partners 112
Conclusion 113

Chapter 4 Offshore outsourcing partnerships 116
Summary 116
Introduction 117
Offshore outsourcing of contract research 117
Offshore outsourcing of contract manufacturing 119
Biopharmaceutical outsourcing 121
Eastern Europe 123
Contract research in Eastern Europe 123
CRO developments in Eastern Europe 125
Contract manufacturing in Eastern Europe 127
CMO developments in Eastern Europe 127
India 128
Contract research in India 128
Patent issues 130
CRO developments in India 131
Contract manufacturing in India 132
CMO developments in India 133
China 133
Contract research in China 134
Patent Issues in China 136
CRO developments in China 137
Contract manufacturing in China 139
CMO developments in China 140
Latin America 140
Contract research in Latin America 141
CRO developments in Latin America 142
Contract manufacturing in Latin America 142
CMO developments in Latin America 142
Offshore outsourcing partnerships 143
Types of relationships 143
Early stage collaborations 144
Global networks 146
Optimizing offshore contracting relationships 146
Country selection 147
Contractor communications 148
Global regulatory reach 148
Conclusion 149

Chapter 5 Future trends in partnerships with contract organizations 152
Summary 152
Introduction 153
Trends in contract research partnering 153
Preferred vendors 153
Functional service providers 154
Risk sharing 155
Technology partnerships 155
Drug licensing 155
CRO alliances 156
Trends in contract manufacturing partnering 156
Pilot plant production 156
Risk sharing 157
Capacity sharing 158
Trends in offshore outsourcing partnerships 158
Early stage collaborations 159
Global networks 160
Conclusion 161

Chapter 6 Appendix 164
Methodology 164
Index 164

List of Figures
Figure 1.1: Tactical vs. strategic outsourcing by type of drug developer, 2007 21
Figure 1.2: Outsourcing plans by pharmaceutical companies in 2005 and 2006 for the coming
year 34
Figure 1.3: Outsourcing plans by drug developers in 2006 by company size 35
Figure 1.4: Importance of contract organization characteristics to pharmaceutical outsourcers,
2007 38
Figure 1.5: Utilization of preferred outsourcing vendors by type of drug developer, 2007 39
Figure 1.6: Percentage of outsourcing dollars spent on preferred vendors by type of drug
developer, 2007 40
Figure 1.7: View of outsourcing relationship as a partnership by type of drug developer, 2007 41
Figure 2.8: Potential advantages and disadvantages of using a CRO 61
Figure 4.9: Relative pharmaceutical research and manufacturing capabilities in Eastern Europe,
India, China and Latin America, 2007 120
Figure 5.10: Relative growth of different types of contract research partnering 154
Figure 5.11: Relative growth of different types of contract manufacturing partnering 157
Figure 5.12: Relative growth of different types of offshore outsourcing partnerships 159

List of Tables
Table 1.1: Summary of drug testing objectives by phase 25
Table 1.2: Relationships between virtual pharma sponsor and contractors 43
Table 1.3: Selected virtual drug development organizations 45
Table 1.4: Reasons for time and budget overruns 51
Table 2.5: Key characteristics of CRO partnering relationships 68
Table 3.6: Key characteristics of CMO partnering relationships 101
Table 3.7: Selected pharmaceutical manufacturing violations, 2002 - 2007 110
Table 4.8: Advantages and disadvantages of international outsourcing 118
Table 4.9: Eastern European operations of leading CROs 127
Table 4.10: Key characteristics of offshore partnering relationships 144