Best Strategies for a Small Company Dealing with CMOs: What to do when Money is NOT a Motivator Steve Pondell 29 Nov, 2006

S. Pondell 29 Nov 2006 Overview  Encysive setting  Relevance  Unique aspects of small companies  Types of contract manufacturers  CMO operating strategies  Interaction tactics

S. Pondell 29 Nov 2006 Encysive Setting  Small company (250 people)  In-house compound Orphan drug, small volume, small molecule  Commercialization planned and underway

S. Pondell 29 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. Pondell 29 Nov 2006 Unique Aspects of Small Companies  Limited resources  Financial  Priorities  Technical expertise

S. Pondell 29 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. Pondell 29 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. Pondell 29 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. Pondell 29 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. Pondell 29 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. Pondell 29 Nov 2006 CMO Operating Strategies  Technical competence  Customer service  Business-systems driven

S. Pondell 29 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. Pondell 29 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. Pondell 29 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. Pondell 29 Nov 2006 Resulting impact of strategies Technical Competence Pricing/costingFixed premium price SystemsFairly rigid Client contact personnel Focused on scientific knowledge Organizational structure Centered on technical competencies Heritage Ex-Big Pharma, start-ups by technical experts

S. Pondell 29 Nov 2006 Resulting impact of strategies Customer Service Pricing/costingMarket-based Systems Flexible to customer needs Client contact personnel Focused on customer needs Organizational structure Project-based, flexible Heritage Small, independent company or conglomerate

S. Pondell 29 Nov 2006 Resulting impact of strategies Business-Systems Driven Pricing/costingCost-plus SystemsNumerous, rigid Client contact personnel Focused on fitting customer to system Organizational structure Functionally centered, divisional interface HeritageIntegrated, large company

S. Pondell 29 Nov 2006 Interaction Tactics  Visits  Schedules  Money  Mutual success  Project manager relationship  Leverage points Contracts Quality Agreements  Hammer

S. Pondell 29 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. Pondell 29 Nov 2006 Interaction Tactics Schedules  Project schedule  Key milestones Ideally developed by supplier If not, you develop  Joint buy-in  Review progress regularly

S. Pondell 29 Nov 2006 Interaction Tactics Money  Sometimes it DOES work  Premiums  Depends on model  Be creative Change orders Credits in your favor

S. Pondell 29 Nov 2006 Interaction Tactics Mutual Success  Remind them of future business potential  Offer joint press releases or articles  Equity position or royalties

S. Pondell 29 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. Pondell 29 Nov 2006 Interaction Tactics Project Manager Relationship  Project manager takes many roles Facilitator  Schedule  Scope Enforcer  Contract negotiations  Schedule slippage Communicator

S. Pondell 29 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. Pondell 29 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. Pondell 29 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. Pondell 29 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 Pondell