6. Build in flexibility for changing needs.
Companies face enormous uncertainties in bringing products to market. Clinical and regulatory uncertainties, manufacturing
scale-up risks, along with technical and demand uncertainties make planning for future requirements a daunting task. Unfortunately,
managers at many emerging life sciences companies tend to believe they lack the leverage required to build flexibility into
their agreements. When dealing with established CMOs, this leads to acceptance of terms mandating strict volume commitments
and minimum orders, thereby limiting future flexibility.
While there are situations where leverage is minimal—specifically with low-volume products with complex requirements that
only a few (or just one) contractors can satisfy—building flexibility into an agreement is not necessarily a win-lose proposition.
Biopharmaceutical manufacturers should work with their partners in advance to develop creative strategies that provide some
ability to accommodate changing business conditions. Flexibility to adjust to changing conditions can allow both parties
to limit their exposure to downside risks, and enable them to quickly seize opportunities on the upside.
7. Re-evaluate the relationship on a regular basis.
Successful CMO relationships are long-term, mutually beneficial arrangements. While managers with foresight and insight will
build flexibility into negotiated agreements, a key to ensuring success over time is the understanding of what and when to
change and restructure the relationship over time. We recommend a periodic re-evaluation of the partnership at regular intervals.
Such an evaluation should include asking and answering the following questions:
- Are the objectives and strategy for this partnership still valid? Do they need to be revised?
- Is this CMO partner still the best fit for realizing these objectives?
- Does the current negotiated agreement encourage the partners to achieve beneficial results?
Performing such a re-evaluation regularly will enable emerging and established life sciences companies to adjust, expand,
or phase out their relationships as conditions warrant, thereby keeping their CMO relationships relevant.
For life sciences companies that do not have the time or resources to build their own facilities, contract manufacturing provides
a competitive advantage. Companies that integrate management of CMOs into their business model can quickly reach commercial
scale, reduce capital expenditures, and attain greater overall flexibility. By applying a lifecycle framework and best practices,
CMO relationships can be leveraged to manage overall business risks, accelerate innovation, and speed products to market.
Todd Applebaum, vice president, strategy/operations practice, Maxiom Group, Reservoir Place, 1601 Trapelo Rd., Suite 145,
Waltham, MA 02451, tel. 781.250.4000, fax 781.250.4901, email@example.com