Features

Developing Drugs Together

Understanding virtual relationships

August 23, 2005

Ph.D.

Jim, vice president of drug development for an emerging pharmaceutical company, is not having a good day. He has just discovered that two studies on the critical path to IND submission will be delayed from what was originally promised. It seems very unlikely that he will be able to meet the expectation of an end-of-the year IND filing that his chief executive officer has promised the shareholders and board of directors. Since future corporate fundraising efforts will be affected by the stock price, the impact of these delays will be significant, perhaps even threatening to the viability of the company.

How could this happen? Jim was pleased with his handling of negotiations that brought together a collection of lowest-cost vendors to tackle the project. Why couldn’t the bioanalytical vendor simply call the toxicologist at the other company and give an impression about what drug exposure looked like in the test animals? Instead, key data had to wait until it cleared the QA audit at the vendor before being shared outside—apparently a company policy. And shouldn’t the formulation supplier have known that you can’t give such a large volume of drug suspension to a rat?

Finally, Jim figured that he could save time and money by writing the IND summaries himself. However, without data and with the available time to prepare the IND submission squeezed from six weeks to 10 days, this was not going to be easy. Where could he get expert writing help on short notice with the limited funds available in the program’s budget?

Is it impossible to get a diverse group of experts who work in different locations, for different organizations, together around a common drug development program? Is Jim just unlucky or was there some learning that could have helped him a few months ago to avoid the pain he is going through today (and will face again tomorrow)?

This scenario represents some common situations faced by drug development managers when trying to initiate and drive drug development in emerging pharmaceutical companies. Drug development is a high-risk business; however, success can be enhanced by creating a development environment where information flow and informed decisions are timely and there is understanding of which outsourcing model best supports the needs and styles of the sponsor and the vendors.

It has only been 20 years since contract research organizations (CROs) began to routinely provide sources of drug supply and manage clinical research for the larger pharmaceutical developers. Today the industry has matured to the point where full drug development capabilities exist in many CROs. Small, emerging pharmaceutical companies now turn to CROs for all their drug development needs. This is often referred to as ‘virtual’ drug development, in that large investments in internal resources are avoided if effective service leasing and product manufacturing arrangements can be built and managed effectively.

However, as Jim is discovering in the scenario above, managing a virtual drug development program can be much more challenging than it first appears. Knowledge of and relationships with several service and product providers must be developed, often quickly, to ensure that the appropriate resources are recruited. Communication across many providers can be difficult, particularly if they are competitors. Getting access to the right people at the right time to solve drug development issues requires commitment from all parties. Independent consulting, while extremely valuable for certain situations, can be costly and may provide highly differing perspectives with little ability to directly influence the execution of a drug development plan, once initiated.

How does one successfully manage relationships required to develop drug candidates in a virtual way? This article outlines some of the key lessons that the authors have collectively learned from nearly 50 years of managing drug development, from both sides of the contracting equation.

First, one must understand what factors are necessary for successful drug development. Next, one must explore which outsourcing management model to use. Finally, one must identify and build trusting working relationships with a core group of service and product providers. Often the first step to a meaningful sponsor/supplier relationship is reconciling differing, limiting perceptions that each party carries of the other.

Success Factors in Virtual Drug Development
After reviewing the success stories of several drug products, we have concluded that there are five common key success factors to successful drug development, whether the product is being developed within a single organization or is the combined effort of several corporate contributors.

It may seem obvious, but the first requirement is a good drug candidate; a product that proves to be safe, selective and easy to administer. Its mechanism of action should be based on a sound therapeutic concept and (ideally) meet an un-met medical need.

The second requirement is an effective drug development team, composed of committed people who together cover all key areas of expertise for the program. Most importantly, the team needs to have a champion, a team leader who is respected for their knowledge of drug development, is passionate about the program, and who can indirectly or directly leverage resources when needed, to get the job done.

Together, the drug development team needs to create a solid plan, one that is based on a decision-gate strategy where risk is managed1. The plan needs to communicate how the science addresses the medical need and how the flow of work matches the company’s business plan. For example, many drug products achieve their first potential return on investment at the so-called ‘clinical proof of concept,’ when the first hint is observed that the drug is working in humans as planned. It is important to know whether there are sufficient financial resources to get the program to this milestone. The plan will evolve with time, but it is important for it to be debated and agreed upon by the drug development team. The timeframes for the plan should be challenging but reasonable.

Many promising drug development programs fall apart because of poor execution of the plan. Execution can become a problem if one or more of the parties involved are not capable of doing the work. Experience counts. An advantage exists if many of the team members represent labs or clinics that have successfully worked together previously in an integrated way. Potential scheduling conflicts can be an issue when working in a virtual environment. Competition for space at highly respected laboratories or clinics can present a challenge for all involved a month or two before initiating the work. However, with the whole team aware of the full drug development plan, long-range scheduling is possible. More-over, as the team members build trust in one another, it is easier to know what preliminary data could be shared to confirm or expedite decision making.

Finally, one of the biggest challenges facing every program is how to respond when something unexpected happens, and odds are that there will be surprises, even after careful planning. These can include: unanticipated toxicity in preclinical testing, requiring changing to another species and the associated scheduling issues; unexpected delays in providing API (active pharmaceutical ingredient); formulation challenges; polymorphic drug metabolism raising issues of subject selection for future studies; matrix effects in bioanalysis; and unexpected long or short drug half-life in humans. A properly led team, in which information and problems are openly shared, should sense a feeling of true synergy, especially when responding to the unexpected.

Why Go Virtual?
There are actually very few companies that practice truly virtual drug development. Most pharmaceutical companies wish to retain some laboratory aspects involved in candidate selection and lead optimization (and possibly formulation). A truly virtual company has no laboratories or clinics, and licenses in products to develop and sell after adding value to the product. Some larger pharmaceutical companies may wish to out-license a complete drug development program in order to preserve internal resources for other more challenging or rewarding programs. Occasionally, virtual development and outsourcing is employed to explore a new area of medical research before an organization commits to investing in additional internal resources and infrastructure.

Outsourcing provides speedy access to services as they are needed, thereby regulating cash flow. For virtual companies, outsourcing is the only way to access the expertise and services needed to progress the drug. GLP, GCP and GMP responsibilities are largely borne by the contractor. Preferred provider relationships can bring additional efficiencies to both sides of the equation.

Where’s the Passion?
Outsourcing decisions are usually judged on the basis of expertise, service capabilities, reputation and timeliness. Often unrecognized is the hidden need: does the contractor share my passion for this program? Conversely, on the contracting side, the question is: Will the client’s passion for this program lead to unreasonable expectations? Drug development, despite being based on applied science, is often driven by the collective passions of a few people.

Consider where the passion lies within the following aspects of the drug under development:

1)	What is the underlying science? Are the developers invested in proving that their knowledge of genomics, proteomics, receptors, biochemistry, natural products science, etc. will produce meaningful therapeutic or diagnostic applications? Drug development is an applied science that does not carry the glamour of drug discovery. Understanding and aligning the passions of discoverers and developers can be a challenge.
2)	What is the driving medical need? Do the developers have an interest in meeting an unmet need? Are they funded or supported to meet this need? Is there a personal reason for their interest in providing a therapeutic solution to a disease?
3)	What is the business plan? Do the developers wish to capture return on investment at the first opportunity? Knowledge of the motivation behind the business plan can affect choices made during drug development.

Models for Outsourcing
Different approaches to outsourcing pharmaceutical R&D work have been the topics of publications and symposia for many years. Recent business thinking on this topic is summarized in two recent reviews2,3. However, most authors have covered outsourcing models from the perspective of one sponsor’s relationship with one vendor across many drug development programs. This article focuses on outsourcing models that can be deployed for development of a single drug candidate.

In many ways, the various outsourcing models for planning and executing a drug development program parallel models for designing and constructing a building. Both require careful planning that incorporates all the needs of the program. Both involve managing the integration of several areas of expertise to produce an effective outcome. Timing and financing issues are critical in both situations. Tens to hundreds of people can be involved in constructing a building or delivering a drug to the market. With this analogy in mind, the following outsourcing models can be considered:

Do It Yourself Model
In this model, the sponsor serves as the general contractor, providing coordination among several vendors and perhaps doing some of the work itself. This model allows for close control of the information generated during the execution of the program. Continuity of the science is an important driver for decision making in early drug development. Competitive bidding assures good pricing. However, managing timely information flow from vendor to vendor (often competitors) can be a challenge with this model, and there is extensive hands-on management of each contract. Finally, the opportunity to capture the synergies among experts working at different companies is limited.

Architect Model
In this model, the sponsor hires an expert consultant to provide consulting and coordination, often among many vendors. While the cost for a good ‘architect’ can be high, the consultant’s expertise can be readily tapped as can its network of experts. Remember that good consultants learn as much from you as you do from them. Competitive bid-ding will provide a check on pricing but this should not be the major justification for employing a consultant in a team leadership role. Management of timely information flow among competing vendors will still be a challenge. More importantly, the consultant is often viewed as an ‘outsider’ by both vendors and sponsor, making it very difficult for an external consultant to play the role of ‘champion’ for the project. Finally, the consultant may not be truly independent, having undisclosed preferred provider relationships with certain vendors.

Integrated Design and Build Model
The sponsor contracts the entire program to one primary vendor that provides coordination internally and with sub-contractors as needed. This model can provide access to an experienced and integrated team of experts. The vendor can provide a ‘champion’ who will ensure timely information flow between sites and projects, leading to time and cost efficiencies. In this way, program management becomes similar to that employed by larger pharmaceutical companies. The smaller client, with many studies at one vendor, now becomes a big client for that vendor. However, serious problems will emerge if the primary vendor cannot execute the program well. This model requires a high level of trust between sponsor and vendor, but if it is present, the rewards will be great.

Risk-Sharing Model
In this model, the sponsor contracts the entire program to one primary vendor that provides all or some of the services in exchange for an equity position with the sponsoring company or other delayed revenue, based on the success of the program.

Vendor and sponsor win or lose together, so there is a strong incentive for the vendor to provide the best service and expertise available. Because the program is managed by one primary service provider in a manner similar to a large pharmaceutical company, good information flow between studies and sites will lead to efficiencies in time and cost.

However, to be successful, the vendor must be able to manage the loss of cash flow. Moreover, it is more difficult for the service provider to be totally objective when it has a financial interest in the outcome of the program. Finally, if the primary vendor cannot execute the program well, the sponsor will discover the price of misplaced trust.

Building Trust: Myths About CROs
Building trust takes time, often a scarce commodity in drug development. The sponsor must not only trust the CRO, but the employees of the contracting organization must respect the sponsor as well. An important step in building trust is to challenge the myths or limiting perceptions that may exist on each side about the other.

“Outsourcing work to a CRO is more expensive than doing it ourselves.” The only way to assess this is to honestly evaluate the true costs of managing and executing a complex program internally. This includes the cost of space, people, supplies and capital.

“Large CROs do not care about small companies. Big Pharma will always get priority.” This is a common fear of small emerging companies. Some CROs have a business plan that does focus priority on bigger clients. Sometimes large pharmaceutical companies will pay to guarantee access to laboratory and clinic facilities, which may limit access for others. So it is worthwhile to probe the CRO’s business strategy and identify the proportion of revenue coming from small and larger clients. Ask for referrals from smaller companies that have done work with the CRO. Finally, observe who gets the attention at major trade shows or meetings.

“Large CROs do not communicate effectively among their parts.” Ask how a package of studies will be managed after the sale. Will there be a ‘champion’ for the program within the CRO? Expect to pay something extra for good program management and leadership.

“CROs are a good training ground for new scientists who then leave. The employees that remain are ones who could not get jobs elsewhere.” It is important to know where the CRO recruits its scientists and what the turnover rate is. CVs of senior scientists and managers should be readily available. Ask why skilled scientists have stayed with the CRO. The ‘sweat-shop’ image of the large CRO is rapidly changing. Many scientists are now recruited from the pharmaceutical industry and CROs are viewed as a stable employer where true scientific expertise can be developed by experiencing a wide variety of situations. It is not uncommon for an experienced analytical chemist to have developed hundreds of methods in his career, or a pharmacokineticist or biostatistician to have evaluated hundreds of data sets, while working for a CRO. Employees of CROs that possess underlying technology platforms are often the first to use, explore and publish new laboratory or data analysis methods. Smart sponsors recognize that they are buying both hands and minds when they contract work with an experienced laboratory or clinic.

Building Trust: Myths About Sponsors
“Large companies do not communicate effectively. Purchas-ing departments control who gets the work regardless of who brings the best value to the program.” It is important to understand who is the ultimate decision-maker for the science and who brokers the contracts.

“Smaller companies use the bidding process as a way of getting free consulting.” It is important to know and be comfortable with how much effort it takes to prepare a customized proposal. If that effort is exceeded, it is appropriate to ask for consulting fees.

“Smaller companies always ask for more than they are willing to pay for.” Assess the business strategy of the sponsor and its ability to pay up front, but be open-minded in considering different approaches to accommodate its business. Many emerging companies do not have a long credit history, yet they may have solid financing in place. Willingness to disclose financial information can be an opportunity to build trust.

“Smaller companies are not objective when interpreting or acting on results of their drug program.” Managing expectations can be tricky. The CRO needs to be enthusiastic but realistic. It is critical to avoid future work with any sponsor that does not at least listen to your advice or misrepresents results or data to regulators or investors.

Tapping Synergies
It is very difficult to know when a truly synergistic group experience will occur. It is often recognized after the fact by a mutual feeling by all participants that much more was accomplished than anyone expected. Moreover, the experience was enjoyable even though the challenges were significant. The best one can do to foster team synergy is to reproduce the environment where synergies can emerge.

The attitude and passion of the ‘champion’ or team leader can be critical for maintaining focus while capturing the power of ‘groupthink.’ Team members need to value the diversity of opinion and expertise through visible signs of respect for each other. Face-to-face meetings of the key team players at the beginning and at three- to six-month intervals during the life of the program help to foster closer working relationships. When issues arise, the team looks at these as opportunities to build trust through a shared experience. Members of the team feel comfortable in risking or leveraging their reputations to accomplish novel solutions. Responsibility for approaches used to get to an outcome is truly shared. The important point is that all parties need to invest (extra money and time) in the team environment for the benefits of synergy to be realized. Synergy will be reflected in good business decisions.

Key Elements in a Successful Sponsor-CRO Relationship
Regardless of which outsourcing model is chosen, the relationship between sponsor and CRO must be managed well. The most important element in that relationship is mutual trust and respect, where both parties feel that they are valued members of the team. In addition:

•	There must be a clear understanding, preferably documented in writing, of each party’s responsibilities;
•	Methods for contracting and paying for work must be negotiated ahead of time;
•	Ideally, there should be a senior manager on each side responsible for the successful execution of the program. Complex programs need champions;
•	All appropriate talent must be available when planning and reviewing progress on the program;
•	Both parties should benefit from the experienced ‘gray hair’ available to the team, and there should be minimal switching of expert team members during each phase of the drug’s development;
•	A healthy relationship seeks and tolerates a diversity of opinion; however, once a decision is made, it is respected;
•	Institutional learning is leveraged and new learning captured. Use of proper program management tools (Gantt charts, computer-assisted schedulers, critical path analysis) will ensure that project timelines are communicated and met;
•	Common metrics should be used to measure progress; and
•	Finally, problems will arise and the working environment should foster open and honest discussion leading to rapid resolution. Partners need to be able to step back periodically and evaluate their work together from the bigger perspective of the whole program.

Virtual drug development relationships offer great potential for the biotechnology and pharmaceutical industries to keep pipelines full and allocate resources more effectively. Improved understanding of the mindset and methods needed to be effective in the virtual environment will lead to increased partnership between those sponsors and vendors with the foresight to build the trusting working relationships necessary to succeed in virtual drug development.

References

1.	“Making Better Drugs: Decision Gates in Non-clinical Drug Development”; J. Fred Pritchard, Malle Jurima-Romet, Mark L.J. Reimer, Elisabeth Mortimer, Brenda Rolfe and Mitchell N. Cayen; Nature Reviews: Drug Discovery; July 2003, Vol. 2; pp. 542-553.
2.	“A Business Model for Sustainable, Strategic Relationships;” Douglas J. Squires and James E. McClurg; Drug Discovery World; Spring 2003.
3.	“Capitalising on a Changing Research and Development Environment”; Nigel Brown; World Markets Series Business Briefing: PharmaTech 2003.