To learn more about Pfizer’s new five-year strategic alliance with PAREXEL and ICON, in which the #1 company will reduce its CRO base from (reportedly) 17 providers down to two, I spoke with key figures from both providers. Up first: Josef von Rickenbach, chairman, chief executive officer and founder of PAREXEL International.
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Contract Pharma: It’s been a few weeks since your strategic partnership with Pfizer was announced. Details were limited then; can you tell us anything new?

Josef von Rickenbach: Not yet, beyond what’s been published. We have not really worked through all the details with Pfizer yet. The focus was mainly on the selection of the partners and how this all would work, in terms of governance and relationship management. We’re only now in the midst of working through the details of what will come over, what the mechanism is for moving work over, and so on.

CP: How will the work be divided between PAREXEL and ICON?

JvR: It’s a five-year agreement, so over time we expect that it’s going to be roughly 50/50.

CP: How does this partnership compare with some of the previous ones, in terms of scope or the initial demands?

JvR: Pfizer is already a very experienced outsourcing company. They were a champion of the FSP [Functional Service Provider] model. This move is both a narrowing of their provider list, from many CROs down to two, but also a switch from FSP to programmatic outsourcing.

CP: Last year, PAREXEL and ICON “co-won” a partnership arrangement with Bristol-Myers Squibb. Have you learned anything from that relationship that aided the selection process this time around?

JvR: In the end, it’s all about the details, and each company has its own profile and its own needs and goals. These mechanisms, procedures and workflows are part of the identity.

Certainly, there are best practices that we can carry from one relationship that we can apply to others, but not in terms of details. It’s more one the conceptual side: what works and what doesn’t.

It doesn’t make a difference which competitor may be selected as the co-partner.

CP: What particular strengths at your companies would make a certain assignment a “PAREXEL job” or an “ICON job”?

JvR: We have our strengths and ICON has theirs. A lot of it is in the eye of the beholder. Pfizer picked our two companies for a reason. I think the combination of our eClinical platform with proven clinical processes is an advantage for broader use. Our global presence is very strong, including in emerging regions, such as Asia, and that may be a differentiator as well. It’s all about what the client values from each partner in order to accomplish their development goals.

CP: From what you’ve learned so far, how would you describe Pfizer’s personality and its needs?

JvR: Pfizer is obviously a big company and one of the things that we found to be very helpful to both parties was our whole suite of technologies that we can bring to the table. It’s a unique set of offerings that we believe has allowed us to propel ourselves to the forefront. And we think these are the tools that will help them navigate this frontier.

CP: How long was the bidding process? How did your past experiences with strategic partnerships help you win this one?

JvR: The process was several months long. Because we’ve announced other partnerships with major pharmas, it was evident to them that we had really strong knowledge and experience about how to enter into these and make them successful. That helped us put a strong case in front of Pfizer.

CP: Do you think there’s a snowball effect? That is, as you publicize more of these partnerships, does it transform you into the de facto preferred partner of major pharma?

JvR: Well, a good reputation is always a benefit. I also believe that it’s a result of a decade-plus process of hard work, deploying our strategy of becoming a global company with all the necessary infrastructure. It takes a lot to develop the SOPs and controls to run a company of this size effectively. In addition, we have an excellent quality reputation. Our consulting group, which has worked with many smaller companies, can be an eye-opener for these major pharmas, which didn’t know about our the extent of our bench strength and expertise to help them from development through commercialization.

CP: How important do you think deals like this are for the health of the CRO industry?

JvR: For our clients, I think it’s absolutely great. In many ways, you could say that we’ve built our company in anticipation of this trend. I think it’s a much more effective way to help our clients achieve their goals. There are significant benefits to our clients in terms of timing, productivity and other aspects. This is good for us as well, and I think it may have had an impact on the structure of our industry.

CP: What impact do you think the proliferation of these partnerships is having on smaller CROs?

JvR: It’s always difficult to attribute cause and effect to industry developments. But I have to believe that if you’re a medium-sized or smaller CRO and you see that relatively large chunks of your market are getting sequestered away into these partnerships, then you have to do something to gain access to those opportunities.

If you do nothing, you stay a small company and for all intents and purposes, your opportunities shrink. I think it’s a consideration that these companies are making, when they take part in these CRO rollups.

CP: Talking to any other major pharmas about strategic partnering? Got a hint about any more announcements we might hear in the months ahead?

JvR: Well, we’re working for every one of the top 50 pharma companies, so of course there is conversation. I believe that this is a better way to conduct business.

One thing that’s interesting: If you look at the companies that have publicly moved in this direction, they’re almost all U.S.-based firms (except for GSK). We’re not seeing these partnerships yet with other European companies or Japanese companies. In the U.S., just about all the pure-play pharma companies have formed strategic alliances with CROs.

CP: What do you think accounts for that?

JvR: There’s a lot of pressure on these companies, with all the changes in the U.S. with healthcare reform and pricing pressures. In some respects, they really are forced to change and make improvements like this.

CP: When we spoke a few months ago for an article on biosimilars, you mentioned some hiccups in terms of how quickly strategic partnerships would advance, when it comes to revenue growth. Have you made progress with managing internal and shareholder expectations about what these relationships mean in the short term to your company?

JvR: We now believe that it takes a while for a partnership to really mature. This arrangement with Pfizer will have a transition period of a year, perhaps a year-and-a-half. That’s the experience we’ve had in some other cases. During these transitions, it’s not so much about revenue recognition as it is about backlog conversion. But it’s only a question of time until that conversion comes along, with these new partnerships.

That said, the work has already started. Some projects have begun, and that goes on in parallel with the greater details of the partnership.

CP: Would you like to swing into the fray with ICON’s CEO and make a guess as to future annual revenues from this partnership?

JvR: Let me just say, we’re thrilled about this arrangement. It was a very competitive selection process and to come out as the winner was a great achievement for our people and our company. We’re extremely motivated to make this a big success.

For ICON’s perspective, read our Newsmakers Interview with Alan Morgan!

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Biographical Note

Josef von Rickenbach, chairman and chief executive officer, PAREXEL
Mr. von Rickenbach founded PAREXEL in 1982, and has shepherded the company from its pioneering beginnings as one of the first CROs to its place as one of the top three public clinical service providers today. He has led PAREXEL through its IPO, multiple public offerings, and more than 30 acquisitions during the company’s history to expand its portfolio in order to meet changing client needs and market demand.

Mr. von Rickenbach’s extensive experience in the biopharmaceutical services industries puts him at the forefront of drug development and management. After having begun his career with Schering-Plough, Mr. von Rickenbach also held positions with ENSECO (formerly ERCO). He served as chair of the Association of Clinical Research Organiza-tions (ACRO) in 2005, and is a long-standing member of ACRO’s board of directors. He also serves on the board of the New England Healthcare Institute.

Mr. von Rickenbach holds a B.S. degree in Business Economics from the School of Business at the Lucerne University of Applied Sciences in Switzerland, and a Master of Business Administration degree from Harvard University.

Under his leadership, PAREXEL has evolved to provide a broad range of services to the biopharmaceutical industry, including integrated clinical development, regulatory affairs consulting, commercialization services and technologies that expedite time-to-market. Foreseeing the globalization of clinical research, Mr. von Rickenbach has worked to expand PAREXEL’s global footprint to provide access to a wide array of geographies for clients’ programs.