I recently came across a Contract Pharma article discussing how large pharmas are increasingly making strategic investments in and licensing deals with smaller biotechs, resulting in a vibrant market segment of early stage to mid-market sponsors. The article explains how one large CRO is attempting to address the needs of this segment, but my experience in the market tells me big CROs are missing the boat and, in fact, it just may be impossible for them to ever make it aboard.
This trend among big pharma is clear evidence that, in response to weak pipelines, they are increasingly outsourcing more of the “R” in “R&D,” in addition to the “D,” which they have outsourced to CROs for 30 years. This is a good thing on many levels in my view. But with it comes the requirement to understand the unique needs of the earlier stage and mid-market sponsor and the ability to deliver the services matched to their needs.
This is something we know about. At Clinipace, we purpose-built a service delivery model and a business model to specifically meet the unique needs of the early-stage and mid-market segment (though not surprisingly, even some large pharma sponsors like it, too).
The article cites data showing that 81% of ongoing development programs originated outside of the top 25 pharmaceutical companies. There is indeed a lot of work in the segment, but large CROs continue to struggle to win business among smaller clients for many reasons. Interestingly, this is not lost on the big CROs—they know it, yet have not been able to penetrate the segment in a meaningful way. It is virtually impossible for them to convince smaller clients that they are the right partner. Why? Think about early stage or mid-market companies. These are not started or run by people who are new to the industry! They are some of the most experienced and smartest folks in the business who have “been there and done that.” Chances are they once worked for a big pharma and saw firsthand what it was like to work with big CROs.
Big company-big CRO partnerships can work well—especially if you have a lot of money. But for cash-efficient mid-market companies, that is never an option. And it takes much more than forming a “biopharm” unit to magically meet the needs of this segment. To use an analogy, it is like trying to convince a client, who only needs a 5-passenger sedan and never has more than 5 passengers, that they need a 7-passenger minivan (over-scoped) stuffed with 10 passengers (overstaffed), and then telling them it is really a 5-passenger sedan. We call this “bloat,” and it is not free to the client. A minivan cannot be repackaged to look like a sedan.
This market segment also wants to feel like they are getting the “A” team. They don’t feel that way with a big vendor. The prevailing market trend in big CRO land is “partnerships.” I love those! I’d like to see more of them. Every time a multi-hundred million dollar strategic partnership is announced, every smaller customer of a big CRO gets even smaller. How can a $5M client be as important, or get as good a resource commitment, as a $250M client? It defies logic. Our market segment knows it, and it therefore builds market demand for my company to address.
The article promotes that large CROs are the only ones who can offer a full set of services to smaller companies, from regulatory to operational guidance, in a one-stop manner. So too does Clinipace. But that is where the similarity ends. At Clinipace, we have pioneered a new delivery model built from the ground up on a single proprietary platform (not three or five or eight third-party applications, all silo-ed) that not only manages the entire lifecycle of the study in-house at Clinipace, but at the site and at the sponsor. It’s been designed to require fewer people to run the study and to enable new monitoring and project management models. All of this translates to cost savings, increased visibility, fewer management layers and a magnet to attract “A” players to join our team and service the client.
Someone (and we know who you are…thank you!) is buying it. In fact, our book-to-bill ratio has been double the industry average for the last five quarters. But the article downplays the role of the small CRO in favor of a large CRO, presumably, in all cases. It is true there are times when a large, global CRO is the best fit for the project. But this is not the case by default. Ten years ago when I started Clinipace, the market penetration on a dollar basis of the top 10 CROs was 50% of all CRO revenue. Ten years later, the players have shuffled a bit, but depending upon which prognosticator you choose, it is between 45 and 50%. It is still roughly the same despite a constant drumbeat of predictions that the smaller CROs would fade out of existence due to consolidation and strategic deals. That’s just not happening.
Nearly one year ago, at the 2013 JPMorgan conference, I had nearly two dozen meetings with executives from early stage and mid-market companies. In at least half of them, they told me they cannot get excited about working with a large CRO because they would never get the attention they feel they deserve for their money. I did not lead the witness! These were unsolicited comments, but I was, frankly, not surprised that it came up so often. It is a fact. And the reality is there is a moat around this mid-tier market segment, and the large CROs have not proven they can consistently penetrate it.
We call ourselves a dCRO. The “d” stands for “digital,” and we talk about it to reinforce the message that we are a different animal. Our technology-amplified processes underpin the human effort to improve trial performance, visibility and coordination among all stakeholders. Clinical research and operations software integrate in one platform the full spectrum of clinical trials functions, including Project Management, Data Management, Monitoring, and Data Analysis and Reporting. With the aid of collaborative technology, every stakeholder involved in a project works around the same hub, uses the same tools and has instantaneous access to the same information. Walls and systems that separate functions in the traditional CRO are broken down in a dCRO, where information flows quickly and freely among project stakeholders. An unprecedented level of information sharing is fostered in this type of environment, enabling efficient analysis for better decision-making, risk mitigation and an ideal environment for the conduct of a frictionless clinical trial.
We understand price is not the first hurdle to clear in being selected for a project. The team, our experience, our global footprint and our model all work together to present a compelling value proposition to our prospects. These make up the “chasm of proof” required by any buyer, but once we have crossed that chasm, price will absolutely come into play. This is where the dCRO model really shines. We have clear evidence that our projects come in 10 to 30% less than a traditional CRO depending on the phase of the trial.
If there is a project in your future, you owe it to yourself to talk with us. If you are an early stage or mid-market firm, we understand your needs. We will not test the laws of physics with a minivan or the elasticity of your budget. We will, however, talk to you about a solution that was purpose-built to match your needs.
Jeff Williams is the CEO of Clinipace.