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Working With CRO’s: Lessons for Small Biotechs



Outsourcing increases flexibility, but sponsors need a clear strategy, from the start, if they want a synergistic partnership



By Jean Yarger , ENDECE, LLC



Published June 3, 2014
Given today’s business realities, small, discovery-oriented biopharmaceutical companies that lack brick-and-mortar laboratories must partner with contract research companies (CROs) to achieve their goals.  However, the right strategy must be in place, and they must select the best partners. The goal is synergy, and a true partnership in which scientists from the sponsor and the CRO work side by side as colleagues, rather than as parts of a vendor-client relationship. This article will share ENDECE’s experience, and some lessons that our company learned in outsourcing some key operations.

ENDECE is a private drug discovery and development company. Our scientific team has discovered compounds with potential benefit, and novel mechanisms of action, for treating cancer, multiple sclerosis (MS) and other neurological diseases. Instead of having a stable of in-licensed products, ENDECE offers a library of proprietary compounds that vary greatly in their biological activities. As a result, flexibility is a key requirement, and a virtual, rather than brick-and-mortar approach, is a reality.

Outsourcing has been the best fit for our company’s three-fold therapeutic focus, on diseases whose treatment options are limited or non-existent, whose causes may not be well understood and whose clinical development paths are still undefined.

Since we, like many small biotechs, are navigating in uncharted territory, early research may yield unexpected results, requiring a quick and efficient shift in focus. It can thus be difficult, or impossible, to anticipate staffing and equipment needs. Investment in brick and mortar lab capacity would be neither practical nor cost-effective, and would be irresponsible to our company’s investors, to whom we must remain accountable. The time required to hire employees and purchase equipment would have a dramatically negative impact on timelines, and, for any company but especially a small biotech, time is money.

Facing these realities, our company decided, from the start, to work with CROs, but to do so in a synergistic way, to optimize program flexibility, increase access to the best expertise and equipment, and to allow for rapid scale up of API manufacturing and formulation.

“Synergistic” is a word that is overused in the business world, but, for us it means having a true partnership, in which we work together as colleagues, rather than as parts of a formal client-vendor relationship. Based on our company’s experience so far, we have found that CROs must meet the following requirements in order to be able to work synergistically. They must:
  • Fully comprehend what the biotech company needs, and be able to show examples of how their experience and expertise can address each need
  • Have world-class capabilities, expertise and experience
  • Have scientists and technical people who are able to think scientifically and creatively while keeping things simple
  • Offer additional/alternative interpretations of data that they help to derive
  • Have a track record of completing projects on time and on budget
  • Be willing to admit it when they lack the requisite expertise for a specific initiative
These factors are prerequisites to a synergistic partnership between a CRO and a small biotech, and are vitally important to accelerating drug discovery and development programs.

Clarity of Goals, Objectives, and Roles
For any synergistic biotech/CRO relationship, the biotech sponsor must openly provide clear project goals and objectives. Such clarity is important for ensuring that the CRO can match its services and expertise with the specific project needs. At the same time, the CRO’s input can help refine the project goals and objectives.

While a CRO can help streamline a drug development project by keeping it on track and on schedule, the innovator biotech will always remain in control of the overall project, including such areas as research methodology and data analysis and interpretation. Nevertheless, the CRO’s analysis and interpretation of the data can be very valuable, especially when the CRO is highly regarded and has substantial experience in analyzing and interpreting data in a particular therapeutic or technological area. It is important that the partnering CMO share these thoughts and impressions when working with the biotech.

Sharing Proprietary Information
In order for a CRO to function in a synergistic manner, it is important that the biotech company share proprietary information, in a legally protected way, of course, with the CRO. If the CRO lacks an understanding of the science behind the contracted work and the reason for the scientific question underpinning that work, it will be impossible for the parties to interact synergistically. 

Consequently, the two parties must establish a high level of trust that goes beyond the standard confidential disclosure agreement. Contract partners should be honest in admitting any gaps in their understanding or experience with the work involved, as this will allow the biotech company to fill them.

Understandably, biotech companies can be uncomfortable about divulging proprietary information to a CRO. However, world-class CROs show a high degree of respect for biotech companies that share such information, and tend to reflexively respond in a synergistic manner.

Technical Expertise and Innovation
Although this may sound obvious, the most attractive potential connections are with CROs that have established a track record of innovation and success in their areas of expertise. Ideally, the CRO should be regarded as among the best in the world in their particular area. This is especially true when preclinical development research requires new analytic and research techniques. These are often areas in which there are very few true experts. In such cases, it can be best to go straight to the source and work with the innovators themselves.

In addition to providing the means to obtain additional information from the data generated in preclinical or clinical research, a CRO’s experience can provide a much deeper understanding of what the data are telling the biotech, due to the CRO’s deep familiarity with the technology. In such cases, the CRO has amassed a body of knowledge from previous use of the technology, and can apply this knowledge to the biotech company’s development program. Additionally, a CRO’s experience can accelerate the development process by minimizing mistakes—a “do it right the first time” approach that is especially compelling to small biotech companies.

Financial and Intellectual Property Issues Considerations
The best CROs are not always the least expensive. Spending more on contract services will often be more cost effective in the long term, if the contract partner can help increase efficiencies and synergies. However, the CRO must also be mindful of the biotech’s financial constraints, and should be expected to make its services affordable and to deliver on time.

It is difficult for a biotech company to work synergistically with an outside contractor (whether it is a CRO or a university) if the latter either holds or wants intellectual property (IP). Since the critical IP that forms the foundation of our research was discovered in-house, and since it is necessary that we solely retain our IP, it is difficult to interact synergistically with a CRO that has built its business around a unique patent position. In such cases, the CRO’s patent position can be limiting, as the only technology offered is specific to that particular IP position. In its desire to obtain future royalties by applying that patent position to answering a specific type of research question, a CRO may not be able or willing to consider other solutions that might be better suited to the compound.

IP positions can also complicate relationships between biotechs and academia. Interacting with academic professors is difficult for biotechs because the professors’ universities generally want patent positions on anything discovered or co-discovered at that institution; this can lead to difficulties when the original IP was discovered solely by the biotech. We have also found that universities move much more slowly than non-academic CROs and are often more expensive due to university’s overhead requirements. For these reasons, it behooves the biotech to fully clarify IP issues up-front and in writing before contracting research to a CRO, whether academic or non-academic. 

On-Site Visits
Although advances in electronic communication have greatly facilitated various aspects of drug development relationships, it is often easier to review and interpret large amounts of data on-site than to do so remotely via telephone or e-mail. A biotech company that has entered into a synergistic partnership with a CRO must make regular visits to the CRO site while a study is underway. The on-site visit should be viewed as a means to help both parties more fully understand the details behind the procedures being used in the study, and to enable more efficient and incisive data analysis. It is not unusual during an on-site visit for a technician to point out a notable, unforeseen aspect to the data the investigators are obtaining. When combined with the biotech scientists’ accumulated knowledge, such observations may yield additional discoveries that might have been lost had the site visit not occurred. Regular on-site visits and observations can also facilitate timely adjustments to the research process, as well as avoidance of unnecessary delays due to confusion or misinterpretation of research expectations.

Networking and Scientific Rigor
Biotechs appreciate CROs that facilitate introductions to other experts with specialized knowledge. Oftentimes, a CRO may have established relationships with other researchers and institutions whose specific expertise can be applied to a biotech company’s development program. The resulting relationships can thus be mutually beneficial.

Of course, high scientific standards and knowledge should be required for any CRO in a synergistic partnership. Although some of the CROs we interact with perceive us as “tough” and demanding, many appreciate our level of rigor because it enhances the synergistic relationship. When a biotech determines that a CRO has insufficiently high scientific standards or expertise, the biotech will avoid using that CRO in the future, and, when necessary, may terminate an unsuccessful relationship before the work is completed.

In short, when a biotech company and a CRO approach a development project with a synergistic spirit, the result benefits both partners, and helps to advance the science. CP


As Chief Administrative Officer, Jean Yarger is responsible for all business administration, strategic development, financial administration, and corporate policy and procedures for ENDECE. Her accomplishments include co-founder of Cedarburg Pharmaceuticals where she was responsible for the implementation of a computerized accounting system and establishing the finance department. In response to growth of human capital, she established the Human Resources department and implemented formal procedures for payroll administration and benefits, departmental strategic planning and development, succession planning, and employee training and development. She holds a Bachelors Degree from the University of Iowa.


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