As a member of the Scientific Advisory Board of Sciformix (www.sciformix.com), the management team thought it would be useful if we were to describe the case for doing business with their company, the value proposition and the practical reasons that accounts for the success of their business. I thought it may be useful to our readership to republish this and share some of our thoughts.
Describing why outsourcing/out-tasking is such a huge success is a straightforward challenge. It is rooted far more deeply than labor arbitrage which is the core reason most companies choose to use an outsourcing “partner”. There are unprecedented shifts in the way Bio-pharmaceutical companies are conducting their business today, partially forced by macroeconomics, politics, population growth and aging and the “flattening” of the globe that provides opportunity and challenge unknown before today.
There is an enormous pressure on management to perform the concurrent miracle of significant cost reductions coupled with simultaneous productivity improvements in order to thrive in our business. While workloads are inexorably increasing, there are daily headlines describing massive layoffs and facility closings in our industry. No corner of the business, regardless of the geography is immune from these pressures.
One of the few growth areas for budgets is the amount of outsourcing/out-tasking/off shoring that the Bio-Pharmaceutical Industry has undertaken. While the industry has been late out of the starting blocks, the lost time is being rapidly made up. Variations on the theme are diverse and include captive centers, joint ventures with global outsourcing companies, the major expansion of use of Clinical Research Organizations (CRO's), use of diverse geographies and any other creative aspects companies can create.
Our point here is to outline four key areas of consideration for outsourcing the drug safety and adjacent functions to a company such as Sciformix. We call it “The 4E Principal” which encompasses the “whys” of doing business together, each company's priorities will differ. The 4E's are Effectiveness, Efficiency, Economics and Employees and we will describe what we mean by each of these:
Effectiveness: In the area of drug safety, effectiveness encompasses results that are of high quality, compliant with appropriate regulations, consistent from batch to batch and well documented. With the large variation in the number and kind of testing that needs to be done and the education updates that are required, it is a significant challenge for the sponsor company to comply effectively. As Sciformix is focused on this area, day after day, the effectiveness we bring to your company is likely to be significantly better than you experience today.
Efficiency: Ideally your lab is running at or near 100%, however the reality is such that “peaks and valleys” are the norm profoundly impacting productivity and increasing unit costs. As a specialized outsourcing partner, companies such as Sciformix provide a predictable, attractively priced alternative to the classic in house staff-many companies tend to adapt a hybrid model that couples both in house expertise with external capability and bandwidth.
Economics: The economics of external drug safety capability are driven by labor arbitrage, that is to say that if external costs are less than 50% of that of in house capability and quality is equal to or better than current models, than the decision is very straightforward. As with investment policies in the financial world, 90% of the value is achieved with the initial decision, further incremental economic benefits are possible, but not as compelling once the major decision to go external is made. Currently, Sciformix can demonstrate cost benefits of greater than 50% compared with either in house or on shore based providers while providing a superior result.
Employees: The key driver for having an external provider for drug safety functions is based on the cost and upkeep of employees-including non-productive time, continuing education, vacations, holidays, benefits, etc. all of which add up to high overhead costs that are virtually eliminated when working with Sciformix.
Showing posts with label Pharmaceutical Clinical Development. Show all posts
Showing posts with label Pharmaceutical Clinical Development. Show all posts
Monday, May 10, 2010
Saturday, April 17, 2010
Oracle Spends Big to be a Leader in Pharmaceutical/Biotechnology Clinical Software
On Friday, April 16, 2010 Oracle (ORCL) announced that it would pay $685 million to acquire Phase Forward Incorporated (PFWD) and integrate it into the Oracle Health Sciences Global Business Unit. This seems to be a carefully considered strategy to dominate clinical development software and provide a one stop superstore of this software when integrated with the previous acquisitions by Oracle of Siebel and its eClinical Suite as well as Relsys a key provider of drug safety and risk management solutions with advanced analytics for the life sciences industry. This may very well be the oft described clinical ecosystem that many senior Pharmaceutical R&D executives have been seeking a way to improve efficiencies and lower costs.
This acquisition does not come cheap—a premium of 30% over the prior day market price and a price that represents over 3.1 times 2009 revenues of $213 million or an astonishing 61 times net profit of $11.2 million-suggests that Oracle sees significant synergies in its product lines.
In our opinion this is a win-win combination for Oracle and Phase Forward since the extraordinary marketing power that Oracle brings should boost Phase Forward Sales while the Phase Forward products fill in significant gaps that Oracle has. Additionally, the concept of Software as a Service (SAAS) has been furthered within Oracle based on Phase Forward's Integrated Clinical Research Suite (ICRS) which could be the glue between Siebel eClinical and the Relsys Product Suites. The possibility of a full service “cloud computing” offering is a distinct possibility in our thinking. The challenge of seamless integration of all this can be problematic and articulation of the value proposition to their clients will need to be clearly defined.
The other questions left to ponder is what will key competitors such as Microsoft and SAP do to be competitive in this space and what acquisitions will come next. One further issue to consider is the enormous potential for consulting and support services and what moves the market leaders (IBM, Accenture, TCS, Infosys, Capgemini, etc.) and more specialized players will do to garner parts of this business.
This acquisition does not come cheap—a premium of 30% over the prior day market price and a price that represents over 3.1 times 2009 revenues of $213 million or an astonishing 61 times net profit of $11.2 million-suggests that Oracle sees significant synergies in its product lines.
In our opinion this is a win-win combination for Oracle and Phase Forward since the extraordinary marketing power that Oracle brings should boost Phase Forward Sales while the Phase Forward products fill in significant gaps that Oracle has. Additionally, the concept of Software as a Service (SAAS) has been furthered within Oracle based on Phase Forward's Integrated Clinical Research Suite (ICRS) which could be the glue between Siebel eClinical and the Relsys Product Suites. The possibility of a full service “cloud computing” offering is a distinct possibility in our thinking. The challenge of seamless integration of all this can be problematic and articulation of the value proposition to their clients will need to be clearly defined.
The other questions left to ponder is what will key competitors such as Microsoft and SAP do to be competitive in this space and what acquisitions will come next. One further issue to consider is the enormous potential for consulting and support services and what moves the market leaders (IBM, Accenture, TCS, Infosys, Capgemini, etc.) and more specialized players will do to garner parts of this business.
Monday, December 8, 2008
The Convergence of Two Perfect Storms—The Drug Industry and The Outsourcing Businesses
The Convergence of Two Perfect Storms—The Drug Industry and The Outsourcing Businesses
by Larry Rothman
We like and fear the term “Perfect Storm”, it conjures up severe disruption if not destruction. We wonder if the drug industry is in the midst of not just one but perhaps a double perfect storm and here's why we think so.
Severin Schwan recently named Chief Executive for Roche Holding AG was quoted in the December 8th issue of the Wall Street Journal saying: “As the global pharmaceutical market gets tougher, some drug makers probably will fail because they won't have enough innovative medicines that health insurers will be willing to pay for”. He goes on to say “Some drug makers might be forced into bankruptcy in coming years. Others could be forced into mergers, or to diversify into other businesses.”
The Perfect Storm causing this is a combination of rare circumstances coming together simultaneously including, but not limited to:
1.Researcher productivity as measured by number of new drug entities approved is at or near an all time low.
2.Discovery and development of new, novel, cost effective compounds is not happening despite great advances in technology as well as all the supposed process improvements made by spending hundreds of millions on outside experts (e.g consultants).
3.Stricter regulations and enforcement (and the promise of more to come) from regulatory authorities, much emanating from the US FDA, but certainly not limited to this country, rather a global phenomenon.
4.The likelihood that in the US (based on President-elect Obama's promises) that the government will soon step in with some form of price controls and the increasing pressures by PBM's and insurance companies to be unwilling to pay for newer drugs without clear benefit and the compounding of the strong push toward generics and there is challenge on the horizon.
5.Oh yes, let's add a global economic downturn that promises to be the worst in 30-70 years.
We do have great respect for the industry and its attempts to focus on these issues, so to suggest a failure of management similar to the US Auto Industry would not be totally fair. However, one of the major tools for cos reduction that the drug industry has deployed is outsourcing and that business is itself facing challenges of the same magnitude as the pharmaceutical industry.
The Outsourcing Industry has its own perfect storm in the making including:
1.The recent tragic events in Mumbai will cause a natural reluctance to place mission critical work in what is perceived as “harms way”, in other words, offshore from the US.
2.Clinical trials have been viewed as an area of great promise both as a globalization vehicle and certainly as a way to lower drug development costs. HOWEVER, there is a perception that despite lower costs and faster recruitment for clinical trials in developing countries that the results may not be “at standard” or even worse as clinicians eager to please their sponsors may “unintentionally” skew results. (We will follow-up separately on this issue and to be fair—suspicions and perceptions are just that, there may be no factual basis to these claims).
3.Talent pools are getting scarcer and their cost is escalating so that many of the outsourcing companies are trying to find the optimum mix of geographies, skills, costs and capabilities. This is easy to describe but very difficult to manage.
4.Finally, at least in the US, there is a political backlash to sending “US jobs” overseas.
So where do they go from here. We'll discuss our opinions in the coming weeks. What do you think?
by Larry Rothman
We like and fear the term “Perfect Storm”, it conjures up severe disruption if not destruction. We wonder if the drug industry is in the midst of not just one but perhaps a double perfect storm and here's why we think so.
Severin Schwan recently named Chief Executive for Roche Holding AG was quoted in the December 8th issue of the Wall Street Journal saying: “As the global pharmaceutical market gets tougher, some drug makers probably will fail because they won't have enough innovative medicines that health insurers will be willing to pay for”. He goes on to say “Some drug makers might be forced into bankruptcy in coming years. Others could be forced into mergers, or to diversify into other businesses.”
The Perfect Storm causing this is a combination of rare circumstances coming together simultaneously including, but not limited to:
1.Researcher productivity as measured by number of new drug entities approved is at or near an all time low.
2.Discovery and development of new, novel, cost effective compounds is not happening despite great advances in technology as well as all the supposed process improvements made by spending hundreds of millions on outside experts (e.g consultants).
3.Stricter regulations and enforcement (and the promise of more to come) from regulatory authorities, much emanating from the US FDA, but certainly not limited to this country, rather a global phenomenon.
4.The likelihood that in the US (based on President-elect Obama's promises) that the government will soon step in with some form of price controls and the increasing pressures by PBM's and insurance companies to be unwilling to pay for newer drugs without clear benefit and the compounding of the strong push toward generics and there is challenge on the horizon.
5.Oh yes, let's add a global economic downturn that promises to be the worst in 30-70 years.
We do have great respect for the industry and its attempts to focus on these issues, so to suggest a failure of management similar to the US Auto Industry would not be totally fair. However, one of the major tools for cos reduction that the drug industry has deployed is outsourcing and that business is itself facing challenges of the same magnitude as the pharmaceutical industry.
The Outsourcing Industry has its own perfect storm in the making including:
1.The recent tragic events in Mumbai will cause a natural reluctance to place mission critical work in what is perceived as “harms way”, in other words, offshore from the US.
2.Clinical trials have been viewed as an area of great promise both as a globalization vehicle and certainly as a way to lower drug development costs. HOWEVER, there is a perception that despite lower costs and faster recruitment for clinical trials in developing countries that the results may not be “at standard” or even worse as clinicians eager to please their sponsors may “unintentionally” skew results. (We will follow-up separately on this issue and to be fair—suspicions and perceptions are just that, there may be no factual basis to these claims).
3.Talent pools are getting scarcer and their cost is escalating so that many of the outsourcing companies are trying to find the optimum mix of geographies, skills, costs and capabilities. This is easy to describe but very difficult to manage.
4.Finally, at least in the US, there is a political backlash to sending “US jobs” overseas.
So where do they go from here. We'll discuss our opinions in the coming weeks. What do you think?
Wednesday, July 16, 2008
Insights from a Top Five Star Fund Manager on Drug Pipelines (Part II)
Recently, Larry and I met with an interesting person, Ken Kam. Ken manages the Masters 100 Fund (MOFQX) and is a Morningstar Five Star fund manager. He has been regularly beating the S&P 500 Composite Stock Price index. Ken believes that his approach to investments using virtual portfolios to derive real investment decisions will be the wave of the future. Ken’s approach can be checked out at www.marketocracy.com. Earlier in his career, he had managed a technology and healthcare fund and had also run a medical devices company. During our meeting, we learned about his current holdings and what he thinks about the future of the pharmaceutical industry. This is the second of three blogs based on that interview.
In my last blog, I introduced Ken Kam, the fund manager of the Marketocracy’s Masters 100 Fund (MOFQX) and reviewed his position in Elan Corporation PLC, his thoughts on its drug, Tysabri,(Bapinuezumab) and its current prospects. In this entry, I will go over Ken’s future prospects for Elan and Tysabri.
Since taking his first in Elan in June 2005, the stock has doubled several times. Ken thinks that it could double again. Larry and I queried him about this and he gave us his reasons. First, Elan is conducting trials for Tysabri for use with Alzheimer’s disease. Unlike the multiple sclerosis space where Tysabri has three other competitive drugs to go against there are no others in the Alzheimer’s space to contend with. For this reason alone, Ken thinks Elan could double. He likes the Alzheimer’s story and thinks that it could make Elan another Amgen.
Next, Ken is taking a longer view on Elan. It possesses nanocrystal technology which allows the manufacture of nano-sized versions of existing drugs. This increases the surface area of the drug permitting a more effective dosage with reduced side effects. This is fundamental technology that can be applied to many other drugs, that are coming off patent. Other companies would have to do the research to see of their drugs were effective. Elan could either acquire other drugs coming off patent and make nano-sized versions or license the technology to the other drug manufacturers. Manufacturers with drugs coming off patent are looking at ways to make their drugs more effective. Nanocrystal technology offers the chance to extend a patent for another ten years Ken explained to us. This is what Ken sees as the future pipeline for Elan and explains his optimistic future for the company.
In my next and final blog based on Larry’s and my meeting with Ken Kam, I’ll write about Ken’s thoughts on the drug industry and its future.
As always, we welcome your feedback. Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.
Contributed by Guy de Lastin
In my last blog, I introduced Ken Kam, the fund manager of the Marketocracy’s Masters 100 Fund (MOFQX) and reviewed his position in Elan Corporation PLC, his thoughts on its drug, Tysabri,(Bapinuezumab) and its current prospects. In this entry, I will go over Ken’s future prospects for Elan and Tysabri.
Since taking his first in Elan in June 2005, the stock has doubled several times. Ken thinks that it could double again. Larry and I queried him about this and he gave us his reasons. First, Elan is conducting trials for Tysabri for use with Alzheimer’s disease. Unlike the multiple sclerosis space where Tysabri has three other competitive drugs to go against there are no others in the Alzheimer’s space to contend with. For this reason alone, Ken thinks Elan could double. He likes the Alzheimer’s story and thinks that it could make Elan another Amgen.
Next, Ken is taking a longer view on Elan. It possesses nanocrystal technology which allows the manufacture of nano-sized versions of existing drugs. This increases the surface area of the drug permitting a more effective dosage with reduced side effects. This is fundamental technology that can be applied to many other drugs, that are coming off patent. Other companies would have to do the research to see of their drugs were effective. Elan could either acquire other drugs coming off patent and make nano-sized versions or license the technology to the other drug manufacturers. Manufacturers with drugs coming off patent are looking at ways to make their drugs more effective. Nanocrystal technology offers the chance to extend a patent for another ten years Ken explained to us. This is what Ken sees as the future pipeline for Elan and explains his optimistic future for the company.
In my next and final blog based on Larry’s and my meeting with Ken Kam, I’ll write about Ken’s thoughts on the drug industry and its future.
As always, we welcome your feedback. Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.
Contributed by Guy de Lastin
Monday, July 14, 2008
Insights from a Top Five Star Fund Manager on Drug Pipelines (Part I)
Recently, Larry and I met with an interesting person, Ken Kam. Ken manages the Masters 100 Fund (MOFQX) and is a Morningstar Five Star fund manager. He has been regularly beating the S&P 500 Composite Stock Price index. Ken believes that his approach to investments using virtual portfolios to derive real investment decisions will be the wave of the future. Ken’s approach can be checked out at www.marketocracy.com. Earlier in his career, he had managed a technology and healthcare fund and had also run a medical devices company. During our meeting, we learned about his current holdings and what he thinks about the future of the pharmaceutical industry. This is the first of three blogs based on that interview.
Ken Kam manages the Marketocracy Masters 100 Fund (MOFQX) that has a Morningstar Five Star for three year returns. The fund’s objective is to seek capital appreciation in common stocks of domestic and foreign companies of any size, seeking to outperform the S&P 500 Composite Stock Price index. What brought Larry and I to meet with Ken was his position in Elan Corporation PLC. Elan has been conducting clinical trials on a drug, bapineuzumab, for Alzheimers patients, and they currently market Tysabri, to treat multiple sclerosis. Elan represents the largest holding of MOFQX at about 9½ % of its entire portfolio. What had brought Elan to Ken’s attention was two of the virtual portfolio managers who use his website (www.marketocracy.com). In March 2005, these two virtual fund managers made Elan 25% of their test portfolios. They were betting their long term track records on this stock. (One had been running cash at 22% of his portfolio, a fairly conservative position.) In addition, 1,500 of 80,000 virtual investors at www.marketocracy.com had Elan in their portfolios. Elan’s clinical trials on their drug, Tysabri, for use with multiple sclerosis had been proving successful. However, because of a one in one thousand chance of a fatality, the FDA had ordered the drug withdrawn.
Ken decided to do more research on the drug. What separates Ken from other stock researchers is his use of the Internet. He e-mailed 1,500 people on the Internet to solicit their feedback. Approximately five hundred responded of whom, one hundred were MS patients and some had been participants in Tysabri’s clinical trials. All were waiting for their insurance companies to approve the drug for use despite the risk of fatality. Ken’s research approach took him in a different direction from other Wall Street analysts who normally talk with the neurologists. Being doctors, they reply that there isn’t information yet to give an opinion.
With this research behind him, Ken took his initial position two months after Elan first came to his attention. Since then the stock has doubled several times after the FDA ban was lifted and Ken is hopeful for the future.
Several things caught my attention during our meeting. First, the use of the Internet to bring together virtual investors to develop stock picks. Next, Ken’s use of the Internet to take advantage of his in depth understanding of clinical trials to conduct original patient research on Tysabri’s effectiveness. In the next several blogs, I will write about what Ken thinks about Elan’s future pipeline and the drug industry in general.
As always, we welcome your feedback. Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.
Contributed by Guy de Lastin
Ken Kam manages the Marketocracy Masters 100 Fund (MOFQX) that has a Morningstar Five Star for three year returns. The fund’s objective is to seek capital appreciation in common stocks of domestic and foreign companies of any size, seeking to outperform the S&P 500 Composite Stock Price index. What brought Larry and I to meet with Ken was his position in Elan Corporation PLC. Elan has been conducting clinical trials on a drug, bapineuzumab, for Alzheimers patients, and they currently market Tysabri, to treat multiple sclerosis. Elan represents the largest holding of MOFQX at about 9½ % of its entire portfolio. What had brought Elan to Ken’s attention was two of the virtual portfolio managers who use his website (www.marketocracy.com). In March 2005, these two virtual fund managers made Elan 25% of their test portfolios. They were betting their long term track records on this stock. (One had been running cash at 22% of his portfolio, a fairly conservative position.) In addition, 1,500 of 80,000 virtual investors at www.marketocracy.com had Elan in their portfolios. Elan’s clinical trials on their drug, Tysabri, for use with multiple sclerosis had been proving successful. However, because of a one in one thousand chance of a fatality, the FDA had ordered the drug withdrawn.
Ken decided to do more research on the drug. What separates Ken from other stock researchers is his use of the Internet. He e-mailed 1,500 people on the Internet to solicit their feedback. Approximately five hundred responded of whom, one hundred were MS patients and some had been participants in Tysabri’s clinical trials. All were waiting for their insurance companies to approve the drug for use despite the risk of fatality. Ken’s research approach took him in a different direction from other Wall Street analysts who normally talk with the neurologists. Being doctors, they reply that there isn’t information yet to give an opinion.
With this research behind him, Ken took his initial position two months after Elan first came to his attention. Since then the stock has doubled several times after the FDA ban was lifted and Ken is hopeful for the future.
Several things caught my attention during our meeting. First, the use of the Internet to bring together virtual investors to develop stock picks. Next, Ken’s use of the Internet to take advantage of his in depth understanding of clinical trials to conduct original patient research on Tysabri’s effectiveness. In the next several blogs, I will write about what Ken thinks about Elan’s future pipeline and the drug industry in general.
As always, we welcome your feedback. Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.
Contributed by Guy de Lastin
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