In the third post of my blog series on the evolution of the CMO industry, I’ll focus on the opportunity to differentiate through scientific leadership, as well as a practical way to start profiting from it immediately. To start this discussion, let’s consider the drug product lifecycle in three distinct phases:

1. Pre-Clinical Development / Formulation
2. Clinical Development
3. Commercialization

Traditional CMOs have typically existed in the third phase for a variety of reasons. And as such, business in this phase has greater competition and smaller margins. Many CMOs have spent the last several years working towards “moving to the left”, or partnering with companies to deliver clinical supplies, pre-clinical formulation, and development. And as related to scientific capability and expertise, the further left you move, the more you need. That is not to say that as a CMO you will not need to have great scientific minds on staff regardless of where you focus. However, their backgrounds, and what you have them working on will differ greatly based on your business strategy and value proposition. I believe that the CMOs who will thrive into the future will have teams made of up of industry leading scientists fulfilling a variety of functions. These resources will be funded by billing for them in a variety of different contract models (part of SLA’s, project based, hourly). They will be leveraged across multiple customers, functions, and activities within the CMO. Examples include the following:

• Marketing:  Creating thought leading industry opinions, being visible at industry functions, conducting workshops / seminars with existing customers and prospects with the intention of creating awareness and demand.
• Sales:  Being involved in the sales cycle to support sales pursuits, to demonstrate competence and credibility, and to increase the competitive differentiation of their company vis-à-vis the competition.
• Projects:  The bulk of their time and revenue generating activity will be focused on working with prospects / customers in the area of pre-clinical development and formulation.  This can and should be a separate “line of business” reporting up through a “Chief Scientific Officer” or something similar, just so it is separate from manufacturing / operations.
• Other:  If you assemble the right team, some with research backgrounds, some with manufacturing backgrounds, some from industry, some from academia, you will be able to leverage them in a variety of client facing and revenue generating activities.  They can spend time as part of customer account teams, play reviewer roles during tech transfer activities, even assist with issue resolution / troubleshooting / investigations.

Most importantly, what your customers, and more broadly, industry sees, is that you are differentiated and you are a leader. The relationships these people bring, in and of themselves, will be valuable. But to execute on this, leaders of today’s CMOs need to think differently about the capabilities they can offer and also their value proposition.To get started today, ask yourself whether or not you are leveraging the expertise and capability of your current employee base to its fullest extent? Could you, for example, take some of the great minds that you have today and leverage them into a kind of apprenticeship program? Spending half their time working with and training someone to do what they do today, and challenging them to use the other half of their time to generate incremental profit for the company by using their scientific knowledge and expertise creatively in new and different ways? There are many ways a program such as this could be accomplished. But it takes leaders who will look up from the “day-to-day” and challenge their direct reports and organization as a whole to “do something different”.  That is the only way that change is possible. And back to the original premise of this blog series, change will be a necessity for CMO’s that want to be relevant into the future. If you would like more information on Clarkston’s CMO Capability Maturity Model, or would like to discuss how to apply it to your organization, please do not hesitate to contact me at JoeD@clarkstonconsulting.com.