Info & Opinion
February 19, 2019
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David Underwood of Quanticate says some firms are giving short shrift to the basics of clinical trials
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By appearances, the services offered by 1,000-employee Omnicare CR are identical to those performed by any large or mid-sized contract research organization (CRO). Omnicare handles the same standard therapeutic areas, the same typical functional areas of work such as trial setup, project management, monitoring and SAS programming.
Appearances, of course, are not always representative of the energetic thrust of a company. James Pusey, chairman and CEO of Omnicare CR, had previously helped turn around a division of MDS Pharma prior to its sale to Inc Research. Last week Pusey helped to finalize the sale of Omnicare CR to investors at Nautic Partners for an undisclosed sum. He'll continue on as the chief of Omnicare CR, which will eventually be renamed to avoid confusion with its former corporate parent, a nursing home chain.
Pusey notes that several big CROs were in the bidding for Omnicare, and that Nautic was chosen partly for its long-term vision and investment patience. Another appeal was Nautic executives who seem to understand the deep ethical seriousness of working with human research subjects. Finally, on a prosaic level, Nautic has an in-house consulting group that, according to Pusey, will ensure Omnicare CR employees have strong IT tools to get their work done.
Turnaround No. 2
Nautic, Pusey notes, is sitting on an additional $400 million in cash. It's neither Omnicare's intention nor official plan to grow by acquisition. But the financial resources for such an approach are at hand if an opportunity does arise.
After 18 months at the firm, Pusey is well along in his second major CRO turnaround, and clearly reveling in the work. He notes the declining Omnicare sales upon his arrival that have since been reversed; a formerly shrinking backlog of projects is now once again growing. Wall Street filings for the firm's former corporate parent suggest Omnicare CR had approximately $120 million in annual revenue in 2010.
He's not doing it alone. Several key aides joined Pusey at Omnicare from MDS. "We have a reputation of being able to look at a CRO and say, 'Where are the opportunities?' " Pusey says of the team. "We have no debt. We have a very healthy cash position. We are one of the only mid-sized CROs that has no debt."
Omnicare CR is running a few projects in China and Korea, and growing rapidly there. But the heart of its strategy is to be more specialized than competitors.
Omnicare has established dedicated business units specializing in big, complex tasks. Pusey and his team are trying to build a CRO that has a bit more specialization in those niches: early phase trials, medical devices and data management. The early reviews for the medical device group in particular have been gratifying, Pusey says. "We've had phenomenal response. We are probably the only specialized medical device business unit that is global," he says. "That's something that is very attractive to the medical device industry. They are different."
The early phase group is especially attuned to the financial constraints of smaller drug and biotech firms, with a goal of finding not just healthy volunteers but patients in the therapeutic area being investigated. The technical services division, comprised of 30 percent of the firm's employees, does all the traditional tasks of biostatistics and data management, and includes clinical data guidelines, vendor management and technical project management as areas of core competence.
In some cases, Pusey acknowledges, the sponsor community is demanding significant cost savings. At times, Omnicare can oblige by offering a discount. On other occasions, it declines to even bid on a project if it doesn't believe it can handle the work expertly. Being privately held, without the need to meet Wall Street expectations every few months, may help the CRO be even choosier about which projects it accepts.
When a discount is offered, Pusey says, it's important not to hobble the Omnicare team by cutting the available number of hours by 10 percent, or reducing some other element of the bid by a random level. Why? Because that might affect the quality of the work. The decision to offer a discount is made higher, at the corporate level, on the basis of the project's financial considerations, without affecting the operational resources of the Omnicare team.
In a survey of customers, Omnicare learned that they are enamored with the firm not so much for what Omnicare does but how its trials progress. "It's not what you do, necessarily, in research. It's the way you do it," Pusey explains. "Doing clinical research is incredibly difficult. Anyone who says it isn't hasn't looked after patients in a clinical trial."
A physician by training, Pusey says the unfortunate truth is that in 2011 not every sponsor wants to be dealing with large CROs that are themselves emulating sponsor firms in their corporate psychological profiles. Pusey says even some groups inside large pharma feel that CROs can feel too big. As a factual matter, needless to say, a handful of large CROs are now larger than most sponsor firms, and have evolved some of the same policies, cultural attributes and infrastructure of sponsor firms.d9A2t49mkex
Pusey says some sponsors still long for smaller, more tactical clinical teams. Such groups can operate more like elite military special operations forces than generalist infantry corps. Says Pusey: "We sensed there was quite a lot of dissatisfaction, especially among the more entrepreneurial, early-phase drug development teams. There was frustration in those individuals with the whole concept of big pharma, big biotech, big CROs and strategic alliances."
Not So Strategic
Pusey respects other views in the industry and other approaches that are working well for competitors. But for Omnicare, he says, concentrating on the details of each trial is more likely to bear results than adhering to the numbers or verbiage in a vast, massive multiyear preferred provider contract covering dozens or hundreds of trials. "I don't want to knock the strategic alliances," he says. "But conceptually, I think they are wrong. Quality is more important than volume."
In theory, he adds, strategic alliances should work. But that is not what he has seen. Says Pusey: "I see project teams [that are] focused on large sponsors being asked 'why aren't the revenues coming in?' It is potentially dysfunctional. We have a different model. We're focused on delivering more specialized, even higher quality service to our clients."
Basically, Pusey sees the mission of the company as providing a service that will appeal to people who don't want a big CRO. Just as Panera Bread tries to provide healthier fast food with a more limited menu than, well, Burger King, Omnicare CR is trying to provide more satisfying, customized offerings in research. "The more specialized support you can provide to that team, the better outcome the team is going to give," he says. "Our clients were saying we don't want strategic alliances. We want smaller teams."
Pusey doesn't want to sound critical of peer companies. For some customers, he says, large CROs work well. For others, they are not so suitable. "Sometimes the smaller units within a customer, a sponsor company, they don't like working with a large organization," Pusey says. "They feel more comfortable with a smaller, more specialized group. That's been an advantage for us."
Editor's note: Here's an earlier article on Pusey.