Your Biologics CMO: Choose Wisely, Then Negotiate
Congratulations! You’ve chosen your biologics CMO… Now comes the fun part: negotiating the supply agreements.
Many early-stage companies do not understand the importance of having a strong operations partner help them negotiate the terms and ground rules of the CMO relationship. But this is crucial to establishing a strong relationship with the organization that will mitigate risks and help ensure delivery of your product on time and on budget.
Often, your chosen CMO will provide a template or term sheet that covers the major topics required for an effective legal contract. This is a good starting place. These standard templates provide simplicity. But it is imperative that you, the buyer, have an experienced biologics operations professional to support your legal, procurement, and R&D team members when negotiating the finer details.
Without the proper knowledge guidance, these negotiations can spread out months more than expectations and potentially impact timelines. Or, worse, the negotiations might result in missing critical points that have a direct impact on your ability to get your product. The contract should describe clear accountabilities for both parties. To put together an effective contract, you need to understand the opportunities and challenges that inevitably arise during these multi-year projects. Here are just a few things that need to be spelled out precisely:
- Understanding inherent versus operations process risk
- Scheduling priorities; who gets the next available slot if a failure occurs
- Allocating cost of failure
- Decision trees, conflict resolution
- Raw material risk: Who pays when delays, OOS or other issues arise
Once the contract is signed and work begins, If any problems arise, and the CMO contract is silent or unclear on the issue, they could easily cause millions of dollars in losses and months of delay. Many of my contacts at CMO’s, large and small, agreed that it is best to have discussed these concerns during negotiations.
Having a “buyer’s agent” or subject matter expert experienced on both sides of the CMO relationship can be invaluable when negotiating these critical points. Having this expert will also help you avoid wasting time negotiating provisions that may be important in a traditional commercial supplier or raw material agreement but are less relevant with a biologics supply agreement.
So, you’ve negotiated a clear, precise contract with your biologics CMO. Now it’s really time for congratulations!
Check out BPTC’s other recent postings on CMO related issues.
Blog article by: Lisa Cozza