Is Executive Leadership At Today's CDMOs Up To The Job?
By Louis Garguilo, Chief Editor, Outsourced Pharma
Competent executive leadership should be a main driver of business-to-business confidence. That includes when assessing your CDMOs.
Because bottom line, despite altruistic goals of serving patients, yours is very much a B2B relationship.
As a component of your CDMO due diligence, are you adequately assessing their senior executives?
If so, do they inspire confidence that CDMO is a well-governed and operated entity?
It’s authored by Morten Nielsen and Mindy Steiger at WittKieffer’s Global Life Sciences, an executive search and advisory company, and as we’ll learn momentarily, appropriately titled “ADAPTING TO CHANGE: The Shifting CDMO Leadership Landscape.”
The Business Of CDMOs
Are today’s leaders equipped to navigate the complexities of the CDMO business model, and guide organizations through technological, customer, and market transformations?
Based on research conducted for the report, CDMOs have exhibited “a predominantly traditional, business-focused leadership composition, structured around general managers.”
Is that a positive construction? Nielsen and Steiger have their doubts.
“While effective historically,” they write, “this approach may reveal competency gaps among leadership in today’s rapidly evolving market, and present challenges to CDMOs' continued success.”
“To thrive, CDMOs should consider augmenting their leadership teams with competencies in digital transformation, artificial intelligence, ESG/sustainability, and cutting-edge modalities such as cell, gene, and mRNA therapies.”
That sounds similar to the leadership needs for biotech and pharma companies as well.
However, according to the report, compared to their counterparts in the industry, CDMOs differ significantly in key aspects.
“While pharmaceutical companies primarily focus on the development and commercialization of drugs for patients, i.e., end consumers (B2C), CDMOs operate in a business-to-business (B2B) model, providing services to pharmaceutical and biotechnology companies.”
“The fundamental differences between B2B and B2C models require leaders in each sector to take distinct approaches to stakeholder management, go-to-market strategies, selling approaches, and team capabilities.”
Obviously, sponsors have intricacies to navigate, including running operations associated with drug discovery and clinical trials, regulatory approvals, commercialization, and sales/marketing.
The complexities of CDMOs are different, but no less significant, says the report.
"Successful CDMOs must manage a high level of complexity, present in technological advancements, portfolios, manufacturing footprints, and increasingly sophisticated processes.”
Because the client base has continued to diversify, CDMOs need to serve “individualized requirements related to emerging and novel technologies and global regulatory compliance.”
Of great importance for the leaders of CDMOs, they must manage to truncate planning horizons when compared to their customers, which says the report, again adds to complexity.
Shorter business-outcome horizons require and contribute to a CDMOs need to focus on adaptability, including market dynamics.
Sagacious business and leadership skills are thus essential to drive operations, and surpass changing sponsor expectations and needs.
Are you getting that confidence-building leadership at your CDMO? It should permeate the organization, flowing to the scientists, engineers, project managers and SMEs you work with directly.
The CDMO CEO Market
Through the compilation of publicly available information from company websites, press releases, BoardEx, and LinkedIn, WittKieffer's insights team constructed a comprehensive dataset elucidating the career trajectories, educational backgrounds, and other relevant attributes of 165 members of leadership teams across 18 leading CDMOs.
The WittKieffer report points out that CDMOs are plagued with high turnover.
This has resulted in “significant challenges for all leadership roles, and leading to a dynamic talent pool and a constant, rapid recalibration of leadership profiles and competencies required for success.”
When compared to counterparts in S&P 500 companies, as well as leading pharmaceutical firms, says the report, “CEOs within the CDMO sector exhibit notably shorter tenures.”
This highlights “the intense pressure and fast-paced environment in which these executives operate, requiring them to deliver results swiftly, and navigate complex challenges adeptly, and with finesse.”
Five of the companies in the report sample experienced CEO changes in the past 12 months, with three — Lonza, EUROAPI, and Recipharm — appointing new CEOs since the beginning of this year.
It’s not only CEOs. Other C-suite roles at CDMOs face a similar predicament – personnel transitions are frequent, and “reshape leadership teams and organizational dynamics.”
First impressions are this cannot be a good thing for CDMO customers, but the report takes a more neutral stance. Nielsen and Steiger write “[t]he active nature of the leadership pool within CDMOs presents both opportunities and challenges for the industry.”
One opportunity is the situation allows for “fresh perspectives, innovative thinking, and the infusion of diverse skill sets into leadership roles.” Perhaps this is how CDMOs keep up with evolving biotechs, technologies, and business models.
In any industry, it’s not unusual to bring in CEOs for specific strategic needs, and then have them hand off the fruits of their leadership efforts to the next chief executive.
Which leads to the question: Who are these rotating executives?
Are they younger, and perhaps mirroring the ages of a new era of entreprenuer customers? Conversely, are they, as a result of having filled various roles, long tenured and experienced?
The report tells us:
- The average age of CEOs at CDMOs today is 52.
- Half of current CEOs have been promoted internally, while the other half were hired externally.
- For 50% of externally appointed CEOs, the most immediate prior employment was at either a biotechs or pharma.
- 38% of external hires had previously worked in the CDMO business sector immediately before taking on their current CEO role.
Separate from the report, I found these two comparisons with executives in other industries:
- The average age of a CEO in any S&P 500 company is around 57-58 years old.
- Specifically in technology sectors, as we might expect, CEOs tend to be younger, often in their mid-40s to early 50s.
Generally, CEOs at today’s CDMOs compare well with chief executives in other industries, and they appear to be experienced within their our industry.
And as we started out, today's CEOs should provide you the confidence they, and their organization, is the right choice as your partner.