From The Editor | June 1, 2016

Outsourcing Insights For Drug Delivery Devices

By Doug Roe, Chief Editor


So, you’ve created a novel drug delivery technology that will potentially meet a large unmet patient need — now what? If you are at a midsize to large medtech company, the choices are numerous. You can develop and manufacture the device in-house or partner with another device company that has expertise in that area. Or, you can ponder the many outsourcing options available.

Determining what functions to outsource involves reviewing your existing facility and technology capabilities, as well as employee competencies, against those that are required for the endeavor. Expanding current infrastructure and acquiring new talent takes time and usually a large financial investment. Add to that the very real concerns related to vendors’ regulatory compliance history and adherence to a growing list of quality standards, as well as the fear of sharing proprietary secrets and the potential loss of project control. The choices can be difficult, but at least you have choices.

If, on the other hand, you work for a startup or a small medtech, your options are slim. Often, your resources are lean. Your real asset is your intellectual property and the future market potential that can be garnered from its commercialization. The advantages of outsourcing a piece, parts, or all of the development and manufacturing processes are obvious, but you share many of the same concerns as your counterparts at medium and large medical device companies. So, with limited resources and the same supplier vetting process to undertake, what is the best approach for you?

Windgap Medical is a small startup that faced just such a challenge. Its wet/dry epinephrine delivery device is in its third generation of prototype development. Chris Stepanian, the company CEO, discussed the outsourcing methodology that has allowed his company’s device to advance to this point, and perhaps continue along the path to market.

Med Device Online (MDO): What is Windgap Medical’s approach to outsourcing?

Chris Stepanian: From the beginning, we have tried to work with the best possible partners we could afford. Initially, we were an angel funded startup, and now we are an angel- and venture-funded startup — but still, we didn’t raise large amounts of money. We had to watch our pennies, but we saw working with great partners as being a necessary investment expense.

The principle that we followed, as we began with a startup mentality, is that one dollar’s value needs to be worth ten dollars. We needed to make sure that we were not saying things to our potential investors like, “In the next phase, we are going to spend tens of millions of dollars to build a cGMP manufacturing plant to our specifications.” They would never have invested.

Building a manufacturing plant, a cGMP plant especially, is very expensive. Creating a quality system appropriate for a plant like that makes it even more expensive. Plus, there is the hiring and training of a large staff. We wanted to avail ourselves of that, and we discovered there are a number of high-quality vendors available. We wanted to utilize folks who had already sunk those costs, who already had a good quality culture in place and a very skilled staff with a lot of experience.

What we had to do was understand the way the industry worked, find out who the good partners were, and entice those partners to come on board. That is the approach we have taken with our design partners and also our growing list of manufacturing partners.

Currently, we are doing a lot of work with outside consultants, contract research organizations (CROs), and contract manufacturing organizations (CMOs). You are always going to be doing a bit of a “trust fall” with any new partner, but developing a strong relationship with them is important, and it takes a lot of time. You are getting married, and you want to make sure that that relationship is going to be for the long haul. They can either really help you overcome whatever bumps are along the way, or potentially hurt you by creating the bumps in the road.

MDO: How did you generate the initial list of candidates, and what system did you use to develop the short list?

Stepanian: One of the nice things about being in Boston is you have a lot of medical device expertise nearby. We have a number of angel investors who have used design firms before. We get to go to medical device or pharma events in the area, and we end up running into the some of the same people all of the time.

We started with folks we knew reasonably well or companies that were recommended to us by colleagues we trusted. That is often the way life is, right? Friends make recommendations to you: “Hey, you need to check out this restaurant. It’s really good.” While the dining website Yelp! is useful, you are going to react even more strongly to a good friend of yours whose advice you really trust. That is what helped form our initial list of contacts, and then it was whether we felt comfortable with them, whether they understood what direction we were going, whether they understood our constraints, and whether they could work within those constraints and really hit the ball out of the park.

We have great respect for folks who have done it before — people who have a lot of wisdom in this space — but finding those companies that can deliver millions of auto injectors into the market, as you can guess, eliminates your corner injection molder from consideration. At that point, you are talking about a pretty limited number of vendors.

Then you apply more social-related filters to get a deeper understanding. You have many conversations. You fly out and meet the companies and talk to the individual teams — and then talk to folks who have worked with them in the past. It is like hiring a potential employee. You really want to understand not just the quality of their work, but how they get that work out and how well they will work with you and the way your office currently operates. There are a lot of social aspects in that equation.

MDO: Can you share any additional methodology behind your partner evaluation process?

Stepanian: It was actually a very hard decision for us to choose partners. There are a number of companies out there that do a very good job. It was a difficult process to understand what their strengths were and to figure out who would be the best fit for us. Obvious, price was not the only thing that we considered.

The people on our team all have engineering backgrounds, so we did one of those weighted checklists, like what you would do for a failure mode effects analysis (FMEA). We ended up creating criteria, assigning each a given weight — whether it was very important to us or moderately important — and evaluating all those different qualities.

That allowed us to understand and compare various standards, apples to apples. It was not just initial cost and what they anticipated total costs to be — that was just one aspect of it. We had to evaluate their quality culture, their expertise in drug delivery, their manufacturing and engineering talent, and their level of interest in the project.

MDO: As a startup, was it difficult to convince potential partners that this was a worthwhile opportunity for them?

Stepanian: Yes. As I’ve described, we were an angel-funded startup, and for a lot of manufacturers, that is really not going to move the needle. They probably have a small startup or an independent approaching them with an idea once or twice a week. We needed to impress them, to get their interest so that they believe, like we do, that there is a big opportunity here. They are not in it for the R&D and scale-up dollars. They are in it for the manufacturing opportunity, keeping their employees and their machines working and their plant floors filled with products.

We had to prevail upon them that this was a heck of an opportunity, and we had to gauge whether they got it or they didn’t. How well would we get along with them on that journey? As I said, it is a marriage, so you are in it for good times and bad. We wanted to get a feel for how supportive they were going to be, in helping us work through any bad times. The teams need to work well together, to overcome the problems, if they are going to get a product approved by the FDA and into production.

As with most relationships, it turns into a bit of a complicated dance. But so far, we have been quite pleased with the folks we brought on board and are moving forward with. If you take the time to find good partners, you will be very well-served.