When Outsourcing, Focusing On Low FTE Rates Can Be Costly

By Roger Frechette, cofounder and partner, New England PharmAssociates, LLC

At a meeting in December 2012, I spoke with an excited young biologist entrepreneur whose grant application had been funded, formally launching his new company. He had arranged shared lab space and couldn’t wait to land an Indian chemistry CRO to get started. I mentioned that there might be a more cost-effective option and offered to discuss this topic in more detail in the new year. His quizzical expression suggested I not wait by the phone.

While outsourcing at all stages of life sciences R&D has become common, it is remarkable that entrepreneurs so often believe outsourcing to a lab more than 10 time zones away is the only option — or even a good option. At a time when access to capital for life sciences start-ups is increasingly scarce, it certainly is possible for a virtual life sciences operation to succeed with a lean, capital-efficient, asset-centric business model, without ever building and staffing a laboratory. But execution of outsourced research requires careful planning and sound management. The siren call of inexpensive FTE rates can be difficult to resist, but for a researchdriven business to succeed, leadership has to take a holistic view of operational needs, where contract FTE cost is but one component.