A few years ago, Vivasure Medical faced an emergency that “nearly shut our company down,” co-founder Gerard Brett said.
“We picked a supplier in good faith — it looked like they had what it took to do the job for us,” he said. “We were working away at developing a part of our product, and we got a phone call with 24 hours’ notice to say the sheriff is going to put a lock on the door of that company.”
The supplier was about 4,500 miles from Vivasure’s Galway, Ireland headquarters where Brett serves as chief operating officer of the maker of advanced polymer implants and delivery systems.
“We literally put people on a plane, hired what looked like the CIA, we had black Suburbans, and we backed up to the back of that facility at 2 a.m. and took our stuff out: equipment and materials,” Brett said. “At 6 a.m., it was locked.”That’s what’s at stake when picking contract manufacturers, Brett said in May 2023 while presenting on a DeviceTalks Boston panel with MedAccred Operations Manager Justin McCabe and Spectrum Plastics Interventional & Surgical Technologies Sales VP Paul Melnychuck.
They offered tips, advice and red flags for medical device developers seeking outsourcing partnerships with contract manufacturing organizations (CMOs) and contract development and manufacturing organizations (CDMOs).
“Ask first of all: What do you want, why do you want it and can you afford it?” Brett said. “Depending on the state of your company’s finances, depending on the state of development of your technology, what you need in a vendor from concept through design through development could be considerably different than what you need for post-clinical and commercialization.”Device developers know their contract manufacturing partners will need the usual certifications and accreditations for devices to survive regulatory scrutiny. That’s just a starting point to dig deeper, said McCabe, whose organization works with major OEMs such as Medtronic, Johnson & Johnson, Stryker and Philips to vet suppliers.
“Don’t take those certifications and accreditations at face value,” McCabe said. “One of the things that MedAccred has built into our process is we require suppliers have a valid quality system in place before we’ll come in and conduct our audit. That may be ISO 13485, it might be 9001. Then we come in and do our deep-dive technical assessment of that supplier’s capability. We see that ISO cert as an inch deep and a mile wide across an organization.”
While a contract manufacturer might have a certification that training programs are in place, MedAccred evaluates how effective those programs are for various capabilities and the people doing the work.
“Our auditors are talking to those operators, looking at the equipment on the shop floor, making sure that quality system is effective for that particular process and any standards that are utilized in that process,” McCabe said.
Melnychuck had good advice of his own: If your plan is to eventually sell your technology to a major device manufacturer, consider partnering with a contract manufacturer that’s already on the approved supplier list (ASL) for the companies you’d like to be acquired by.
“This has a lot of benefits. First of all, at a company like ours, our quality management system is shaped by our customers’ QMS systems. And so we, to the extent possible, resemble their own systems,” he said. “Secondly, if you’re on the ASL, that saves probably six months — maybe more — of due diligence time to get on the ASL. There are business considerations, sometimes contract negotiations, and there are quality concerns. If you partner up front with a firm that’s on the ASL of three of the top five targets, you have a better chance of being able to slip that in. That time for a startup is valuable. That’s market access time, that’s worth money that I would say should add and contribute positively to the exit valuation of your firm.”
And always keep your options open with multiple plans for critical requirements and critical material.
“Do that as part of the process of setting up a vendor,” Brett said. “Otherwise, you’re walking in reasonably blinkered, and you can get into trouble that you can never anticipate.”
Look for signs of trouble when you’re talking with CMOs and CDMOs even from the earliest stages.
“Be wary of empty promises,” Melnychuck said, warning that manufacturing is at or near capacity due to a lack of investment in the COVID-19 pandemic.“Everyone’s busy, and if someone [says], ‘We can start Monday morning,’ I would really probe that because if there’s capacity available, you are paying for that because it means it was idle,” he continued. “Vet, do your due diligence and really be patient. And if that means the lead time is going to be a little longer before someone can start your project, whether it’s on the engineering design development side or commence manufacturing or transfer to manufacturing, I think it’s better to play the long game and work with a strong and viable partner that’s also efficient and is going to probably price that efficiency into your product as opposed to one that maybe has that idle capacity that you’re going to pay for in the long run.”
Remember that you’re looking for a long-term partnership that will benefit both of your businesses.
“If they don’t want to be part of the game with you and they’re doing it just because they’d like to get some more money, you’re in a danger zone,” Brett said. “You need to be sure that they want to work with you just as much as you want to work with them. You need to make sure that they’ve got the financial stability.”
Beware of hidden costs, unanswered questions and a lack of detail in the proposed partnership, especially when it comes to more comprehensive projects.
“The concept development cost, the setting up a manufacturing process, characterizing the process, qualifying the process, getting into clinical studies, and then going into commercial, each one of those comes with a pretty hefty ticket,” Brett said. “Understand it all from start to finish before you make the jump.”
Supplier sizeConsider the size of a contract manufacturer against your own needs. The largest contract manufacturers might have more financial stability than smaller shops with fewer customers, but those smaller shops may be more responsive or even more knowledgeable in a particular area of specialization.
“When the pressure comes on, will you get the priority you need?” Brett asked. “And how do you know you’re going to get that attention? How do you know it’s all going to work for you? Setting your expectations clearly up front, understanding what you want to do, understanding what they can do, and understanding that you can work together is vitally important.”
Supplier size by itself isn’t a guarantee of better service, price or speed. For more niche services, you may have limited to smaller suppliers — but one of them might just happen to be the best in the industry for your particular project.
Local suppliers are not only easier to vet before a partnership, but easier to drop into for check-ins, face time and in case of emergencies.
“You must touch, you’ve got to go visit, you’ve got to go see, you’ve really got to peel back,” Brett said. “And this is where Justin’s organization (MedAccred) really comes into play because as a startup, sometimes you just don’t have the bandwidth of people to do that. But you need to. You need to take the time because the amount of aggravation and challenges and pain and sleepless nights that you’re going to avoid will be well worth it.”
Communication and chemistry
Communication between both sides is crucial for success, and a big part of that is making sure there’s chemistry between the engineering teams and management teams before you work together.
“If you don’t, it doesn’t matter how good they are, you’re going to be challenged and it may or may not work,” Brett said. “Ensure you’ve got single points of contact. Don’t have 10 people from one company speaking to 10 people from the other. You’re going to get spaghetti junction communication. … We pick the best communicator, the best negotiator to be that person.”
Don’t overlook intellectual property in these conversations. After agreeing on your IP strategy internally — including up through your board and investors — you’ll need to be clear with your CMO or CDMO about who will have ownership.
Having all these conversations up front will provide a good foundation for building long-lasting relationships where there are no secrets and no surprises. It takes time, effort and trust.
“We have five absolutely critical components,” Brett said. “I’m good friends with the CEO of each one of those companies and can pick the phone up, we have dinner together when we meet, and it works, and we don’t go poking each other and say, ‘Can you help me because I’m two days late on one part?’ But when something needs to happen, it can happen. It all comes back to relationship management, and if you’re not genuine, it’ll come apart very quickly.”
And if that happens, you might find yourself on a 4,500-mile flight racing to beat the sheriff to your contract manufacturer’s shop.
More: Tips for vetting contract manufacturers from Fictiv CEO Dave Evans