When life sciences organizations such as pharmaceuticals companies opt for R&D site closures, it is key that they handle strategic, tactical, and operational considerations in a change management framework - as presented here - to minimize disruption and ensure a profitable shift.

1. • Cognizant 20-20 Insights
Shaping a Three-Layered Intended
Strategy to Realize Benefits for Life
Sciences R&D Site Closures
To ensure minimal disruption and impact to regular business operations,
leadership teams must ensure that closure and transition to a new site is
smooth; this requires effective change management, as well as efficient
knowledge retention and management.
Executive Summary new site is smooth; this requires effective change
management, as well as efficient knowledge
The global life sciences industry is undergoing a
retention and management.
wave of mergers and acquisitions, organizational
transformations and restructurings. R&D site To attain this, life sciences organizations should
closures are a consequence of radical changes to embrace the three-layer intended strategy, pre-
the traditional life sciences research and devel- sented in this paper, to execute a site closure
opment business model. Since 2009 there have program that results in substantial business
been nearly 18 R&D site closures in the U.S. and benefits that exceed expectations. The three layers
14 in the EU region, based on public disclosures. pivot around strategic considerations, tactical con-
siderations and operational considerations.
To remain competitive, life sciences organizations
are focusing on core research/therapeutic areas
Industry Trends Influencing
and consolidating their R&D locations (closing
R&D Strategic Changes
some sites and relocating others to lower-cost
destinations) and selectively outsourcing activities As revenue growth slows, the R&D strategies of
to external service providers to gain efficiency and life sciences players are morphing. These changes
reduce costs. The decision to close an R&D site is are in response to:
a major, sensitive issue for life sciences organiza-
• Patent cliff: With patents on many blockbuster
tions. Once decided upon, the closure must be drugs due to expire, an estimated $290 billion
delicately managed and executed because it can in sales are at risk between 2012 and 2018.1
have a significant long-term impact on the orga- There are also persistent fears of government-
nization. To ensure minimal disruption and impact backed healthcare reforms aimed at reducing
to regular business operations, leadership teams exclusivity periods enjoyed by drug makers in
must ensure that the closure and transition to a different geographies.
cognizant 20-20 insights | december 2012

2. • Post-merger integration activities or con- Key R&D Site Closures Since 2009
solidation: R&D consolidation is an important
aspect of post-merger integration, as it helps Year Companies
bolster productivity and reduce costs. For
2009 Pfizer, Merck, Eli Lilly
example, in 2009 Pfizer consolidated R&D
operations and closed six R&D sites in the UK 2010 GlaxoSmithKline, AstraZeneca,
and U.S. following its acquisition of Wyeth. Pfizer, Takeda, Abbott Labs,
Sanofi-Aventis, Bayer, Roche,
• Shift toward selective outsourcing: Due to Novartis
margin pressures driven by higher development
2011 Pfizer, Novartis
costs, increasing regulatory compliance costs,
reduced R&D budgets, government-enforced 2012 Sanofi, AstraZeneca, Roche
price cuts and intellectual-property-related Figure 1
taxation laws, life sciences organizations have
gradually embraced cost-reduction strategies
such as selective outsourcing of R&D activities laborative approach, with selective outsourcing
to academic institutions (early stage research) and “open innovation,” are gradually phasing out
and contract research organizations (CROs). oversized facilities, which is creating greater job
insecurity across the industry.
• Pipeline deficiencies: In the past, life sciences
organizations relied on a robust pipeline of new Typical site closure activities run the gamut, from
products that opened up new revenue streams exiting the site completely, to reducing its existing
to offset revenue lost from patent expiration footprint by exiting partially, or by consolidating
of existing products in the market. However, operations across multiple sites. Regardless of
a sharp decline in successful innovation due the approach taken, the primary goal is to help
to increasingly complex disease targets and the organizations reduce costs, consolidate R&D
numerous late-stage new product failures has efforts, focus on core therapeutic areas, create
had an adverse impact on returns from R&D a leaner organization and redirect resources to
expenditures. areas of greater focus or ROI. Figure 2 illustrates
the key parameters of the rationale for R&D site
• Location optimization: The top-10 global
closures.
pharmaceuticals companies occupy at least
430 million square feet of office, manufactur-
ing and specialist research space around the
world, of which approximately 75% is owned
— one of the highest ownership ratios of any
Indicative Business Case for
corporate sector.2 To address the issue of R&D Site Closures
high fixed costs, the pharmaceuticals sector
is beginning to gravitate toward all-purpose
campuses containing manufacturing, R&D,
sales, marketing and administration functions.
Reduce
costs
Site Closure Decisions and
Possible Impact
Life sciences organizations face increasing cost Redirect
resources to Consolidate
pressures due to drying pipelines and declining areas of R&D efforts
greater focus
productivity in R&D operations, forcing them
to rethink their core focus areas in an effort to
improve efficiency and lower operating costs. This
has also resulted in the cessation of operations
in “not so important” therapeutic areas. In 2009
alone, major pharmaceuticals players announced Focus on core Lean
therapeutic organization
site closures and layoffs of more than 40,000 areas
staffers the world over.3 Figure 1 reveals some
of the site closures/site consolidation announce-
ments. New-age R&D organizations, those that
are increasingly adopting a more open and col- Figure 2
cognizant 20-20 insights 2

3. Our Three-Stage Strategy for R&D Site Closures
Layer One: Strategic Considerations
Shaping Three-Layered
Layer Two: Tactical Considerations
Intended Strategy for
Effective and Efficient
Layer Three: Operational Considerations R&D Site Closures
Figure 3
Three-Layered Strategy for Successful align with the organization’s green initia-
Site Closures tives (site redevelopment and sale).
A wide range of internal and external attributes • Build a climate for change and continuous-
of life sciences organizations were carefully ly assess the effectiveness of the change
considered in our adaptable and flexible strategic management plan.
approach for developing a three-layered strategy
for successful R&D site closures (see Figure 3).
>> Develop a climate for change in the organi-
zation to improve the readiness of the orga-
nization for change.
Layer One: Strategic Considerations
The key strategic considerations must first be >> Identify the impact of change and conduct a
identified to provide an overall objective and change readiness assessment. The assess-
direction on the organizational initiative required ment must consider who will be impacted
to realize the expected business benefits from by the change, what the impact is and how
site closures. Some of these strategic consider- to maximize readiness for the change.
ations for R&D site closures could include: >> Ensure the change is managed in the most
effective manner and an assessment of
• Define a clear site exit strategy or site the change management plan is done at
transition strategy and align it with primary regular intervals to ensure methodologies
business objectives of the site closure. implemented to manage change are effec-
>> After the organizational announcement of tive, focused and improving continuously
a site closure, there is an immediate need throughout the change period.
to define and develop the site exit strategy,
site transition strategy, identify the impact-
• Develop effective communication with
consistent and targeted messaging from the
ed business areas and the key stakeholders leadership team.
involved in it.
>> The site exit decision brings job losses and
>> Ensure that primary business objectives of some turbulence in daily operational ac-
the site closure initiative are aligned with tivities. It is highly recommended that ac-
the organizational objectives and expecta- curate, consistent and targeted message
tions from site closure. content is created for organization-wide
>> Work with municipal planning authorities to communication.
help find socially responsible solutions to
help employees impacted by the site exit as
>> Ongoing communications and stakehold-
er management activity must encourage
well as the impact on the region as a whole. movement along the change curve.
>> Define site remediation and cleanup goals >> Prepare and execute a communication plan
to reduce environmental impact and to and training plan.
cognizant 20-20 insights 3

4. • Define benefits of site closure strategy and sure that all team members are working in
identify measures to track the realization of an integrated manner.
benefits. It is essential to track and quantify
the benefits of the site closure activities.
>> Project oversight and coordination: Sys-
tems integrators provide an assurance
Methods for quantifying benefits could include
role that ensures preparedness for smooth
measuring the savings from reduced opera-
functioning of program activities; they also
tional costs and return on investment metrics,
maintain oversight and coordination of pro-
such as direct contribution to the company’s
gram-level activities.
market position and revenues generated, etc.
>> Conflict management and resolution:
Layer Two: Tactical Considerations This is extremely critical in multi-vendor
Key tactical considerations must then be identified scenarios where there could be differences
to establish a logical approach to successfully in approach. Any delay in issue resolution
executing R&D site closures. These tactical imper- can place a program at risk. A standard ap-
atives could include the following steps: proach for conflict resolution must be cre-
ated and agreed upon with all the vendors/
• Develop a dedicated “systems integrator” suppliers. Teamwork and collaboration must
team to manage the multi-vendor ecosystem. be the guiding principle in the formulation
of this approach. In collaborative ways of
>> Supplier integration and management:
working, systems integrator teams involve
The systems integrator is a crucial function
in site closures programs because of the suppliers in the conflict management pro-
complex engagement structure that results cess, identify the underlying issues and, in
from multi-vendor environments. Systems theory, arrive at a solution acceptable to all.
integrators act as a glue to bind all suppli- >> Audit management and support: Systems
ers by defining and enforcing unified oper- integrators maintain key audit artifacts and
ating principles and ways of working. They provide a support program during IT com-
form an umbrella over all the suppliers to pliance audits. This team will also work with
manage and oversee their activities and en- vendors to collect evidence and material in
Quick Take
Managing Site Closure for a Leading Global Pharma Player
Client Situation • A structured approach for multiple supplier
management and integration, project oversight
• A leading pharmaceuticals organization
and coordination, conflict management,
identified efficiency improvement as one of the
audit management and communications
primary areas of focus in its R&D strategy. Site
management. This structured approach helped
closure and consolidation was identified as an
in avoiding delays, reduced ambiguity in
important means of achieving this objective.
cross-supplier communications and provided
• As part of this initiative, the IT function defined a seamless transition of activities across
a roadmap for R&D consolidation that covered suppliers with improved IT compliance.
operations across all global R&D sites. We were
engaged by IT leadership to act as a strategic • Management of end-to-end site closure
activities, including applications migration,
partner in planning and executing site closure
decommissioning and clean-up activities on
activities across multiple R&D sites.
the application estate, reporting, etc.
Benefits Delivered • Effective relationship management with all
We worked with the client’s program leadership suppliers, resulting in improved quality and
team and provided a strategic direction to the site timely delivery.
closure activities. As such, we provided:
cognizant 20-20 insights 4

5. support of their compliance with the audit problems during migrations and potentially
findings. impact other dependent applications.
>> Identify cross-supplier dependencies and >> Define a structure to record the data
facilitate communications: System inte- collected to ensure ease in data mining
grators facilitate communications on cross- activities: The template for data collec-
supplier dependencies, key announcements tion must be reviewed and agreed upon
and program decisions. This helps to reduce by all the stakeholders of the site closure
ambiguity in communication and retains a program. The data collection effort should
single communications channel and a ”one not create a mountain of information that
communications approach.” generates no valuable insights and results
in tremendous data mining efforts. At the
• Develop a robust governance structure: same time, data gathering must be compre-
>> Create a clearly defined responsible, hensive enough to ensure all information is
accountable, consulted and informed available for decision-making; there should
(RACI) matrix: Ensuring clarity on roles not be a need to repeat the exercise at fu-
and responsibilities is an absolute business ture points in the program.
essential to avoid duplication of efforts and
reduce ambiguity in ownership of activi- >> Identify applications interdependencies:
ties. In a site closure program, there could Early identification of dependencies will
be multiple suppliers who might have some help in creating groups of dependent ap-
overlaps and dependencies on each other. plications that can then be migrated en
Defining and agreeing to a RACI approach masse. Doing this will reduce the possible
with all the suppliers during the initial disruptions in service for these applications
phase of the program will reduce conflicts as well as other dependent applications.
and the risks during the execute phase. >> Application rationalization: The purpose
of this is to identify quick win opportuni-
>> Management reporting through a joint
ties for decommissioning and thus reduce
program management office (PMO): A
migration efforts by eliminating/decommis-
joint PMO handling reporting will reduce
sioning applications that are not required
the requirements of status/progress re-
by users in other sites or users from this
porting of multiple suppliers. The quality of
site moving to other sites.
reports will improve by having “one version
of truth” produced by a joint PMO with in- • Business continuity — managing disruption
formation provided by all suppliers. to business-as-usual (BAU) activities: The
site closure program disrupts BAU, impacting
Layer Three: Operational Considerations the availability of applications to end users.
• Information discovery: This phase is essential Site closure programs must identify and factor
for a clear understanding of application avail- in the specific requirements of critical or
ability, criticality and architectural interdepen- complex applications in the scope of migration.
dencies to diligently scope migration waves Program leaders should plan a customized
and create a data inventory of the entire approach for such applications to minimize
application estate. It is important to validate application downtime. Communicating realistic
this data inventory using multiple manual and downtime for the applications in advance will
automated approaches. It would be dangerous help in managing business expectations and
to assume that applications currently in use aid in planning ways to minimize the disruption.
represent the entire set to be migrated. Ensure
one version of the truth is worked upon by all • Define “unified processes” for application
migration and decommissioning across
parties and maintained on an ongoing basis
regions: Standard processes that minimize the
>> One applications data inventory to ensure deviations across regions will result in better
accuracy and completeness of the infor- audit results and will reduce efforts to manage
mation stored: One of the most important multiple processes across regions.
considerations for application migration and
decommissioning is the completeness and • Data loss prevention: Due to the level of
complexity and the quantum of work involving
accuracy of the data inventory for each ap-
large volumes of data in application migrations
plication. Incomplete data sets could cause
and decommissioning, there is a big risk of
cognizant 20-20 insights 5

6. data loss associated with it. It must be ensured • Knowledge retention and management: This
that the application owner places appropriate can be accomplished by ensuring that informa-
measures for data backup to reduce the prob- tion and data from applications being decom-
ability of data loss resulting from migration missioned are archived. Knowledge retention
initiatives. For instance, there could be many will ensure the availability of legacy informa-
regulated applications that have mandates tion in the event key staffers leave the orga-
from health/legal authorities for data retention nization or as a result of regulatory audits or
and storage. legal inquiries. The retention and management
of knowledge stored in the applications decom-
• IT compliance, GxP — which includes good
missioned will also improve the reusability of
laboratory practice (GLP), good manufactur-
the information and save efforts to reinvent the
ing practice (GMP) and good clinical practice
wheel. This data can also be used to generate
(GCP) — SOX and legal hold requirements: A
valuable insights to reinforce management
regulatory impact analysis must be performed
decision-making.
on the application landscape impacted by the
site closure program. Appropriate actions must
The Way Forward
be identified for each application to ensure
regulatory compliance, as per the following: Life sciences organizations face overwhelming
challenges to bring down costs. R&D site closures
>> Data retention requirements from health are among the key R&D levers companies can apply
authorities: Regulatory authorities have to an overall cost-reduction strategy. Although
clear mandates for data retention with suf- this is a complex activity fraught with operational
ficient details provided to life sciences or- sensitivities, the three-layered approach outlined
ganizations on the data types required and above provides most of the necessary inputs for
timelines. Life sciences organizations must shaping the strategy to achieve most if not all of
comply with these requirements; noncom- a life sciences organization’s business objectives.
pliance could result in penalties or more (See the accompanying sidebar on page 4 for a
serious consequences for the organization. brief illustration of how this methodology can be
>> Legal hold on system, information and applied.)
data: It is critically important to identify the
systems and information/data subjected to The potential savings from the site closures must
legal hold before migration and decommis- be directed to core focus areas leading to higher
sioning of applications. return on investment. The absolute savings
can be maximized if the site closures program
>> Requirements on the system’s downtime is managed in an operationally effective and
for some critical applications (financial efficient manner.
systems, adverse event reporting system,
etc.).
Footnotes
1
“World Preview 2018-Embracing the Patent Cliff,” www.evaluatepharma.com.
2
“The Pharmaceutical Sector: Real estate implications of industry wide change,” Nov. 2009,
http://www.cbre.eu.
3
Chemical and Engineering News; company Web sites; Fierce Pharma.
About the Authors
Dinesh Singh is a Consulting Manager with Cognizant Business Consulting’s Life Sciences Practice. He is
a seasoned advisor with nine-plus years of experience in business strategy, large transformation initia-
tives and complex program management consulting in the life sciences industry. He has worked with
leading pharmaceuticals clients to help them address key business problems and align their strategies.
He can be reached at Dinesh.Singh@cognizant.com.
Rohan Desai is a Consultant with Cognizant Business Consulting. He has worked as a solution consultant
for various life sciences solution development activities, projects and pursuits. He can be reached at
Rohan.Desai@cognizant.com.
cognizant 20-20 insights 6

7. About Cognizant
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