Nucleon Case - Business Strategy

Business Strategy(_Nucleon Case)

1. What kind of factors do you think should be taken into account to make a decision for Nucleon? And why do you think so?

( Nucleon, of rather small size, is one of over 200 biotech companies in a relatively new field, racing to gain a proprietary position through R&D efforts, but it lacks the capital and manufacturing capabilities to bring their product through clinical trials and to the market.)

First of all, financial helps (investment) and returns which are directly impact on their survival. Biotechnology sphere is strongly effected by capital availability. Especially Nucleon as a small company with lack of budget, it’s undeniable fact that they have very limited options to choose from their unstable financial status. Like Jeff Hurst in this case said, “When it comes to raising capital today, it’s a buyers’ market.”, venture capitalists, they are reluctant to fund biotechnology companies. Which is basically increasing the uncertainty of its survival. (About the question #2, when considering the monetary one, there should be consideration both of quantitative results like that of the NPV, but also qualitative results in order to weigh factors that are not so easy to quantify such as synergies effect from having a big corporate partner.)

Secondly, another key issue is the probability of successfully completing each phase of testing. For both Phase I/II and Phase III, if the phase was not completed, there would be zero sales and all capital expenditures would be rendered useless except for the failed experience. Here, the Phase I/II seemed relatively routine; however, Phase III was much more complex and presented a much bigger risk of preventing FDA approval and eliminating all future sales. In order to survive potential failure of CRP-1 in FDA clinical trials, selling of risk in the form of licenses might be more beneficial than losing all the invested capital of R&D depends on the strategy.

Thirdly, whether they could keep their a long-term competitive advantage. In other words, Nucleon, since its inception had been exclusively an R&D firm. Nucleon management saw cell regulating proteins as an attractive niche, in which there were few competitors. However, there was also potentiality for company growth through entrance into the manufacturing of the products developed by Nucleon’s R&D. Therefore, It is undeniably important factor to make a impact on longer-term capabilities of the enterprise and technology transfer. Unique capabilities in R&D enable Nucleon to command a high royalty and there is a need to protect intellectual property. For this, they are able to have either internal(in-house development) or external(licensing) developing way.

2. Please compare Option 1 and 5. Which option do you think is better for Nucleon? Why?

Option 1 focuses more on the long-run success of the company if the CRP-1 is approved by the FDA. Its advantages are potential higher profits (Option 1 brings 11.3 M, option 5 brings 5.29 M according to the pre-estimated data of NPV), that could allow Nucleon to acquire basic manufacturing skills as well as full control of the process and quality of their product. And plus,