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8/10/2019 SAJVA Group 6 Millenium Case
1/20
Millennium
Pharmaceuticals, Inc. (A)
Umakanta Sahu PGP/16/294Sanjay Bhatt PGP/15D/111Janmejay Das PGP/16/262Parichita Kapoor PGP/16/275Charlotte Faure IE/16/014Yoann Dattolo IE/16/040Camille Le Bian IE/16/013
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Biotechnology Revolution
Mid 1970s- biological breakthrough
Rising importance of genetic technology (DNA)
Synthesis of compounds and interrelated chemicalreactions in human body contingent on DNA (competitive advantage of Millenium)
Heavy investment in 1970s and 1980s forcommercialization of tech. without due diligence
R&D expenditure ~ 15-20% of sales
230mn$ spent on the drug which has a average time tomarket- 14.8 yrs-(high breakeven time ), (huge risksinvolved)
But still promising returns to investors attractedscientists
Key-and lock theory
I:basicResearch (2
yrs)
II: Pre-clinicalscreening (3
yrs)
3: humanclinical trials
(6 yrs)
4: FDA review(2-3 yrs)
1997- 228 collaborations
Noalliance biotech firms- bankrupt (very few successful),
unsuccessful biotech firms picked by pharma companies
Biotech wanted to access rich cash and downstreamsynergies for manufacturing and marketing ( as can be
seen from millennium- Bayer Deal)
Hence, Market Structure
partnerships and mergers,1990s saw more intricatealliances, emergence of tool companies
Main aim of biotech companiesto become fullyintegrated pharma companies
Biotechnology firm could not bear the blow of high rat
drug failure in comparison to pharmaceuticals due tolarge size
STRATEGIC INSIGHTS
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Introduction to Millennium Pharmaceuticals Started in 1993 with initial investment of $8.5 million through venture capital
funding
Aim was to create better research facilities better than the best universities &creating a technology platform from the best available, infusing capital in theplatform to stay ahead of competition
Assembles an impressive array of various technologies lie robotics, informationsystem and molecular biology
Team include Chief Technology officer, Michael Pavia who is a pioneer inCombinatorial Chemistry revolution, Chief Business officer, Steven Holtzman is anOxford trained Rhodes Scholar who helped Millennium in making good acquisitiondeals
Vision: To marry molecular biology with automation and informaticsAdvantage- Discovering and processing big information about genes Making it possible for finding treatment for thousands new targets
Its Genomics based approach reversed the traditional process by first identifying &understanding the role of genes implicated in causing a disease
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Managing Growth
Focus of growth: To take the highest downstream share of adrugs profit
Key Success attributes
Research collaborationwith other biotech
firms and universities
Ability to attract goodemployees based onscientific merit andinterpersonal skills
Low internal politicsamong top
management
Set the pace for ahardworkingenvironment
Stock options for allemployees which in
turn resulted insignificant capital gains
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Managing Growth (Continued)
Managements negotiation strategy for Strategic Alliancesreflected companys long-term goals by carefully carving outenough choice cuts for the firm itself
Millennium sought to retain rights to unforeseen discoveriesin the course of a partnerships
Allowed the company to reserve select rights for its own future drugdevelopment such as particular geographic market, specific therapeuticapplication which are not of immediate interest to alliance partners
In 1997, Millennium had 5 alliances with drug firms for findingspecific gene targets
Strategy to remain independent
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Major obstacle from being a drug development firm: Lack of
expertise in going from drug targets to actual lead
components
Acquired ChemGenics: Gave Millennium an upper edge whilenegotiating with big firms
Millenniumsadvantage:
Managing Growth (Continued)
Rationale for starting alliances and mergers
Drawing on world class personnel
Tough negotiating strategies leading to key mergers and acquisitions
Value adding relationships with other universities and firms
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Major Alliances
Technological Alliance:Monsanto Deal
PharmaceuticalAlliance :
The Bayer Deal
Largest alliancebetween biotech andpharmaceutical firm
Lundberg Deal ( intoconsideration)
Catered theneed for
venturing into
agricultural
tech systems
Catered to
need for drug
pipeline
developmentand market
reach
???
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The Bayer Deal
Millennium currently present in upstream drug targetdevelopment
From Millenniumspoint of view
Weakness-> capability to take drug to market,
Weakness-> efficient pipeline of drug development
Opportunity-> responsible for 50% of all targets going intoBayersdrug development pipeline
Opportunity-> rights to several targets found accidentally
resulted in high investor confidence with stocks bullish in wallstreet
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The Bayer Deal
(pharmaceuticals accounted for 30bn$ business of Bayer)
Vision 2000 launched for finding appropriate alliance targets
From Bayerspoint of view
Weakness-> target discovery and biotechnology
Opportunity-> 225 new drug targets will be found out by
Millennium for Bayer
Opportunity-> 465$ mn over 5 years , 14% equity stake
Bayer Millenium
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Alliance with MonsantoMonsanto : US based giant multinational
What was in the deal for Monsanto:
They wanted to capitalize on the state of the art technology of Millennium. Afteracquiring ChemGenics Millennium was looking to extend its reach in the agriculturefield through biotechnology
What was in the deal for Millennium:
it was looking to leverage the integrated platform for agriculture and create nearterm value
The Alliance:
Creation of Cereon Genomics, a Millennium subsidiary which will transfer the technology for
Monsanta to develop its product Transfer of 100 employees from Millennium platform to Cereon platform
Total worth of the alliance: $218 million ($118million up front and rest in yearly $20million
installments based on achieving milestones)
Milestone was set to be 80% achievable-
This deal was established to avoid the biotech firm from being conservative and the
pharmaceutical from being aggressive
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Monsanto deal cont.
Association with Monsanta can give them a stronghold in the Agri-biotech business
Huge potential for growth in the agriculture field
Symbiotic relationship for the middle ranking scientist and technologist
Help Millennium to document its protocol and software formally which can be utilize for futurereferences
Generating useful information in the process
Increase team bonding among the employees
Shuffling of employees from Millennium
Increase workload for the scientists and technologists of Millennium
Diversion of the complete focus which Millennium management has on the human health
Need to hire more employees may lead in the managing issues
May encourage Millennium management to get into more such alliances which may not be successful
Advantages of Monsanta deal to Millennium:
Disadvantages of Monsanta deal to Millennium:
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Pulling up socks (new drug paradigm)
To industrializing drug discovery process, millenniumapproached technique of extensive research anddevelopment and hiring people that question theassumptions held by the industry for decades.
Being a new firm and untouched by normal corporateinertia, Millennium learnt how to challenge conventionalwisdom
Lessons in drug development were brought from recruits
from large firms
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Revolutionizing Drug Development
Speed up individual Steps Speed up steps involved in isolating, characterizing and understanding DNA
through automation experts and engineers with manufacturing experiences
Major bottleneck: ability of scientists to assimilate and make sense ofstaggering amount of data made available.
Focus on bioinformatics was essential to tackle the issue
Carrying out serial steps in parallel wherever possible
To compress drug development timeline by conducting more steps inparallel for target validity, organ-specificity, bio-availabilityand toxicity.
Find new technologies that could front-load critical problems
Tried to find out potential failure modes thereby increasing thepredictability of success
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HR Management issues
Stress for high- rankscientists
Extensiveresponsibility forsupervising
marketing skills formore outsidepartners
Stress at lower levels
HRDs latest semi-annual survey, 1999
Employees facedunmanageable
workload, higherexpectations,difficulties inmanageability ofstress
Further Issues:
Frustration due to Higherexpectations in comparison to
other industries Work of 2 scientists performed
by 1 person
Impact: Dilemma in employees to do all
work in a mediocre way orsome part but in a perfect way
Can lead to low performance Can disrupt the culture
Stress management:Managers made responsible for holding individual stress sessions with subordinates
Question :Is Millennium entering into alliances more than it can actually manage??
Is the focus being lost??
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Pros and cons from point of view of Lundberg
Lundberg Deal
Sought to access genomic technology, much in a manner of theMillennium-Monsanto deal
Access to technology that would help identify plant genes as well
as for high throughput screening capabilities
Very much desperate for deal: Had done little due diligence andlittle examination of the previous deal of Millennium-Monsanto
Lundbergs senior management very kin on showing strong
consensus and were ready to make major financial commitmentright away
People management will be a stressful activity
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Lundberg Deal
Pros and cons from view point of Millennium Software documentation from Lundberg which in not enough in
comparison to the benefits provided to Lundberg
Documentation : Not so necessary in short term
Strategic fit: Lundberg has to help create software for the new venture It could pay for some of the work it needed to do for itself anyway
Impact on its R&D productivity
To set up system that would allow Lundberg to receive the technology
Potential conflict with its prior relationship with Monsanto
Sharing all the prior technical expertise gained from previous alliancesjust for the sake of agri-business
Mismatch with vision and goal
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Vision misalignment
Vision of Millennium:Tofocus on activities that allow us to take the highest downstream shareof a drugsprofit- wherever these profits may occur
Extension to vision:
becoming a genomics firm and helping revolutionize the drugdevelopmentprocess
Deal with Lundberg doesnt contribute to pipeline of drugdevelopment process specially
It also doesnthelp gain expertise in human genomics firm
(additionally it doesnthelp in marketing or distribution side of process)
But only deviation from the main aim of Millennium.
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Conclusion
The consensus:
Millennium should not finalize the deal with Lundberg
as
Deal will result in losing competitive advantage
Not major help in drug development process
Not in alignment with vision
Not much help in achieving any of corporatesvision
Not much synergy would be gained
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Thank You
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