Realizing Your

Business Model

Realizing Your

Business Model

Alberto Onetti, Director, CrESIT

Antonella Zucchella, President, CIBIE

Alberto Onetti, Director, CrESIT

Antonella Zucchella, President, CIBIE

Workshop CrESIT-ASSOBIOTEC 2009

Business Models for BiotechVarese, November 23rd

www.cresit.it

Antonella Zucchella, President, CIBIEAntonella Zucchella, President, CIBIE

CONFIDENTIAL

Why you need a Business Model

� To get to your Destination, you need Directions

� The Business Model is the road map to your Destination

� Managerial tool — Defines how the company organizes its activities

� Decides your business:

� “Focus” — the relevance of the different activities

� “Locus” — the localization of the different activities

� “Modus” — the way different activities are executed

� Analytical planning tool — What you need to do “activity by activity”

Our Business Model Concept

FOCUS LOCUS MODUS

Activity AHow much

to allocate?Where to place

the activities?

Who? In-house or Third Parties?

How? Capital or labour-intensive?

How much tech-intensive?

Which Skills are required

(brain-intensive)?

Activity B

Activity C

…

Source: Onetti and Zucchella, 2008

� The Business Model: Multiple decisions for Focus, Locus, and Modus� A company has many options

� Business Model decisions characterize the company in a unique way

� Too many options — risk of “losing your direction”

� High Tech and Life Science firms are typically global firms: multi-location is the natural way of being

� A company’s network is “broad” and “multidimensional”: they have to manage many relationships, not

only upstream (scientific community, industry…) and downstream (lead users), but also laterally (e.g.

First Issue: How to represent complexity

only upstream (scientific community, industry…) and downstream (lead users), but also laterally (e.g.

finance)

� They partner in different ways (licensing-in and –out, outsourcing, joint venture, strategic alliances…)

� More than an analytical planning tool, the Business Model is a blueprint of how a

company works

� A representation of the company’s Business Model

� Enables one to identify the Business Model’s constituents — the “value architecture”

Case study: MonogramBio

(formerly ViroLogic)

� Founded in 1996 � Genentech spin-off

� Currently 350 people, $40M in revenue

� Public in 2000, acquired by LabCorp in Aug 2009 (2,800 people, $4B in revenue)

� Lines of Business: molecular diagnostic products � Personalized Medicine

� Tailored drug therapy, resistant tests for HIV (75% of revenue)

� Testing for Pharma Companies, working on new HIV drugs

� 25% of revenue

� From 2004 they are diversifying from virology to oncology

� They bought Aclara BioSciences, Mountain View, CA

Focus

Case study: MonogramBio

LABS & SALES

Source: Onetti-Zucchella 2009

Case study: MonogramBio

Lesson learned

� The company diversified but did not change its business model� They manage oncology in the same way they did virology

� Managers have the feeling to approach different lines of business in different ways

� Frequently they adopt the same model

� They reshaped the Business Model during the life of the companycompany� Locus

� No change, it was and still remains a Bay Area Company

� Modus:

� Billing: initially out, then back in

� Focus

� Initially R&D, thereafter Labs and Sales

Second Issue: Business model can

evolve and change

� The Business Model may change over the time� Day by day company makes decisions that may affect Focus, Locus and Modus

� Each decision, separately considered , is not necessarily a radical change, often just a fine tuning of prior decisions

� But the sum of all these decisions may radically change the way the company works and its Business Model

� The Focus may change as the company evolves The Focus may change as the company evolves � Life Science firms typically change focus as their research moves from early to later phases

� Some companies do not (“satellite" companies, CROs)

� Not just Focus, but also Locus and Modus� Companies can locate activities in different places

� This can open up to new business opportunities or exploit new partnerships

� Companies can initiate new alliances

� Partnerships can change the way the company works (“platform” companies)

� The more parameters are modified, the more radical is the business model change� In some cases business model changes are so radical to drive strategy change

Case study: Napo Pharmaceuticals

� Founded in 2001� Napo bought Shaman's library of compounds, including crofelemer

� It raised approx. $300M

� Currently approx. 30 people (over 100 a few years ago)

� Public in 2006

� Business: development and commercialization of proprietary pharmaceuticals

ACTIVITY LIST FOCUS

Strategic Importance (1=low - 10=high)

Pre-Clinical

Phase 1

Phase 2

Phase 3

Pilot Manufacturing/Tech Transfer

Registration

Business Development

4

6

3

10

Focus

Case study: Napo Pharmaceuticals

Manufacturing and Sales

EARLY STAGE RESEARCH

LondonLondon

Source: Onetti-Zucchella 2009

ACTIVITY LIST FOCUS

Strategic Importance (1=low - 10=high)

Pre-Clinical

Phase 1

Phase 2

Phase 3

Pilot Manufacturing/Tech Transfer

Registration

Business Development

8

2

3

3

6

6

8

Focus

Case study: Napo Pharmaceuticals

Manufacturing and Sales 2

8

REGISTRATION & BD

LondonLondon

Source: Onetti-Zucchella 2009

Where may the Business Model tool

help?

� Plan & manage your evolution, not just be driven by events� “Models evolve, change, often react to where the science or the money is”

� “We figured it out based on the environment”

� How do you see your company in 3 years? What actions are required to reach your new Destination?

� Check the evolution path and learn from your past� Are we today what we wanted to become?

� What drove my evolution? � What drove my evolution?

� The analysis of the past can help plan for future actions

� Communicate what your company does� Life science and high tech companies are not easy to pitch

� Scientists do not talk business, but business people and venture capitalists do not like to hear science (for more than 40 secs)

� Our tool analyzes and wraps-up how the company actually works

� It is the snapshot of your company as it is now

� 3 years ago the company probably looked different

� 3 years from now it will likely be different

� The worst thing for a manager is to be surprised about that