Business Case of Ducati.

Business Strategy(_Nucleon Case) 60091041 / Park, Sang Hun

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?

One of the key issues identified by our group was the return for our venture capital investors in the form of the NPV of costs and revenues (See Tables). This is an important issue due to the fact that biotechnology is heavily affected by capital availability and recently, venture capitalists were reluctant to fund biotechnology firms. As Jeff Hirst said, “When it comes to raising capital today, it’s a buyers’ market.” Therefore, producing returns for our current investors and producing high returns for potential buyers was a key focus.

A second key issue was 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. 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.

A third key issue was sustaining a long-term competitive advantage. 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 a potential for company growth through entrance into the manufacturing of the products developed by Nucleon’s R&D. Therefore, it was imperative that the implications on long-term competitive advantage be considered when deciding which option to proceed with.

Option A 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, having the basic manufacturing skills in-house and ready to use when they are needed, keeping control over the design and manufacturing process firmly in Nucleon’s hands, and of course, gaining experience in dealing with technological and regulatory issues.[xxii] However, some of the disadvantages include high capital investment, uncertainty when tested in humans, the time required to recruit new talents into the company, and if CRP-1 is rejected by the FDA, the plant will end up being idled. Since most drugs that go through the clinical testing never reach the market, the greatest disadvantage is uncertainty.

The main issue is that Nucleon has to be able to find enough cash in-flow not only for the founding of the clinical trials for CRP-1, but also for the further development of the two new cell regulating factors and of the mammalian cells fermentation technology. Therefore, by choosing its manufacturing strategy, Nucleon should not only focus on the percentage of the forecasted sales revenues, but also focus on the possible synergies. I believe that partnerships have to be part of this Nucleon business strategy: they can advance the development of its projects, by complementing and optimizing Nucleon technology platforms.

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

a. Nucleon – Nucleon: The main advantage of this option would be the ability to develop its own in-house manufacturing capability that could allow Nucleon to acquire basic manufacturing skills as well as full control of the process and quality of their product. However, due to the FDA regulations, construction of a full-scale commercial manufacturing required for Phase III trials will require a large amount of capital and Nucleon will have to recruit its own personnel for the facility operations. This option, however, returns high profits which it may be worth taken.

e. Licensee – Licensee: This option has the lowest risk as the licensee will essentially bear all the risk related to the expenditures in clinical development, clinical manufacturing, regulatory filings and commercial manufacturing and marketing. In addition, this option will allow for immediate revenues. On the other hand, this option will not generate high profits as “Option A and C” would and this option was highly unpopular among the scientist. Conclusion: Based on the different options and the returns attributed to each option, I recommend option a. Although, this option does not yield the highest profits and entails the highest risk, it is the most promising

Conclusion: Based on the different options and the returns attributed to each option, I recommend option a. Although, this option does not yield the highest profits and entails the highest risk, it is the most promising

I would recommend Nucleon to License the development and manufacturing right to corporate partner for phase I and Phase II clinical trial. By doing that Nucleon can get enough money to do more research with low risk and can gain manufacturing experience from their partner which can be useful if Nucleon want to go for in-house facility for Phase III.

* Having big corporate