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  • Abgenix & The Xenomouse

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    ABX should partner with BioPart in a 50/50 joint venture to develop ABX-EGF technology. This would split costs, reduce failure risk in half, and increase the chances of FDA approval and market success through BioPart's expertise. The benefits of partnering outweigh licensing to a pharmaceutical firm, which limits long term gains, or developing alone through Phase II, which bears high costs and risk. A joint venture best achieves ABX's goal of minimizing risk while maximizing financial returns and market opportunity.

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    abgenix & the xenomouse

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    ABX should partner with BioPart in a 50/50 joint venture to develop ABX-EGF technology. This would split costs, reduce failure risk in half, and increase the chances of FDA approval and market success through BioPart's expertise. The benefits of partnering outweigh licensing to a pharmaceutical firm, which limits long term gains, or developing alone through Phase II, which bears high costs and risk. A joint venture best achieves ABX's goal of minimizing risk while maximizing financial returns and market opportunity.

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    524 views3 pages

    Abgenix & The Xenomouse

    Uploaded by

    aida
    ABX should partner with BioPart in a 50/50 joint venture to develop ABX-EGF technology. This would split costs, reduce failure risk in half, and increase the chances of FDA approval and market success through BioPart's expertise. The benefits of partnering outweigh licensing to a pharmaceutical firm, which limits long term gains, or developing alone through Phase II, which bears high costs and risk. A joint venture best achieves ABX's goal of minimizing risk while maximizing financial returns and market opportunity.

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    of 3

    Introduction

    We believe ABX should partner with BioPart, as there are many strategic advantages associated
    with this joint ventureship. BioPart is a leading competitor within the Biotechnology Industry
    due to their high success rates in drug testing and management. This will allow ABX to split the
    costs of development, through a 50/50 partnership, as well reduce the risk of failure.
    Additionally, this will increase ABX’s ability to gain FDA approval and market introduction;
    thereby, ensuring longevity and profitability. The logic behind our reasoning is as follows:

    A) License its ABX-EGF technology to a large pharmaceutical company, Pharmacol.

    - Benefits:
    - No risks related to FDA approvals
    - No marketing expenses
    - High royalty rate(10% in perpetuity)
    - Higher market share
    - Risks:
    - Gains are limited in the long run (note Exhibit 3 years 9 and 10 are equal in
    projected sales)
    - Alignment with Strategy:
    - Strongly aligned with Abgenix's previous strategy of minimizing risks. Since only
    1 in every 5000 experiments are accepted by the FDA, handing off means that
    Abgenix minimizes their risk and earns a guaranteed income.

    B) A joint venture with another, bigger biotech company, BioPart.

    - Benefits:
    - BioPart as a leading competitor within the Biotechnology Industry
    - FIBCO “fully integrated biotechnology company”
    - Manage the regulatory process (higher likelihood of FDA approval)
    - Development, marketing, and sales
    - 50/50 partnership allows ABX to:
    - Split cost of development
    - Reduces risk of failure in half
    - Share revenues
    - Receive upfront payments ($5 million on signing and $5 million once
    clinical trials began)
    - Creates long term investments
    - Expand Abgenix’s capabilities
    - Access to previously untapped research and market introduction
    - Research and Development following Phase II
    - Risks:
    - BioPart has a smaller market share, resulting in 20% less projected sales
    compared to scenario A, additional costs to incur
    - Alignment with strategy:
    - Less strongly aligned but still absorbs risks which the company tends to avoid,
    many other firms in the same sector would choose this option.

    C) Go it alone through the end of Phase II trials.

    - Benefits:
    - Keep control over new technology and research developments
    - Gain more of the market share
    - Increased bargaining power when they inevitably want to hand off or hand in
    - Risks:
    - Potential of an unsuccessful Phase II trial
    - Bearing the $28M costs alone
    - Alignment with strategy: Not as aligned with company strategy since risk is maximised
    in the short run and will keep increasing in the long run because of the high degree of
    uncertainty of going through the project alone.

    Conclusion

    Finally, as it was mentioned at the beginning, the best option to follow is doing a Joint Venture
    with BioPart due to the fact that the amount of benefits are many more than the other options,
    and at the same time the risk associated with this decision would not have a considerable impact
    on the company. However, the benefits of the other options are also very interesting, but the risks
    that they present are important which means a huge uncertainty about the future of the company.

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