Specifically, Abgenix had to choose among three salient alternatives for the route to market of ABX-EGF. These were: 1. Entering into a licensing agreement with “Big Pharma” Pharmacol, yielding a series of development fees as well as royalties of Pharmacol’s ABX-EGF sales. 2. Forming a joint venture with the biotech firm Biopart, equally sharing all future costs and profits. 3. Pursuing a “go-it-alone” strategy through the end of phase II…show more content…
The joint venture entails co-development work in phase II, whereas Biopart will take the lead in subsequent phases including in what concerns commercialization activities. Abgenix will, however, remain significantly involved through all stages, which strategically could be important, since it gives the potential for acquiring the complementary assets needed to perhaps single-handedly bring future products to market.
The “Go-It Alone” strategy
The marketing and sales barriers to entry not being scalable, Abgenix would be forced, at one point or another, to either partner or sell its rights on ABX-EGF. However, the company did have the in-house capabilities of taking the drug through the second phase of clinical testing. If the drug successfully made it beyond this point, then Abgenix would be in possession of a much stronger product, as the biggest chunk of uncertainty around drug innovation would have been left behind. This would entitle the company with a much higher bargaining power when entering the negotiations to choose a partner. On the other hand, testing costs ($28 million) would fall entirely upon Abgenix. Would renegotiation allow for the company to compensate that “extra” investment?
Financial assessment -NPV & Risk
From the NPV calculations (Anex III)
Case Analysis'XenoMouse'Abgenix's new drug development, ABX-EGF, showed much promise to its industry. The company needed to make a decision as to collaborate with another organization or take on the project itself. The following describes the pros and cons of Abgenix collaborating with another organization for ABX-EGF.If Abgenix were to collaborate they would be sharing the risk with their partner compared to embracing all of the risk by attempting it themselves. This is beneficial to Abgenix because they are only liable for the amount they invest into the project. This action is very common in the business world especially when the project is expensive and the outcome is uncertain.Another pro of collaborating is how Abgenix has the opportunity to gain more creativity and innovation. There is evidence on how collaborations with multiple organizations creates the most significant source of innovation. This is due to how these organizations provide resources and capabilities necessary for novel ideas. Also, including another organization allows different perspectives on ABX-EGF in regards to how it should be marketed, any improvements if needed, etc. Collaborating with a company allows Abgenix to gain strengths they did not have before.