Xenomouse Case Study Analysis
In April 2000, the biopharmaceutical company Abgenix faced the important strategic decision of how to most profitably commercialize its XenoMouse based high potential cancer product ABX-EGF, which had reached phase I clinical trials after having successfully passed preclinicals.
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 trials, thus postponing the decision of whom, if any, to partner with.
The first two alternatives were somewhat consistent with Abgenix’ past business model that yielded revenues in two ways: 1) by issuing exclusive licenses to use XenoMouse for drug development targeting specific diseases to leading pharmaceutical and biotechnology companies and 2) by undertaking the early stages of XenoMouse based drug development and subsequently selling off the rights to further develop and bring the drugs onto the market. In contrast, the “go-it-alone” method would require an expansion of Abgenix’ resource base and capabilities: a more risky approach with the potential of a relatively high value generation.
In order to arrive at conclusions as to which alternative Abgenix should opt for, the three alternatives are analyzed in the following pages based on a financial assessment in the form of strategic assessment as well as an NPV analysis.
Strategic assessment
In addition to the strictly financial analysis based on potential risk and reward prompted by each of the three alternatives, a strategic assessment is crucial to single out Abgenix’ current resources and capabilities so as to unveil its core competencies. Once this is understood, the
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 trials, thus postponing the decision of whom, if any, to partner with.
The first two alternatives were somewhat consistent with Abgenix’ past business model that yielded revenues in two ways: 1) by issuing exclusive licenses to use XenoMouse for drug development targeting specific diseases to leading pharmaceutical and biotechnology companies and 2) by undertaking the early stages of XenoMouse based drug development and subsequently selling off the rights to further develop and bring the drugs onto the market. In contrast, the “go-it-alone” method would require an expansion of Abgenix’ resource base and capabilities: a more risky approach with the potential of a relatively high value generation.
In order to arrive at conclusions as to which alternative Abgenix should opt for, the three alternatives are analyzed in the following pages based on a financial assessment in the form of strategic assessment as well as an NPV analysis.
Strategic assessment
In addition to the strictly financial analysis based on potential risk and reward prompted by each of the three alternatives, a strategic assessment is crucial to single out Abgenix’ current resources and capabilities so as to unveil its core competencies. Once this is understood, the