Nucleon Inc. Case Study

1161 Words3 Pages

I. Problems

Nucleon is a small biotechnology start-up with a very promising potential product (CRP-1), which is also the first product that Nucleon is planning to go into the clinic market. Nucleon has reached to human clinical trials phase with its product and it has no manufacturing facilities that satisfy the guidelines for these clinical trials and testing. Nucleon is on the verge of making a critical choice of manufacturing strategy, which will affect Nucleon’s survival in the intense competition in the long haul. Nucleon management is aware of the facts that they have a limited budget to start with, the financial environment in biotechnology is rapidly changing and establishing the safety and efficacy of products like CRP-1 is complex, time-consuming and expensive; that’s why they want to evaluate risks and rewards of each manufacturing strategy before making their final decision.

II. Alternatives

Before moving on with clinical testing phase, Nucleon management is evaluating advantages and disadvantages for 3 main manufacturing strategies for the company. For Phase I and II these options are 1) building a new 5000-sq pilot plant supplying CRP-1 needed for Phases I and II, 2) contracting clinical manufacturing to an outside firm, and 3) licensing the manufacturing to another biotech or pharmaceutical firm. If CRP-1 succeeds in the first two phases, there are two more options available to the company for Phase III, that are 1) vertical integration to commercial marketing and 2) licensing manufacturing and marketing.

III. Issues

The main issue for Nucleon is the current capital availability. They only have $6.5 M at their hand when they are evaluating these options. Nucleon doesn’t have the option to going to pub...

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... come to nothing. Nucleon’s core competencies are doing proper scientific research with its team of experts and their strong link to academia leading to technical prowess; therefore, they should focus on the continuation of their expertise in science.

If they choose not to license the product in the early stage and CRP-1 succeeds in Phase I & II, I recommend Nucleon to invest in a plant to supply the market on their own if they can find external support from investors. With their solid test result from Phases I & II I believe Nucleon can build trust in investors and get the initial investment. The expected return on this investment is very high compared to licensing the product at this phase. However if they don’t end up finding external support, they can still license the product at Phase III and enjoy the immediate cash flow followed by the royalty payments.

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