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Table of Content
Chapter 1: Industry Overview ......................................................................................................... 3 1.1 What is Biotechnology? ........................................................................................................ 3 Chapter 2: Regeneron Pharmaceuticals .......................................................................................... 4 2.1 Introduction ........................................................................................................................... 4 2.2 History................................................................................................................................... 5 2.3 Regeneron Pharmaceuticals Vision ...................................................................................... 5 2.4 Regeneron Pharmaceuticals Mission .................................................................................... 6 2.5 Products................................................................................................................................. 6 Chapter 3: External Analysis .......................................................................................................... 8 3.1 PESTLE ANALYSIS ........................................................................................................... 8 3.2 Porters Five Forces Model ................................................................................................. 10 Chapter 4: Internal Analysis ......................................................................................................... 13 4.1 SWOT Analysis .................................................................................................................. 13 4.2 Resources ............................................................................................................................ 14 4.2.1 Tangible Resources ...................................................................................................... 14 4.2.2 Intangible Resources .................................................................................................... 14 4.3 Core Competencies ............................................................................................................. 15 Chapter 5: Generic Strategy .......................................................................................................... 16 Chapter 6: Value chain of Regeneron Pharmaceuticals ................................................................ 17 Chapter 7: Strategic Approaches .................................................................................................. 19 7.1 Strategic Alliances .............................................................................................................. 19 7.2 Acquisition .......................................................................................................................... 19 Chapter 8: Regeneron Model (NPD) ............................................................................................ 20 Chapter 9: Regeneron Pharmaceuticals Business Model.............................................................. 22
Chapter 10: Code of Conduct ....................................................................................................... 24 10.1 Business Ethics ................................................................................................................. 24 10.2 Trading Securities on Inside Information ......................................................................... 24 10.3 Laws and regulations ........................................................................................................ 24 10.4 Anti-Trust Law.................................................................................................................. 25 Chapter 11: Future Growth Strategy ............................................................................................. 26
At its simplest, biotechnology is technology based on biology - biotechnology harnesses cellular and bio molecular processes to develop technologies and products that help improve our lives and the health of our planet. We have used the biological processes of microorganisms for more than 6,000 years to make useful food products, such as bread and cheese, and to preserve dairy products.
Modern biotechnology provides breakthrough products and technologies to combat debilitating and rare diseases, reduce our environmental footprint, feed the hungry, and use less and cleaner energy, and have safer, cleaner and more efficient industrial manufacturing processes.
Currently, there are more than 250 biotechnology health care products and vaccines available to patients, many for previously untreatable diseases. More than 13.3 million farmers around the world use agricultural biotechnology to increase yields, prevent damage from insects and pests and reduce farming's impact on the environment. And more than 50 bio refineries are being built across North America to test and refine technologies to produce biofuels and chemicals from renewable biomass, which can help reduce greenhouse gas emissions.
2.2 History
By Abhishek Gupta
Their commitment towards the cutting edge science and enabling technologies helps the firm to fully integrate into a biopharmaceutical enterprise: VelociSuite Technologies Neurotrophins, cytokines, angiogenesis, receptor chemistry and signaling Cytokine and growth factor traps
2.5 Products
1. EYLEA developed to treat a common cause of blindness in the elderly (Neovascular age). The drug was approved by the U.S. Food and Drug Administration (FDA) in November 2011. Eylea (aflibercept) is made from a human antibody fragment. It works by keeping new blood vessels from forming under the retina (a sensory membrane that lines the inside of the eye). In people with a certain type of eye disease, new blood vessels grow under the retina where they leak blood and fluid. This is known as the "wet form" of macular degeneration. Eylea is used to treat wet age-related macular degeneration. Eylea is also used to treat swelling in the retina caused by a blockage in the blood vessels. 2. ZALTRAP Treating Metastatic colorectal cancer (Colon and rectal cancer involve the lowest part of the digestive system). Approved by the FDA in August 2012. Zaltrap is a medicine that contains the active substance aflibercept. It is available as a concentrate to be made into a solution for infusion (drip) into a vein. The active substance in Zaltrap, aflibercept, is a protein that binds to vascular endothelial growth factor (VEGF) and placenta growth factor (PlGF), substances that circulate in the blood and makes blood vessels grow. By binding to VEGF and PlGF, aflibercept stops them having an effect. As a result, the cancer cells cannot develop their own blood supply and are starved of oxygen and nutrients, helping to slow down the growth of tumors.
3. ARCALYST Approved by the FDA in February 2008. Arcalyst (rilonacept) is used to treat some of the symptoms of rare genetic conditions such as Familial Cold Autoinflammatory Syndrome (FCAS) or Muckle-Wells Syndrome (MWS). FCAS and MWS are inflammatory disorders in which the body develops certain symptoms without a known cause (such as virus, bacteria, or illness). These symptoms include fever, chills, fatigue, and joint pain. More serious symptoms may involve the bones and joints, the central nervous system (deafness, vision loss, mental impairment), or major organs such as the kidneys. Arcalyst may treat or prevent the symptoms of Familial Cold Autoinflammatory Syndrome (FCAS) or Muckle-Wells Syndrome (MWS). However, this medication is not a cure for these inherited conditions.
Political There is a growing political focus and pressure on healthcare authorities across the world. This means that governments look for savings across the board.
Economic The global economic crisis still exists yet government reports show that they still spend on healthcare per capital continues to grow. The growth in healthcare demonstrates how nursing services have moved to the private sector and have become a key business offering. The reduction in consumer disposable income will have an impact on those countries using health insurance models particularly where part payment is required.
These economic pressures are seeing an increased growth in strategic buying groups who are forcing down prices. Increased pressure from shareholders has caused a consolidation of the industry: more mergers and acquisitions will take place over the coming years.
Social
The increasing aging population offers a range of opportunities and threats to the pharmaceutical industry. The purpose is to Capitalize on the opportunities. There is also the problem of the increasing obesity amongst the population and its associated health risks. Patients and home carriers are becoming more informed. Their expectations have changed and they have become more demanding. Public activism (e.g. PETA activists) has also increased through the harnessing of new social networking technologies
Technological Technological advancements will create new business prospects both in terms of new therapy systems and service provisions. Development of molecules as resulting from technology changes. The online opportunities will see the growth in new information and Communications technologies.
Social Media for Healthcare Customized Treatments Direct to Patient Advertising Direct to patient communications
Legislation The pharmaceutical industry has many regulatory and legislative restrictions. There is also a growing culture of litigation in many countries. The evolution of the internet is also stretching the legislative boundaries with patients demanding more rights in their healthcare programs.
Environmental There is a growing environmental agenda and the key stake holders are now becoming more aware of the need for businesses to be more proactive in this field. Pharmaceutical companies need to see how their business and marketing plans link in with the environmental issues. There is also an opportunity to incorporate it within their Corporate Social Responsibility programs. Marketing and new product development should identify eco opportunities to promote as well.
High barriers to entry as the company needs to put a lot of capital into research and development, lengthy approval process, marketing before it is able to receive any returns. The big pharmaceutical companies that were able to build global operations are benefiting from economies of scale in terms of manufacturing. They are able to access low-cost supplies, as a result. Challenging regulatory conditions (hurdles to get FDA drug approvals for new products); industry is highly regulated which to some extend protects from new competition. The FDA approvals appear to have slowed during 2007. This could be one measure indicating that the FDA is taking a more cautious position on new drug approvals. In addition, legislative changes in the upcoming years may have a negative impact for the industry. Pharmaceutical companies benefit from continuation of U.S. employer-based health coverage. Customers buy medication that was prescribed by the doctors. Patent expirations may lead to an entry of new competitors (generic competitions), resulting in decreased revenues. High rates of patent expirations are approaching in 2010 through 2012. The ability of a pharmaceutical company to offset loss of revenue from patent expirations depends on growth in existing products as well as successful execution from the new product pipeline.
The pharmaceutical industry is the highly competitive market as there a big players that are influencing the whole industry. The industries like Pfizer, Johnson & Johnson, Roche, & GlaxoSmithKline comprises of majority of market share. Industry benefits from strong demand
from consumers. Weak, small companies usually go out of business (bankruptcy) if they have no potential blockbuster in future pipeline. Others that have some significant research or valuable assets will be bought by big and strong pharmaceutical companies. 3. Bargaining power of suppliers HIGH:
In the case of pharmaceutical suppliers they have a better chance to bargain as the patents for drugs are very highly priced and so negotiations are high. Also, the suppliers need patent licenses for the manufacturing of goods which could come at a high cost and thus they charge more for their product from pharmaceutical companies.
Generally consumers have very little bargaining power. Most of the medication is prescribed by the doctors. Consumers will have to buy the drug at any given price if they need it. More educated consumers may buy a generic alternative (which have the same impact but less expensive) if available on the market. Pricing pressure The U.S. remains one of the few developed markets where drug manufacturers have significant pricing flexibility, and this is in jeopardy due to increasing pressures from consumers and legislators to control health care costs. Governments in other markets are generally the primary customers, and therefore, enjoy substantial pricing leverage. Shareholders continue to pressure the companies for increases in the share repurchase programs. The companies looking for ways to increase shareholders returns partly because the industry is approaching maturity and is not growing as rapidly, and because many companies have a lot of cash on their balance sheet.
Threat from generic competition. Customers can find substitute medicine if the original product has an expired patent. However, if it is a new product the consumer generally will have no choice for an alternative. Over the few years generic drug manufacturers face excellent opportunities for utilization and volume trends. Generic companies are increasing focused on establishing global operations in order to achieve a lower-cost of supplies, thus posing even more threat to non-generic drug manufacturers. Based on Porters model LOW to MEDIUM forces are present among the strong players in the pharmaceutical industry. Thus, the industry is attractive to investors largely due to the highbarriers to entry, purchasing and pricing power, and strong credit profiles of existing firms.
Experienced Management
Weaknesses Research & Development Their R&D competencies are very weak and to develop the drug they made alliances with Sanofi Aventis and Bayers Healthcare.
Opportunities
Medical Research for more critical diseases like HIV. Growing Economy
Threats Expiration of Patents Patents lasts for 17 years and thus thereafter the drug can be imitated by other pharmaceutical companies Government Regulations Every drug which is produced required permissions from government regulatory authorities and there exist a threat of losing the whole research and development on the drug if it is not approved by the authorities. High competition The market is dominated by large pharmaceutical companies like Johnson & Johnson, Pfizer, Roche and GlaxoSmithKline.
4.2 Resources
Laboratories use cutting-edge analytical equipment, automated laboratory information management systems, and electronic document management systems. Fundamental Patents rights by U.S. Patent and Trademark office for its Mouse Antibody Technology used in Velocimmune. Manufacturing performed under strict cGMP (current Good Manufacturing Practices) conditions.
Expertise of technical staff i.e. scientists, engineers, technicians, and managers for developing and operating the complex manufacturing processes
Innovation Product idea generation and bringing these ideas into final drugs is the core competency of Regeneron Pharmaceuticals. Drugs like Eylea is the biggest innovation they made in collaboration with Sanofi Aventis.
Velocimmune Technology (mammalian genetic engineering i.e. technology for producing fully human monoclonal antibodies). Regeneron has Expertise and knowledge in neurotropic factors and regenerative capabilities.
Regeneron Pharmaceuticals is following focused differentiation strategy as it is catering to specific diseases, selling to specific segment and charging premium prices. Regeneron is following niche marketing strategy to gain the competitive advantage over its competitors. For example, EYLEA is a drug for curing the blindness of old-age people thus, targeting the specific segment of people.
Lower cost
Differentiation
Regeneron is a vertically integrated firm as from the drug development to manufacturing and distribution are done by the firm. Regeneron shares the Discovery stage with Sanofi-Aventis and Bayers Healthcare and for distribution outside U.S. Regeneron was sharing Bayers Healthcare distribution network.
Discovery Regeneron brings the product ideas for critical and rare disease whose cure is not available in the market. Then the research is performed for the feasibility of the drug which is shared with their strategic partners to reduce the risks.
Product Development Once the molecular discovery is completed, Regeneron moves towards the development stage in which 3 stages testings are performed to check the compatibility of drugs on the human body. Once all the 3 stages are successfully cleared, the drug is given to the regulatory authority for the approval.
Manufacturing As soon as the approval is received, Regeneron starts producing the drug in their manufacturing facilities i.e. the drug is produced in-house.
Marketing Further the product is distributed through their distribution network in U.S. and to commercialize the product outside U.S., Regeneron share the distribution of Bayers Healthcare.
I.
In 2003 allied with Aventis to develop and commercialize VEGF Trap-eye which further got merged with Sanofi
II.
In 2006, allied with Bayer healthcare to develop and commercialize Eylea and support VEGF-Trap
III.
2007, made partners with Sanofi & Aventis to discover and develop & commercialize fully human antibodies
IV.
7.2 Acquisition
Acquired manufacturing facility in NY in 1993 to develop in-house capabilities and to get vertically integrated.
Regeneron Pharmaceuticals follows the model as shown in the figure below for new product development. In this model, the firm first generate ideas about the drug to be developed and according to the skills and competencies of their partners, they decide whom to choose for which type of drug development. After selecting the partner for the drug, the drug is designed and developed with the strategic partner. After the molecule for the drug is formed and researched, the trials are performed for testing the drug. These trials are performed in 3 phases:
Trial 1
In this the drug is tested on the mouse using Velocimmune human antibodies technology to check for any side effects and whether the drug is working as per the plan.
Trial 2 This trial is performed on other animals to check whether the same results are achieved on them or not.
Trial 3 This is the last trial which is termed as clinical trial. As this trial is done on the humans to check the consistencies of the drug.
Once the unique and innovative drug passes through all the stages of trials, the drug is send for approval from government regulatory authority. And after the approval is received, Regeneron executes the production of the drug followed by the distribution.
Regeneron core technology is Innovation as they have experienced staff and are good in bring new ideas into existence. The firm shares their resources i.e. Velocimmune Technology monoclonal human antibodies which is mammal genetic engineering with their partners Sanofi Aventis and Bayers Healthcare in return by sharing the research and development with them to bring new product idea into existence. They have two functionality in their organization which is Drug Development and Production. The firm is vertically integrated and in these the drug development is shared with their strategic alliances to share their risks and then the in house production of the government regulatory approved drug is done. They had made this competencies by acquiring the manufacturing facilities in New York in 1993. Further the drug is passed through quality check and then the packaging is done and the distribution of product is made.
In this distribution, the firm is having a good network in U.S but for the commercialization of drugs outside U.S they are sharing the network with Bayer Healthcare. The revenue achieved from the drug selling are further utilized in improving their in house R&D team, so that in future they could have their own R&D.
Regeneron policy is to comply with all applicable laws and regulations. Officers, directors, and employees are expected to conduct business in accordance with all relevant laws, regulations, and company policies and to refrain from any illegal, dishonest, or unethical conduct.
Regeneron expects all personnel to comply with all applicable laws and regulations. These include, but are not limited to, False Claims Acts, Anti-Kickback Statutes, Prescription Drug Marketing Act, Food and Drug Administration Modernization Act, Federal Food, Drug, and Cosmetic Act, Health Insurance Portability and Accountability Act and Federal healthcare program requirements. Violations of healthcare laws or regulations may result in severe
penalties against the responsible employees and the Company, including jail sentences, large fines and exclusion of Regeneron products from reimbursement under federal and state programs. Regeneron is committed to conducting the sales and marketing of its products in compliance with these laws.
i.
No employee, officer or director shall discuss with or provide information to any competitor about pricing or related matters, whether such information concerns the Company or Regeneron suppliers, distributors, wholesalers or customers.
ii.
No employee, officer or director shall agree with a customer on resale price; imply that such resale price is a condition of sale, contract renewal, or advertising allowance; or discuss with or imply to a customer that Regeneron will attempt to influence the pricing of another customer or competitor.
iii.
No employee, officer or director shall engage in group boycotts or allocate or divide customers, territories or production with a competitor.
iv.
No employee, officer or director shall engage in any predatory pricing or discriminate in prices or terms of sale, for like goods, between competing customers to the injury or damage of the disfavored customers, or induce a seller to so discriminate in favor of the Company, as purchaser.
1. Regeneron Pharmaceuticals is developing 2 drugs for curing LDL cholesterol which is the most common problem in the world and rheumatoid arthritis. On Nov 22, 2013 Sarilumab drug which is used to treat rheumatoid arthritis reached its clinical stage of testing.
2. Since Eylea sales continue to increase by 49% in U.S. and by 22.5% outside U.S. and along with this the product is also used to cure small eye related disease that is caused due to blood clotting, so the firm can spend further on the research and development of Eylea to discover more about the other usability of the drug.
3. Regeneron can move their research & development into more critical drug whose cure is not available like HIV.