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Internationalization strategy

JV with Eli Lilly


In 1979 a joint venure was proposed to the top management of
Novo, which would combine Genentech (the company that made the
first genetically engineered human insulin), Eli Lilly , the dominant
palyer in the industry with 85% market share and Novo. Eli lilly
would receive the rights for the US market. In return Novo would
receive the rights to genetically engineered human insulin for the
rest of the world. Novos strategy to penetrate foreign markets had
primarily been based on product differentiation. This branded
strategy was contingent on promoting the advantages of Novos
highly purified insulin.
Squibb/ Novo Joint Venture
In February 1982, Novo entered into an agreement with E.R. Squibb
& Sons Inc. to establish Squibb/Novo., a jointly owned company with
purpose of marketing a full range of insulins produced by Novo and
distributed in the US by Squibb. Having tried independently
penetrate the US market, Novo expected that the Squibb/Novo
partnership would lead to increased sales of insulin in the US.
Although, Squibb was the second leading producer of insulin in the
US market, it had faced serious problems since the 1970s with its
quality and its ability to generate innovative new products. Its
insulin product was low quality and its production process according
to a former executive was horrible. In addition, the company had
multiple providers of bulk insulin and had built up enormous
inventory of low quality insulin. Thus, in 1978, Squibb contacted
Novo in an attempt to alleviate its product and quality problems.
The outcome was an agreement whereby Novo became the single
bulk source provider of animal insulin for Squibb. Squibb had wanted
Novos high quality Monocomponent Insulin but Novo which wanted
to penetrate the US market on its own, was reluctant to give Sqibb
this product and instead gave them a medium quality insulin
product. By the early 1980s it became clear that Squibb, given its
lower quality product, was unlikely to remain a long term player in
the industry.At the same time, Novos aspirations for a branded US
strategy had resulted in less that 5% market share. By 1982, the
stage was set for joint venture. Novo possessed excellent
production and purification skills and Squibb had a US distribution
network of 800 people and 40 medical specialists. Squibbs sales
force had a limited range of products to sell and had ample capacity
to sell Novos insulin. The joint venture based its operations and
office in Princeton, just ten minutes from the corporate
headquarters of Squibb. The joint venture helped companies to
globally expand. Over time, Squibb broadenedits product portfolio.
It allocated sufficient resources to meet the needs of joint venture.
In 1989, the mergers of Squibb with Bristol Myers and Novo with

Norsdisk coincided with managements decision to totally change its


approach to the US insulin market.

Worldwide Strategic Joint Ventures


After 1982 the company used the Squibb Novo JV model in forming
alliances throughout the world with major insulin suppliers as a
means to penetrate markets and significantly consolidate the
industry
In Feb 1984 the Canadian government approved Novos
establishment of insulin production in Canada. Following an
agreement between Novo and Connaught Labs a new Novo
subsidiary, Novo Labs Ltd was established to produce insulin. The
insulin prepared by Novo would be sold by Connaught in Canada.
In 1984 Novo and Commonwealth Serum Labs entered into an
agreement covering the manufacturing and marketing of insulin
preparations in Australia, New Zealand and Oceania. Under this
agreement Novo was responsible for purification and the JV
company CSL Novo would market the complete range of Novo
insulin preparations.
In November 1987 Novo entered into an agreement in Japan with
Sumitomo Pharma to handle diabetic care products. In 1988 Novo
increased its marketing efforts through cooperation with Boehringer
Mannheim for marketing its products in Germany. Novo also made
marketing alliances with Kabi in Sweden and Orion in Finland. It
formed a marketing alliance with Wellcome in the UK and Institut
Merieuxin France
Along with entering new Markets their strategy to enter new
product categories was made possible by some key
Acquisitions. These were,
Zymogenetics
Novo established research cooperation with Zymogenetics of
Seattle, Washington in 1982. It also acquired a 16% minority stake
in the company. The two companies worked closely in yeast and
mammalian cell technology to develop the know-how that helped
Novo engineer the first ever genetically engineered human-insulin.
The collaboration also led to the development of Factor VIIa. This
was a novel treatment for hemophilia. Zymogenetics was a
company that was renowned for its expertise in molecular biology.
This helped Novo increase its knowledge of blood coagulation and

fibrinolysis. Hence it also involved Novo in human growth factors


research. Novo completely acquired the company in 1988 for 23.3
million dollars and has maintained it as an Independent Research
Unit
Novo Diagnostics Systems
Novo increased its emphasis on diagnostic systems and developed a
new business unit in the 1980s. It was an evolution of the 1981
acquisition of the production and the marketing rights for BMC Lab
22. This was a system for non-invasive measurement of bone
mineral content. The increased worldwide effort to develop a
preventive treatment for Osteoporosis benefited Novo.
NovoBioLabs
The company acquired the production and marketing rights for
monoclonal antibodies used in the diagnosis of lung cancer in 1984.
This new acquisition was combined with its existing facilities in cell
biology and immunology to form a new business unit. This was
called NovoBioLabs. Its primary objective was to use monoclonal
antibody technology for the development and production of test kits
for the diagnosis and monitoring of diabetes, cancer and other
diseases. Novo BioLabs was consolidated with I.Q. Bio which was a
British manufacturer of diagnostic kits. This extended Novo BioLabs
effort to develop and market diagnostic products.
Alfred Jorgensen Labs
Alfred Jorgensen Labs, an internationally recognized consultant to
the brewing and the food industry and supplier of pure yeast culture
was purchased by Novo in 1984. In December 1986 Novo acquired a
minority stake in California base company Idetek Inc specializing in
food, feed and veterinary analysis based on monoclonal antibody
technology. They also worked together on food and beverage
analysis using this technology.
Ferrosan
Novo also bought Danish company Ferrosan. The rationale for the
acquisition was to exploit the combined strength of the companies
in the central nervous system field. In addition Ferrosan brought
with it a broad portfolio within OTC and prescription pharmaceutical
preparations, veterinary activities and vitamins. Although Ferrosan
was originally intended to operate as an independent company,
most of its activities were integrated into the Novo group and other
parts were divested.