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Transcript of Genentech
Porter’s five forces model
Key issues and challenges
Recommendations Background of the Company THREAT OF NEW ENTRIES FIVE FORCES MODEL STRENGTHS SWOT ANALYSIS QUESTIONS AND COMMENTS Genentech was founded in 1976
by Robert Swanson and Hebert Boyer
After few years of the company
Genentech scientists successfully produced the first therapeutic proteins which involve human genes. POWER OF SUPPLIERS POWER OF BUYERS THREAT OF SUBSTITUTES KEY ISSUES AND CHALLENGES Not all the drug patents developed passes the FDA control PESTEL ANALYSIS Political RARE VRIO ANALYSIS VALUABLE COSTLY TO IMITATE ORGANIZE TO CAPTURE VALUE The main advantage of the company:
Best scientists in the world doing their own research. The company is focus on:
Producing best-in-class medicines with leading-edge scientific knowledge. Creative and innovative environment:
Which leads to the creation of new scientific breakthroughs. Genentech has a rare resource:
Provided the scientists with a 275,000 square foot state of the art facility. This amenity provides:
Scientists an opportunity to collaborate with one another, since they are all under the same building. This working environment is rare
It produces numerous research papers and patents each year. Herbert Boyer owns the first major patent in the new biotechnology sector. This factor is costly to imitate because:
The company has the patent for a period of time, thus creating a competitive advantage. No other companies can duplicate or purchase those patent rights. Sophisticated selection criteria in order to:
Move projects from the discovery phase to commercialization. Research, development and manufacturing which is dictated by the FDA Projects based on:
Critical medical needs,
Significant market opportunities,
Adequate market protection
Reasonable manufacturing economics. Economical SocioCultural Technological Ecological Legal Research and development of these new biotechnology breakthrough tended to be discover in Universities and other research institutions Researchers have to partner with private equity or venture capital firms in order to commercialize their products into the market. Traditional medicine involved chemistry-based procedures which was successful up until 1950s Genentech created a new way of looking at how to treat diseases related with cancer The technological innovation that Genentech brought to the industry is related with the development of the rDNA (recombinant DNA) This new technology allowed scientists to isolate and amplify any gene or DNA segment and move it with controlled precision With this new method, the industry changed because it helped to produce proteins, such as human insulin, under controlled conditions. In terms of patent protection, brand name drug-makers like Genentech have to protect themselves from the generic drug-makers. In order to make the investment profitable, they would like to see their patent extended for 14 years. This would allow the brand name drug-maker to recoup the high cost of developing the drug. EXISTING COMPETITORS Between 1994 and 2006, biotechnology start-ups exploded, reaching over 1,400 new companies with a revenue exceeding $53.5billion Since all the companies control the research, development and manufacturing of the drugs, they set their market price without negotiating with any supplier Since biotechnology drugs came into development, many patients cannot demand lower price The main substitute for the biotechnology industry comes from generic drugs By 2007 alone, pharmaceutical and biotechnology companies formed 417 new partnerships. WEAKNESSES OPPORTUNITIES THREATS Work environment and the development of the new biotechnological industry
State of the art facilities
Developed the rDNA Merged with Roche
Business approaches of each company were different
Genentech clearly had a focus on research and development while Roche was more concerned about marketing and commercializing their products Genentech focus on was oncology, which represented 70% of sales in 2008 Biologics Price Competition and Innovation Act
No differences in safety, purity and potency
Can be produced with less investment RECOMMENDATIONS Set a time limit for new drugs development Phase I, scientists are free to pursue their own research
After the time is finished, scientists will propose their ideas to management
Management will then decide which drugs will get FDA The company can control the efficiency of the scientists as well as the cost to develop these new drugs Genentech should produce both the brand name and the generic drug They already have the research, development and procedures to commercialize this new product.
Change the label and the price
Keep the active ingredients similar The company can increase their presence in the market by selling both generic and brand name The company was one of the first biotechnology companies
Mission to develop manufacture and commercialize bio therapeutics drugs.
Genentech main focus was in areas of oncology, immunology and tissue growth and repair. The last year prior to the acquisition by Roche
Made revenue of $13.4 billion, more than double the amount it had in 2005.
Majority of the revenues come from the drugs the company sold, which represent 78% of the revenues. Comparative Effectiveness Research Bill (CER) Assess how various medical products and procedures compared with each other The government now has a greater involvement in the health care sector Climate change plays a large factor in the biotechnology industry Pollution in major city can cause lung cancer
Rise in temperature can cause an outbreak of west Nile virus Biotechnology industry will continue to
Eradicate cancers and diseases caused by man Low switch cost, generic drugs were able to capture 72% of the total pharmaceutical sales in 2008 Since the companies are getting larger, it is hard to control and manage a big group of scientists working together The drug called “Rituxan” could be used to treat cancer as well as to protect the immune system Generic drugs Flat outlook of the biotechnological industry
From 1998 to 2007 biotech sales grew from $15billion to $33billion
This demand is high because patents began to expire in 2012
Avastin did not provide significant benefits in terms of survival
Two different business cultures
Genentech’s management believed that early drug discovery research was the key to the company’s future
Roche wanted to focus more on immediate returns Competition from Generic drugs FOUNDER CORE COMPETENCE MAJOR REVENUES Manuel Garcia