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By: Cierra Carter, Michael Choi, Sara Ghannam, and Susana Martins

Introduction

Biocon Ltd.

Building a Biotech Powerhouse

Introduction

Introduction

Biocon is India’s largest and fully-integrated, innovation-led biopharmaceutical company and is committed to reduce therapy costs of chronic diseases.

Through Biocon Foundation the Company is engaged in promoting social and economic inclusion by ensuring that marginalized communities have equal access to healthcare services, proper sanitation and educational opportunities.

Biocon's efforts in providing better healthcare through affordable innovation do not stop at developing new medicines.

In the case study during the year 2005, Biocon was the largest biotechnology enterprise in India. As of today, Biocon is ranked among the Global Top Ten Biotech Employers as of 2016. In addition, they continue to be the only Asian Company in the Prestigious Science Careers Top 20 Employers List.

GOAL: To Achieve annual revenues of $1 billion and to secure a place among the top 10 global biotech firms by 2015

Biocon & Vertical Integration

Biocon & Vertical Integration

Vertical Integration is a strategy that many companies use to gain control over their industry’s value chain. In layman terms, it is when one company takes complete control over one or more stages in the production of a product. This ensures full control over the supply of the raw materials to manufacture its products.

In order to execute her goal, in 2005, Mazumdar- Shaw envisioned building a vertically integrated biotechnology enterprise with a strong discovery orientation.

An example of vertical integration currently in the organization today is when Biocon strategically collaborated with Mylan. Mylan handled the commercialization of product development, while Biocon handled the scientific portion of product development. Together, they were able to mitigate the costs of product development, as well as improve quality.

Background

Background

Background

Background

Biocon began in 1978 and was created as a joint venture .

The founders of Biocon are:

  • Kiran Mazumdar-Shaw, an Indian entrepreneur
  • Biocon Biochemicals limited of Ireland

Biocon started off as an enzyme manufacturing company and later has become a full on biopharmaceutical enterprise.

To this day, Mazumdar-Shaw remains chairman and managing director with 60% of the company's stock .

Under her direction, Biocon's early years were in genetic drugs and enzyme.

Background

Background Continued

Specialized Areas:

1. Enzymes

2. Biopharmaceuticals

3. Custom Research

4. Clinical Research

Biocon has been able to differentiate itself due to its skill and ability to ferment.

Biocon used its skill in fermentation to set itself apart from competition, mainly caused by the WTO patent law which was introduced in 2005.

Background

Background Continued

In the past, Biocon aligned with Clinigene who handled their clinical trials, which benefited Biocon because of India’s “large population and low cost pool of qualified medical and scientific professionals to provide quality clinical research services at attractive prices and to facilitate rapid establishment of trial groups.”

Biocon’s main focus was clinical trials for new drug molecules in phases 1 - 3.

Mazumdar-Shaw’s ability to add businesses that increase growth by partnering up and getting the company closer and closer to the next goal is what has made Biocon so successful.

Issues

Issues

Leadership Issue:

  • Mazumdar-Shaw, who preferred to be addressed as "chairman" instead of "chair person" found herself against a “Concrete ceiling” when she started the company, Biocon.
  • Men did not want to work for her or with her because women were not “dependable."
  • As of 2005, under Chairman Mazumdar-Shaw, 30% of employees are women, including the senior management levels.

Competitive Issue:

  • There is a high level of competition due to the fact that there are 74 other manufacturing facilities in India that are also certified by the FDA with sales of more than 1 billion per year in the U.S/European markets.
  • The high level of competition is also due to the 30 clinical research organizations (CROs) that have adequate capabilities in Research and Development (R&D).

Biocon

Situation

Situations

Core Competencies and Capabilities

Then vs. Now

Core Competencies and Capabilities

Then vs. Now

Biocon’s core competencies in 2005:

  • Molecular Biology
  • Fermentation
  • Enzyme Manufacturing
  • APIs & Generic Formulations
  • In house research and development (R&D) team and biodiversity program to discover new biotech products

Biocon’s Core Competencies Today:

  • Branded Formulations Program to help educated patients and doctors in disease prevention, as well as detection and management.
  • Innovated manufacturing technologies such as

a. Microbial Fermentation

b. Human Insulin & Biosimilars

c. Mammalian Cell Structure

d. Chemical Synthesis

  • Increased scope of R&D team and manufacturing operations
  • Commercialisation capabilities

Issues Faced

Issues Faced

  • Risk associated with drug discovery

  • Low availability of venture capital in India

  • Implementation of WTO patent law

  • Competition with European players

  • Capabilities/skill level of subsidiaries

  • Limited experience in commercialization

Why Should We Care?

Why Should We Care?

Biocon is committed to finding biotechnology solutions in global health care.

•Two focal points of disease research: Diabetes & Cancer

•Final level of evolution in becoming a fully integrated biotech company: Creation of Proprietary Drugs

•Cancer drug Biomab is key to entering into this market successfully

Assessment

Assessment of

Issues

Issue # 1

Issue # 1

Risks Associated with Drug Discovery:

High Cost: A consequence in an emerging market means the company has to spend a significant amount on research, advertising, and marketing.

High Risk of Failure: Another consequence of an emerging market is a substantial risk of product failure.

Competition: The market is an example of an Oligopoly, because Biocon is competing against other companies that have similar products to what they have. The competition is mostly based on quality, than price.

Issue # 2

Issue # 2

World Trade Organization (WTO) Patent Law:

  • Due to the WTO patent law, companies in India are no longer able to make generic products during the originators patent timeframe. This forces Biocon to only be able to produce generic versions, after the product’s patent has expired.

  • In addition, the WTO patent law causes concern for not only Biocon, but all of the other companies who profited from producing generic drugs during the originators patent timeframe; thus this has caused increased competition.

  • The WTO patent law also affects Biocon’s overall income of manufacturing of patented drugs.

Issue # 3

Issue # 3

Little Experience in:

  • Commercialization: Since Biocon has little experience in marketing a drug, consumers will not have access to the product, resulting in failure of the company.

  • Clinical Trials: In the past, Biocon has benefited from outsourcing clinical trials to other companies, which assisted in sharing the cost of developing the drug. However, this did not assist them in gaining knowledge or desired revenue for Biocon. The top three players in India had revenues of $18, $10, and $7 million, while Clinigene (Biocon’s outsourced company) only had a revenue of less than half a million. While sharing costs is beneficial, if desired revenue have not been reached, one would say the company has failed its goal.

Issue # 4

Issue # 4

Spreading The Company Too Thin:

  • Instead of focusing on one or two areas, Biocon is attempting to move into an unfamiliar sector, which may ultimately negatively impact their goal of achieving annual revenue of $1 billion and to secure a place among the top 10 global biotechnology firms by 2015.

  • According to the case study, it was estimated that by 2025, biodrugs would replace 70% in conventional therapies. It is important not to rely on this statistic, because the future and the environment is constantly shifting. It is during these times of uncertainty that companies may attempt to vertically integrate themselves into the market to save on transaction costs. For example, Humana (what year) chose to expand from a small nursing home, to a large insurance company, to then expand into the hospital industry. The expansion from a large insurance company to the unfamiliar hospital territory caused the organization to face major setbacks. For one, their net income plummeted due to their over estimation of returns from owning their insurance company and hospital.

Recommendations

Recommendation

Recommendation # 1 : External Solution

Recommendation # 1 : External Solution

A Strategic Alliance occurs when two or more organizations join together to pursue mutual benefits.

Forming a strategic alliance with global companies is the key to success for Biocon. By partnering with global companies, Biocon can:

  • Manage their risk better.
  • Lower costs in drug discovery.
  • Form economies of scale.
  • Enter into new foreign markets.

1st Type of Strategic Alliance

1st Type of Strategic Alliance

In a Joint Venture Alliance, it has few members, but each member is able to have direct ownership and large directional authority because each party (member) contributes capital equally as well as holds equity all the same.

Benefits Include:

  • Provide companies with the opportunity to gain new capacity and expertise.
  • Allow companies to enter related businesses or gain new technological knowledge.
  • Sharing of risk with a venture partner.
  • Access to greater resources.

2nd Type of Strategic Alliance

2nd Type of Strategic Alliance

We are also recommending forming a Virtual Vertical Integration. This can be achieved when organizations/companies focus their investments on specific areas of specialization.

Benefits Include:

  • Perform relatively better in unstable markets.
  • Greater flexibility.
  • Save on costs, because communication and manufacturing are at each companies discretion.

Recommendation # 2: Internal Solution

Recommendation # 2: Internal Solution

1. Build a team that has experience in commercialization, specifically marketing pharmaceutical products.

2. Conduct a Patient Origin Study;

a.This is in order to identify drugs that will best fit the needs of their surrounding population to maximize chance of profit.

3. Measure the Market Structure;

a. Biocon may be able to utilize a focus-differentiated strategy depending on the results of the market.

4. Researching products that best align with the results obtained from the patient origin study and market structure measurement.

5. Develop and market the product.

How To Succeed

How To Succeed

The Future of Biocon

Conclusion

In Conclusion

In Conclusion

Mazumdar-Shaw in 2005 had a great vision in mind of acheiving $1 billion in revenue and to be in the Top 10

global companies by 2015.

Biocon managed to become one of the top 10 global companies in 2016.

However, Biocon will continue to strive towards the goal of achieving annuals sales of $1 billion.

Thank you for Listening

Thank you for Listening

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