sajva group 6 millenium case

8/10/2019 SAJVA Group 6 Millenium Case

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Millennium

Pharmaceuticals, Inc. (A)

Umakanta Sahu PGP/16/294Sanjay Bhatt PGP/15D/111Janmejay Das PGP/16/262Parichita Kapoor PGP/16/275Charlotte Faure IE/16/014Yoann Dattolo IE/16/040Camille Le Bian IE/16/013


2/20

Biotechnology Revolution

Mid 1970s- biological breakthrough

Rising importance of genetic technology (DNA)

Synthesis of compounds and interrelated chemicalreactions in human body contingent on DNA (competitive advantage of Millenium)

Heavy investment in 1970s and 1980s forcommercialization of tech. without due diligence

R&D expenditure ~ 15-20% of sales

230mn$ spent on the drug which has a average time tomarket- 14.8 yrs-(high breakeven time ), (huge risksinvolved)

But still promising returns to investors attractedscientists

Key-and lock theory

I:basicResearch (2

yrs)

II: Pre-clinicalscreening (3

yrs)

3: humanclinical trials

(6 yrs)

4: FDA review(2-3 yrs)

1997- 228 collaborations

Noalliance biotech firms- bankrupt (very few successful),

unsuccessful biotech firms picked by pharma companies

Biotech wanted to access rich cash and downstreamsynergies for manufacturing and marketing ( as can be

seen from millennium- Bayer Deal)

Hence, Market Structure

partnerships and mergers,1990s saw more intricatealliances, emergence of tool companies

Main aim of biotech companiesto become fullyintegrated pharma companies

Biotechnology firm could not bear the blow of high rat

drug failure in comparison to pharmaceuticals due tolarge size

STRATEGIC INSIGHTS


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Introduction to Millennium Pharmaceuticals Started in 1993 with initial investment of $8.5 million through venture capital

funding

Aim was to create better research facilities better than the best universities &creating a technology platform from the best available, infusing capital in theplatform to stay ahead of competition

Assembles an impressive array of various technologies lie robotics, informationsystem and molecular biology

Team include Chief Technology officer, Michael Pavia who is a pioneer inCombinatorial Chemistry revolution, Chief Business officer, Steven Holtzman is anOxford trained Rhodes Scholar who helped Millennium in making good acquisitiondeals

Vision: To marry molecular biology with automation and informaticsAdvantage- Discovering and processing big information about genes Making it possible for finding treatment for thousands new targets

Its Genomics based approach reversed the traditional process by first identifying &understanding the role of genes implicated in causing a disease


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Managing Growth

Focus of growth: To take the highest downstream share of adrugs profit

Key Success attributes

Research collaborationwith other biotech

firms and universities

Ability to attract goodemployees based onscientific merit andinterpersonal skills

Low internal politicsamong top

management

Set the pace for ahardworkingenvironment

Stock options for allemployees which in

turn resulted insignificant capital gains


5/20


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Managing Growth (Continued)

Managements negotiation strategy for Strategic Alliancesreflected companys long-term goals by carefully carving outenough choice cuts for the firm itself

Millennium sought to retain rights to unforeseen discoveriesin the course of a partnerships

Allowed the company to reserve select rights for its own future drugdevelopment such as particular geographic market, specific therapeuticapplication which are not of immediate interest to alliance partners

In 1997, Millennium had 5 alliances with drug firms for findingspecific gene targets

Strategy to remain independent


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Major obstacle from being a drug development firm: Lack of

expertise in going from drug targets to actual lead

components

Acquired ChemGenics: Gave Millennium an upper edge whilenegotiating with big firms

Millenniumsadvantage:

Managing Growth (Continued)

Rationale for starting alliances and mergers

Drawing on world class personnel

Tough negotiating strategies leading to key mergers and acquisitions

Value adding relationships with other universities and firms


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Major Alliances

Technological Alliance:Monsanto Deal

PharmaceuticalAlliance :

The Bayer Deal

Largest alliancebetween biotech andpharmaceutical firm

Lundberg Deal ( intoconsideration)

Catered theneed for

venturing into

agricultural

tech systems

Catered to

need for drug

pipeline

developmentand market

reach

???


9/20

The Bayer Deal

Millennium currently present in upstream drug targetdevelopment

From Millenniumspoint of view

Weakness-> capability to take drug to market,

Weakness-> efficient pipeline of drug development

Opportunity-> responsible for 50% of all targets going intoBayersdrug development pipeline

Opportunity-> rights to several targets found accidentally

resulted in high investor confidence with stocks bullish in wallstreet


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The Bayer Deal

(pharmaceuticals accounted for 30bn$ business of Bayer)

Vision 2000 launched for finding appropriate alliance targets

From Bayerspoint of view

Weakness-> target discovery and biotechnology

Opportunity-> 225 new drug targets will be found out by

Millennium for Bayer

Opportunity-> 465$ mn over 5 years , 14% equity stake

Bayer Millenium


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Alliance with MonsantoMonsanto : US based giant multinational

What was in the deal for Monsanto:

They wanted to capitalize on the state of the art technology of Millennium. Afteracquiring ChemGenics Millennium was looking to extend its reach in the agriculturefield through biotechnology

What was in the deal for Millennium:

it was looking to leverage the integrated platform for agriculture and create nearterm value

The Alliance:

Creation of Cereon Genomics, a Millennium subsidiary which will transfer the technology for

Monsanta to develop its product Transfer of 100 employees from Millennium platform to Cereon platform

Total worth of the alliance: $218 million ($118million up front and rest in yearly $20million

installments based on achieving milestones)

Milestone was set to be 80% achievable-

This deal was established to avoid the biotech firm from being conservative and the

pharmaceutical from being aggressive


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Monsanto deal cont.

Association with Monsanta can give them a stronghold in the Agri-biotech business

Huge potential for growth in the agriculture field

Symbiotic relationship for the middle ranking scientist and technologist

Help Millennium to document its protocol and software formally which can be utilize for futurereferences

Generating useful information in the process

Increase team bonding among the employees

Shuffling of employees from Millennium

Increase workload for the scientists and technologists of Millennium

Diversion of the complete focus which Millennium management has on the human health

Need to hire more employees may lead in the managing issues

May encourage Millennium management to get into more such alliances which may not be successful

Advantages of Monsanta deal to Millennium:

Disadvantages of Monsanta deal to Millennium:


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Pulling up socks (new drug paradigm)

To industrializing drug discovery process, millenniumapproached technique of extensive research anddevelopment and hiring people that question theassumptions held by the industry for decades.

Being a new firm and untouched by normal corporateinertia, Millennium learnt how to challenge conventionalwisdom

Lessons in drug development were brought from recruits

from large firms


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Revolutionizing Drug Development

Speed up individual Steps Speed up steps involved in isolating, characterizing and understanding DNA

through automation experts and engineers with manufacturing experiences

Major bottleneck: ability of scientists to assimilate and make sense ofstaggering amount of data made available.

Focus on bioinformatics was essential to tackle the issue

Carrying out serial steps in parallel wherever possible

To compress drug development timeline by conducting more steps inparallel for target validity, organ-specificity, bio-availabilityand toxicity.

Find new technologies that could front-load critical problems

Tried to find out potential failure modes thereby increasing thepredictability of success


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HR Management issues

Stress for high- rankscientists

Extensiveresponsibility forsupervising

marketing skills formore outsidepartners

Stress at lower levels

HRDs latest semi-annual survey, 1999

Employees facedunmanageable

workload, higherexpectations,difficulties inmanageability ofstress

Further Issues:

Frustration due to Higherexpectations in comparison to

other industries Work of 2 scientists performed

by 1 person

Impact: Dilemma in employees to do all

work in a mediocre way orsome part but in a perfect way

Can lead to low performance Can disrupt the culture

Stress management:Managers made responsible for holding individual stress sessions with subordinates

Question :Is Millennium entering into alliances more than it can actually manage??

Is the focus being lost??


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Pros and cons from point of view of Lundberg

Lundberg Deal

Sought to access genomic technology, much in a manner of theMillennium-Monsanto deal

Access to technology that would help identify plant genes as well

as for high throughput screening capabilities

Very much desperate for deal: Had done little due diligence andlittle examination of the previous deal of Millennium-Monsanto

Lundbergs senior management very kin on showing strong

consensus and were ready to make major financial commitmentright away

People management will be a stressful activity


17/20

Lundberg Deal

Pros and cons from view point of Millennium Software documentation from Lundberg which in not enough in

comparison to the benefits provided to Lundberg

Documentation : Not so necessary in short term

Strategic fit: Lundberg has to help create software for the new venture It could pay for some of the work it needed to do for itself anyway

Impact on its R&D productivity

To set up system that would allow Lundberg to receive the technology

Potential conflict with its prior relationship with Monsanto

Sharing all the prior technical expertise gained from previous alliancesjust for the sake of agri-business

Mismatch with vision and goal


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Vision misalignment

Vision of Millennium:Tofocus on activities that allow us to take the highest downstream shareof a drugsprofit- wherever these profits may occur

Extension to vision:

becoming a genomics firm and helping revolutionize the drugdevelopmentprocess

Deal with Lundberg doesnt contribute to pipeline of drugdevelopment process specially

It also doesnthelp gain expertise in human genomics firm

(additionally it doesnthelp in marketing or distribution side of process)

But only deviation from the main aim of Millennium.


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Conclusion

The consensus:

Millennium should not finalize the deal with Lundberg

as

Deal will result in losing competitive advantage

Not major help in drug development process

Not in alignment with vision

Not much help in achieving any of corporatesvision

Not much synergy would be gained


20/20

Thank You

sajva group 6 millenium case

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