Biodel Inc

BUAD 490 3/14/13 Team scripted Case Analysis (Concise) Biodel, Inc. BIODEL INC. EXECUTIVE SUMMARY Biodels use of biotechnology expertness in the common chord prime beas of Cell Biology, molecular Biology, and Immunodiagnostics has led their lodge into some great opportunities. Biodel created a synthetic blood blood blood blood serum to replace fetal calf serum and horse serum, and provide a more consistently open increase for scientific queryers. Biodels molecular(a) Biology division used DNA technology to chance on 60% of the grocery store constituent of growth factors and stock the hulkingst collection of commercially ready(prenominal) synthetic nucleotides, which was 50% of their sales.Biodels seek and development in Immunodiagnostics led to the invention of DEMA, a non-radioactive method for measuring a wide array of biologicly important substance. The intelligence and vision of Dr. Oscar Feldman drove Biodel to a position of leadership in the biotechnology in dustry. Dr. Feldman has applied innovations in Cell Biology, Molecular Biology and Immunodiagnostics to increase trade allot for Biodels crops. Dr. Feldmans scientific friends and pedantic contacts offered Biodel high-quality expert advice and links to scientific community, and led to sophisticated enquiry and development advances.Now the association is at a crossroad with decisions and direction necessary. In addition to strategic cooking, the phoner would benefit from a modest re-structuring to streamline operations and prep be for unexpected veritable(a)ts. Their future investments should be in areas where patent protection is likely, and in directions and put ups that exploit their native expertness in molecular biology and transmittable plan. These technologies seem likely to transform health care in the next two decades.Having survived the brat of bankruptcy, Biodel straight has a more balanced contract investigate portfolio and is poised to develop an purge gr eater stir in the future. CURRENT SITUATION Biodels communicate revenues for 1980 consist of $1 million in contract research, and nearly $1. 5 million in research growths. The contract research revenue was split 70% from industrial research, and 30% governance research. This research included act upon in Biodels trey main fields (molecular biology, carrell biology, and immunology) as well as passelcer chem early(a)apy and enzymology.These contracts are secured by Dr. Feldman through his relationships with different scientists. The revenue from research products excessively comes from the three main fields of Biodel. Nucleotides from the molecular biology area account for 50% of revenues, electric cadre growth factors from the kiosk biology field account for 40%, and immunodiagnostics products account for the new(prenominal) 10%. enquiry product sales have been growing 35% over the last few years, even with pick out merchandise efforts. However, Biodel is being outc ompeted in the immunodiagnostics securities industry and further growth is not being pursued.Biodel has a really(prenominal) small staff, with the beau monde split up into five different sections the comptroller, advertising and sales, and then an experienced scientist manages for each(prenominal) one main field of the corporation. The scientists who manage their fields are all in charge of research and development, production, and even have some selling responsibility. Dr. Feldman does not employ a commercialiseing manager or a research director, instead filling both roles by himself. Feldmans style of management is very informal, preferring to walk virtually and talk to his employees rather than have them do unnecessary paper reach.The go with itself is run more like an schoolmanian facility than a business, with the atmosphere more leaning towards challenging each another(prenominal) and making proficient advances. In addition, employee turnover is very low so jus t about of the staff is very experienced with the work that the company is doing. The staff is led by Dr. Feldman, who represents the main reason for low employee turnover. Biodel employees describe him as a unique and enthusiastic man, and the reason why the company is so successful. Marketing had been a very unconformable department, with Dr. Feldman usually assuming all of the study marketing responsibilities.But when Dr. Feldman decided that he needed to market his company more aggressively he hired Mr. Steve Kaplan who had been a marketing manager at a turgid pharmaceutical company. However, Mr. Kaplan and Dr. Feldman soon disagreed on who should direct Biodels marketing strategy. Kaplan proceeded to spend a large amount of gold on marketing, including hiring additional salespeople and other staff. These changes resulted in a 65% increase in sales, but marketing costs increased by 500%, which resulted in profits dropping from $95,000 in 1978 to $17,000 in 1979. As a result, Dr. Feldman is reconsidering Mr.Kaplans direction in the marketing department. OPPORTUNITIES First, Biodel had under development a synthetic serum that would be used to satisfy growth requirements in cells. This would be an innovative product that could be a relief pitcher(a) for natural fetal calf serum and horse serum. However, a study problem with the fetal serum is the unstable fluctuation in cost. The cost is primed(p) by the supply of the serum and the supply is indomitable by the number of calves that are slaughtered. The synthetic serum could offer a steady rate. The market is intercommunicate at $50 to $80 million.Biodel would have a competitive advantage over the competition and could strickle 20% of the market share if they pursue this jump out. A big problem with this project is the uncertainty that Biodel testament be able to receive a patent. That provides a major risk in this investment. Second, another project is available that is extremely intriguing to us . Biodel has the opportunity to produce a naked as a jaybird product called DEMA. DEMA is a exam technology based on enzyme membranes rather than radioactivity. This product could be used to test for pregnancy, syphilis, hepatitis, mucklecer, toxins in fodder for thought and carcinogens in the environment.DEMA is a healthier, safer, faster and cheaper way of interrogation than the radioactive method. There are no hazards or side effects to DEMA and it brook provide the same results as radioactive tests. The problem with this project is the pecuniary aspect. It is more high-priced than the synthetic serum. Investments could total in the millions and the R costs could range from $1 to $3 million. However, this project has drawn the attention of major drug companies who are ordaining to participate in a joint venture with Biodel, which would help with the costs of the investment. Third, Biodel has been thinking about joining the patrimonial engine room field.The company ha s basic but not wide experience if this field but they have been a major supplier of molecular biology products. At the moment, there are four major competitors in the market Cetus, Genentech, Genex and Biogen. The basic purpose of this field is to engineer a cell to produce a specific biologic product. Competitors use the bacterium E. coli as their host cell, for the closely part. Biodel has the opportunity to enter the market with a reinvigorated strategy that involves the use of yeast as the host cell instead of E. coli. He and three other scientists believe that yeast would be a better host cell than E. coli.Yeast has a biochemical machinery that shtup allow the growth of medically relevant glycoproteins such as Interferon and Urokinase. These glycoproteins are used to inhibit the coevals of cancerous cells and to disrupt blood clots. The investment costs for this project would be high, including salaries that Biodel would pay for Dr. Ballantine and three other highly succe ssful scientists to work for them. However, the return on such an investment could be immense. RECOMMENDATIONS 1. The Biodel Board of Directors should submit annual or semi-annual Board meetings to review company progress. Dr. Feldman should delegate more.The Board should be expanded by 1 or 2 people to achieve greater diversity and breadth of expertise. Succession mean should be considered in case Dr. Feldman died, or a division head left. 2. Mr. Kaplans marketing separate should be streamlined and asked to focus on a marketing strategy for DEMA. The marketing collection can probably be reduced to lower costs while maintaining the increase in research product sales. Challenge Kaplan to analyze the marketing group to understand the most valuable parts versus parts that are expendable. 3. Among the growth opportunities to pursue, the synthetic growth factor option does not seem likely to succeed.Although it is the least pricey investment, there is uncertainty that the patent pro tection can be obtained. Furthermore, researchers accustomed to fetal bovine serum may be unlikely to abandon a tried and true method. In contrast, the DEMA technology is a unique opportunity for Biodel. It eliminates the risks and hazards associated with radioactivity, which researchers would appreciate. There is a high likelihood of patent protection. Based on the cultivation in the case, the company needs a better understanding of how to bring this product to market.This could be a great project for Kaplans smaller marketing group. 4. Pursue Genetic Engineering, with the advice and guidance of the four faculty member experts. This is an important initiative and Biodels connections with the prize-winning scientists are important. They should be compensable per diems and offered stock options. One of the four in like manner should be invited to join the Biodel Board of Directors. APPENDIX A SWOT Analysis S- Strengths Biotechnology special expertise by the 1970s in (three prime areas of focus/ other fields) 1.Cell biology market-gardening technology nonrecreational off 60% share growth factor market 40% offspring sales 2. Molecular biology DNA paid off 60% share growth factor market stocked largest commercially available synthetic nucleotides (50% of sales) 3. Immunodiagnostics biology a. Sub categories Cancer chemotherapy Enzymology Offered high-quality technological advice, numerous links to scientific community, highly sophisticated research and development service Feldman was able to secure contracts with his personal relationships with scientists in the organisation and industry Low employee turnoverW Weaknesses Molecular biology researchers used numerous substitutes Immunodiagnostics biology large firms aggressively entered and has not expanded since 10% of sales of research products -1980 profitability varied on depending on intensity of product research and development By the 1980s 60% of companys revenue was from commercializing res earch dependent on government contracts when they started making cut backs 85% contracts are government forcing Biodel into 1st layoff (damaging to long-term otential) 55 employees scientists and technicians no marketing manager or research director hired (Feldman filled both positions with far-flung contacts and scientific expertise) Staff meetings rare and no regular reports required from subordinates Poor Marketing Products sold by mail Depends on word of mouth trade shows, advertising, direct mail, ad phone solicitation client service almost laughable O OpportunitiesGoal to manufacture and market biochemical products developed through their throw research Cell Biology synthetic serums to satisfy growth requirements in cell lines of tissue finis replacing natural fetal calf serum (most widely used, horse serum was 2nd most widely used). Market of 50 million domestically and 80 million worldwide growing at 15% no systematic analysis of serum market done Immunodiagnosti cs- opportunity to enter the market new test technology based on enzyme membranes rather than radioactivity new product DEMA simpler, faster, and little expensive.Market in excess of $100 million and has potential to be over $1 billion. High hap for a patent and a joint venture with a major drug company. Genetic engineering exciting advantages/high return on investments Supplier of molecular biology products nucleotides and synthetic genes sold back up by genetic engineers some cases biodel was soul supplier T Threats Relying on government contracts lead them to the bane of bankruptcy Biodels spending strategies APPENDIX BBiodel IncBUAD 490 3/14/13 Team create verbally Case Analysis (Concise) Biodel, Inc. BIODEL INC. EXECUTIVE SUMMARY Biodels use of biotechnology expertise in the three prime areas of Cell Biology, Molecular Biology, and Immunodiagnostics has led their company into some great opportunities. Biodel created a synthetic serum to replace fetal calf serum and horse serum, and provide a more consistently available product for scientific researchers. Biodels Molecular Biology division used DNA technology to descend 60% of the market share of growth factors and stock the largest collection of commercially available synthetic nucleotides, which was 50% of their sales.Biodels research and development in Immunodiagnostics led to the invention of DEMA, a non-radioactive method for measuring a wide array of biologically important substance. The intelligence and vision of Dr. Oscar Feldman drove Biodel to a position of leadership in the biotechnology industry. Dr. Feldman has applied innovations in Cell Biology, Molecular Biology and Immunodiagnostics to increase market share for Biodels products. Dr. Feldmans scientific friends and academic contacts offered Biodel high-quality technological advice and links to scientific community, and led to sophisticated research and development advances.Now the company is at a crossroad with decisions and d irection necessary. In addition to strategic planning, the company would benefit from a modest re-structuring to streamline operations and prepare for unexpected events. Their future investments should be in areas where patent protection is likely, and in directions and projects that exploit their native expertise in molecular biology and genetic engineering. These technologies seem likely to transform health care in the next two decades.Having survived the threat of bankruptcy, Biodel presently has a more balanced contract research portfolio and is poised to develop an even greater equal in the future. CURRENT SITUATION Biodels projected revenues for 1980 consist of $1 million in contract research, and virtually $1. 5 million in research products. The contract research revenue was split 70% from industrial research, and 30% government research. This research included work in Biodels three main fields (molecular biology, cell biology, and immunology) as well as cancer chemotherap y and enzymology.These contracts are secured by Dr. Feldman through his relationships with other scientists. The revenue from research products also comes from the three main fields of Biodel. Nucleotides from the molecular biology area account for 50% of revenues, cell growth factors from the cell biology field account for 40%, and immunodiagnostics products account for the other 10%. seek product sales have been growing 35% over the last few years, even with throttle marketing efforts. However, Biodel is being outcompeted in the immunodiagnostics market and further growth is not being pursued.Biodel has a very small staff, with the company split up into five different sections the comptroller, advertising and sales, and then an experienced scientist manages each main field of the company. The scientists who manage their fields are all in charge of research and development, production, and even have some marketing responsibility. Dr. Feldman does not employ a marketing manager or a research director, instead filling both roles by himself. Feldmans style of management is very informal, preferring to walk slightly and talk to his employees rather than have them do unnecessary paperwork.The company itself is run more like an academic facility than a business, with the atmosphere more leaning towards challenging each other and making technological advances. In addition, employee turnover is very low so most of the staff is very experienced with the work that the company is doing. The staff is led by Dr. Feldman, who represents the main reason for low employee turnover. Biodel employees describe him as a unique and enthusiastic man, and the reason why the company is so successful. Marketing had been a very ill-matched department, with Dr. Feldman usually assuming all of the major marketing responsibilities.But when Dr. Feldman decided that he needed to market his company more aggressively he hired Mr. Steve Kaplan who had been a marketing manager at a large ph armaceutical company. However, Mr. Kaplan and Dr. Feldman soon disagreed on who should direct Biodels marketing strategy. Kaplan proceeded to spend a large amount of silver on marketing, including hiring additional salespeople and other staff. These changes resulted in a 65% increase in sales, but marketing costs increased by 500%, which resulted in profits dropping from $95,000 in 1978 to $17,000 in 1979. As a result, Dr. Feldman is reconsidering Mr.Kaplans direction in the marketing department. OPPORTUNITIES First, Biodel had under development a synthetic serum that would be used to satisfy growth requirements in cells. This would be an innovative product that could be a substitute for natural fetal calf serum and horse serum. However, a major problem with the fetal serum is the unstable fluctuation in cost. The cost is determined by the supply of the serum and the supply is determined by the number of calves that are slaughtered. The synthetic serum could offer a steady rate. Th e market is projected at $50 to $80 million.Biodel would have a competitive advantage over the competition and could reach out 20% of the market share if they pursue this project. A big problem with this project is the uncertainty that Biodel will be able to receive a patent. That provides a major risk in this investment. Second, another project is available that is extremely intriguing to us. Biodel has the opportunity to produce a new product called DEMA. DEMA is a testing technology based on enzyme membranes rather than radioactivity. This product could be used to test for pregnancy, syphilis, hepatitis, cancer, toxins in food and carcinogens in the environment.DEMA is a healthier, safer, faster and cheaper way of testing than the radioactive method. There are no hazards or side effects to DEMA and it can provide the same results as radioactive tests. The problem with this project is the financial aspect. It is more expensive than the synthetic serum. Investments could total in the millions and the R costs could range from $1 to $3 million. However, this project has drawn the attention of major drug companies who are willing to participate in a joint venture with Biodel, which would help with the costs of the investment. Third, Biodel has been thinking about joining the genetic engineering field.The company has basic but not wide experience if this field but they have been a major supplier of molecular biology products. At the moment, there are four major competitors in the market Cetus, Genentech, Genex and Biogen. The basic purpose of this field is to engineer a cell to produce a specific biological product. Competitors use the bacterium E. coli as their host cell, for the most part. Biodel has the opportunity to enter the market with a new strategy that involves the use of yeast as the host cell instead of E. coli. He and three other scientists believe that yeast would be a better host cell than E. coli.Yeast has a biochemical machinery that can allow t he growth of medically relevant glycoproteins such as Interferon and Urokinase. These glycoproteins are used to inhibit the propagation of cancerous cells and to disrupt blood clots. The investment costs for this project would be high, including salaries that Biodel would pay for Dr. Ballantine and three other highly successful scientists to work for them. However, the return on such an investment could be immense. RECOMMENDATIONS 1. The Biodel Board of Directors should hold annual or semi-annual Board meetings to review company progress. Dr. Feldman should delegate more.The Board should be expanded by 1 or 2 people to achieve greater diversity and breadth of expertise. Succession planning should be considered in case Dr. Feldman died, or a division head left. 2. Mr. Kaplans marketing group should be streamlined and asked to focus on a marketing strategy for DEMA. The marketing group can probably be reduced to lower costs while maintaining the increase in research product sales. Ch allenge Kaplan to analyze the marketing group to understand the most valuable parts versus parts that are expendable. 3. Among the growth opportunities to pursue, the synthetic growth factor option does not seem likely to succeed.Although it is the least expensive investment, there is uncertainty that the patent protection can be obtained. Furthermore, researchers accustomed to fetal bovine serum may be unlikely to abandon a tried and true method. In contrast, the DEMA technology is a unique opportunity for Biodel. It eliminates the risks and hazards associated with radioactivity, which researchers would appreciate. There is a high likelihood of patent protection. Based on the info in the case, the company needs a better understanding of how to bring this product to market.This could be a great project for Kaplans smaller marketing group. 4. Pursue Genetic Engineering, with the advice and guidance of the four academic experts. This is an important initiative and Biodels connections with the prize-winning scientists are important. They should be paid per diems and offered stock options. One of the four also should be invited to join the Biodel Board of Directors. APPENDIX A SWOT Analysis S- Strengths Biotechnology special expertise by the 1970s in (three prime areas of focus/ other fields) 1.Cell biology culture technology paid off 60% share growth factor market 40% offspring sales 2. Molecular biology DNA paid off 60% share growth factor market stocked largest commercially available synthetic nucleotides (50% of sales) 3. Immunodiagnostics biology a. Sub categories Cancer chemotherapy Enzymology Offered high-quality technological advice, numerous links to scientific community, highly sophisticated research and development service Feldman was able to secure contracts with his personal relationships with scientists in the government and industry Low employee turnoverW Weaknesses Molecular biology researchers used numerous substitutes Immunodiagnostics biology large firms aggressively entered and has not expanded since 10% of sales of research products -1980 profitability varied on depending on intensity of product research and development By the 1980s 60% of companys revenue was from commercializing research dependent on government contracts when they started making cut backs 85% contracts are government forcing Biodel into 1st layoff (damaging to long-term otential) 55 employees scientists and technicians no marketing manager or research director hired (Feldman filled both positions with far-flung contacts and scientific expertise) Staff meetings rare and no regular reports required from subordinates Poor Marketing Products sold by mail Depends on word of mouth trade shows, advertising, direct mail, ad phone solicitation client service almost laughable O OpportunitiesGoal to manufacture and market biochemical products developed through their proclaim research Cell Biology synthetic serums to satisfy growth requirement s in cell lines of tissue culture replacing natural fetal calf serum (most widely used, horse serum was 2nd most widely used). Market of 50 million domestically and 80 million worldwide growing at 15% no systematic analysis of serum market done Immunodiagnostics- opportunity to enter the market new test technology based on enzyme membranes rather than radioactivity new product DEMA simpler, faster, and little expensive.Market in excess of $100 million and has potential to be over $1 billion. High conjecture for a patent and a joint venture with a major drug company. Genetic engineering exciting advantages/high return on investments Supplier of molecular biology products nucleotides and synthetic genes sold support by genetic engineers some cases biodel was soul supplier T Threats Relying on government contracts lead them to the threat of bankruptcy Biodels spending strategies APPENDIX B