Case Study
WHAT RECOMMENDATIONS WOULD YOU OFFER GENZYME FOR THE FUTURE? Genzyme’s strategic vision is that they wanted to be a diversified company that could use technology to make difference for people with serious diseases and to get profitable so they can continue to make new medicine. With this vision and focus they developed and produced new drugs while the majority of their competitors only developed new drugs in collaboration with major pharmaceutical companies for producing and distributing the new drugs.
Definitely Genzyme has set an example in biotech industry of handling the entire business of producing and distributing drugs but this is a risky and challenging target to sustain. Genzyme decided to walk alone because they thought collaboration would distract them from their strategic direction and eventually make them dependent. Moreover they also wanted to enjoy the whole profit earned by the orphan drug and spent as self sufficient as they could specially during their start-up phase.
Initially, when Genzyme had few projects to handle this policy worked well but as the company is growing quickly and has lots of upcoming projects in the pipeline we think Genzyme should look at engaging in collaboration as well. Genzyme’s core competence and the basis of their ongoing sustainability and profitability is the development of formula for new orphan drugs, but production and distribution could be better dealt by market leader pharmaceuticals in this industry.
This may seem to reduce Genzyme’s profitability initially but it will allow the company to exploit its core competency effectively which in turn will lead to the development of more leading to drug inventions and thus increasing their revenue and profitability over the medium to long term. Collaborations types and structures can take many forms having terms, conditions structures set on a case by case basis. Here as Genzyme’s production, distribution capability already exists it puts Genzyme in a better position to negotiate a fairer profit sharing contract with a potential partner.
Instead of traditional practice of handing over the drug formula to production company and getting paid for the royalty Genzyme can have a joint venture or other cooperative arrangement where Genzyme’s production set-up will be joining the counterpart in production and thus they will secure better share of profit and technological knowhow. Another area of the company should consider change within is the area of finance. The company history reveals that it is counter balancing it R&D cost by running side businesses raises stability and sustainability questions and issues around its ongoing investment base.
As Genzyme has proved that the small population diseases market is financially profitable they should be able to attract investors in this sector. Genzyme should work on interested investment parties and thus create and foster a sound and sustainable financial foundation for the company. The company should consider outsourcing non vital products like medicine bottle or plastic strip production other companies that specialize in in those areas and can provide increased economies of scale.
This will allow Genzyme to concentrate and invest on its core ideology and thus making the company flexible by bring down the administrative and organization cost. Genzyme can diversify into many areas that are closely related to biotechnology field and once the activities recommended above reduce production, distribution and administrative costs there is the opportunity to devote additional funds to research and development (the core strength and competency of the firm).
They can invest limited amounts of capital in the development of BLOCK BUSTER drugs which in turn will give them a higher probability of developing a solution for the rare disease types. With the release of additional capital the can investigate parallel technologies such as the nanotechnology industry which is has the potential to be an explosive growth industry and allows them to maintain their focus on their core research and development strengths. Genzyme should also consider expansion via acquisition of emerging bio technology companies to improve its internal knowledge base or to acquire high value intellectual property.
Genzyme could also consider changing the way it engages with the community and customer base it service by opening clinics or a small hospital that specializes in rare diseases. This will allow direct access to and enthusiastic participation of those people with a rare disease. Genzyme can start a COLLECTIVE RESEARCH ORGANIZATION in partnership with one or many universities to encourage and foster new budding scientists and other human resources and specialist skills while at the same time leveraging the universities infrastructure.
