Academic journal article Entrepreneurship: Theory and Practice

Anne Evans: Assessment of a Biotechnology Market Opportunity

Academic journal article Entrepreneurship: Theory and Practice

Anne Evans: Assessment of a Biotechnology Market Opportunity

Article excerpt

This case describes Anne Evans' search for a market opportunity in the biotechnology industry, and examines the feasibility of establishing a new venture to exploit this opportunity. The drug development process in the biopharmaceutical industry spans three critical phases: pharmaceutical discovery, pharmaceutical development, and product marketing. The drug development process is a very capital-intensive process with expenditures averaging $800 million per drug and with very high failure rates--only one out of 5,000 compounds that emerge from discovery and preclinical testing will make it into the market. The drug development process therefore contributes to very high cash burn rates and corporate failures in the biotechnology industry.

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Being intimately aware of the reality and economics of drug development, Anne was intrigued and excited by the possibility of establishing an intermediary in the pharmaceutical discovery phase of the drug development process. Such an intermediary designated as a biotechnology services investment firm (BSIF) would bring together providers of discovery testing capabilities and biotechs that would be key users of such critically needed capabilities. Anne believed that the BSIF would succeed by enabling biotechs-and subsequently the much larger pharmaceutical organizations--to significantly enhance the efficiency of the drug development process. Her MBA thesis examined the feasibility of establishing a BSIF. While Anne was confident about the conceptual analysis underlying the feasibility of establishing a BSIF, she pondered what action(s) to pursue at this juncture. Was she passionate about the venture to overcome the entrepreneurial struggles that she anticipated would inevitably follow the launch of her venture?

Introduction

It was November of 2000 and Anne Evans had just been informed, in confidence, that the small biotechnology organization (biotech) she had joined less than six months prior was unlikely to remain as a going concern, in its current form, beyond first quarter 2001. She was advised that fixed costs would have to be drastically reduced and that it would be wise to initiate a search for a new position. The news was not unexpected, since the MBA she had completed that same year had enabled her to read the "writing on the walls" in the corporate financials. The situation was certainly not unique to the industry, since few biotechs had positive cash flow from operations, so when cash from external sources dried up, the organizations generally withered and died. She knew this all too well--not just from reading business periodicals or comforting laid off industry colleagues, but from personal experience--having been laid off roughly two years prior.

The question she kept asking herself was simply, "so now what?" Join the management team of yet another biotech and watch it burn through its cash as it tried to beat the odds and bring a product to market? At least her husband and family would know better than to suggest that she simply abandon her ten years experience in the biotech and pharmaceutical industry, fall back on her doctorate in veterinary medicine, and retreat to the fiscal stability that a practice in veterinary medicine would offer. The latter was as safe an out to her current predicament as it was dull and entirely out of keeping with the interests that had driven her back, midlife, to participate in the executive MBA program at San Diego State University.

Anne found herself contemplating the thesis that had culminated in her MBA program. Her business experience spanned the critical phases of drug development: pharmaceutical discovery, pharmaceutical development, and product marketing. Being intimately acquainted with the process, Anne was intrigued by the possibility of establishing an intermediary in the discovery phase of the pharmaceutical development process. Such an intermediary designated, a biotechnology services investment firm (BSIF) would bring together providers of discovery testing capabilities and biotechs that critically needed such capabilities. …

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