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Abgenix Essay

1115 words - 4 pages

The analysis of this case addressing the future of ABX-EGF leads me to recommend that Abgenix should sign a deal with Biopart and be involved in the entire process of bringing ABX-EGF to the market profitably. Seven years of hard work and a $40 million dollars investment was what led to the creation of XenoMouse. With a brilliant line up of pharmaceutical and biotechnology companies for the license of XenoMouse and a total market capitalization of up to $3 billion dollars, Abgenix seems to be on a steady path to realize them into a FIBCO, a claim only elite few can make. [1: Robert Dolan. Abgenix and the XenoMouse : Meet XenoMouse, Harvard Business School. January 9,2001. Page 1.]The Business ModelAbgenix has four development programs in its pipeline which were in various stages of clinical trials. The usual business strategy is to develop the product until step 3 in the product development value chain, and then to licence it to a pharmaceutical company for further development and marketing. With one product in Phase 3 clinical trials (ABX-CBL), another in phase 2 (ABX-IL8) and ABX-EGF in phase 1 of the clinical trials, Abgenix has covered quite a ground in terms of portfolio enhancement. Since they have a market capitalization of $ 3 billion and substantial liquidity to invest in a project, it will be in the best interest of Abgenix to partner with Biopart. This deal may help Abgenix to take a massive step forward towards becoming a FIBCO.According to the value by stage diagram, Phase 2 trials are the inflection points. If Abgenix proceeds to phase 2 of the clinical trials, the value of the drug rises and hence they will secure a pioneering position for getting a higher value for their drug. A deal with Pharmacol will have a tarnishing impact as it will reduce the profit that they could earn if they proceed towards the next stage of clinical trials. [2: Robert Dolan. Abgenix and the XenoMouse : Meet XenoMouse, Harvard Business School. January 9,2001. Page 07.]Risk AssessmentA hands in deal with Biopart seems much more riskier due to the expenditure that Abgenix has to shell out for the whole process. The developmental cost for this deal is an excruciating $125 million, half of which will be the cost that Abgenix will spend on the deal. In contrast, a deal with Pharmacol will incur no developmental costs to Abgenix as they are not a part of the process.If the product is not able to successfully emerge through the FDA approved clinical trials, then the loss that Abgenix would have to incur is $10 million. Although the amount of money is huge, the prospect of the drug being successful will profit Abgenix and would engender a substantial return value on the investment.Market AnalysisThe market size for cancer is increasing by 5% every year. With such a growth rate, the value of potential oncology therapeutic increases resulting in a phenomenal profit for successfully developing and commercializing it. Moreover, investing in an ever increasing market...

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