Industry Analysis of Nucleon, Inc.

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Nucleon, Inc.
Final Case

Table of Contents
I. Executive Summary……………………………………………………………………………………………………………………3 II. Strategy Identification……………………………………………………………………………………………………………..…4 ▪ Key Issues and Problems
III. Strategy Evaluation…………………………………………………………………………………………………………………….4 ▪ Industry Analysis – Porter’s 5 Forces
▪ Market Positioning Graph (Figure 1)
▪ Competitor Analysis – VRIO (Table 1)
IV. Strategic Option Development……………………………………..………………………………………………………….12 ▪ Option A
▪ Option B
▪ Option C
o Option C Flowchart (Figure 2)
V. Strategic Option Evaluation………………………………………………………………………………………………………14 ▪ Trade-Offs Between Options (Table 2)
VI. Strategy Selection…………………………………………………………………………………………………………….………16 VII. Strategy Implementation………..…………………………………………………………………………………….…………16 VIII. Managerial Implications………………………………………………………………………………………………………….16

I. Executive Summary
Founded in 1985 by Dr. Alan Ball, Nucleon’s vision was to develop pharmaceutical products based on a class of proteins known as cell regulating factors. Although CRP-1 (Nucleon’s first product) was a naturally occurring protein contained in human blood plasma, the amount that could be extracted was far too small to be of any commercial use. For that reason, from 1985 to 1988, Dr. Ball and a small group of scientists researched ways of producing CRP-1 outside the human body. After extensive research, it was indicated that CRP-1 had potential as a treatment for burns and for kidney failure.[i]

Nucleon was one of over 200 firms founded since the mid-1970s to develop pharmaceutical technologies based on recent technologies in molecular biology and immunology. Not surprisingly, the new field of R&D also attracted the attention of established companies, which meant that competition was intense. Scientists at both established and new companies were racing to be the first to clone certain genes and establish a strong proprietary position. As explained in the case by Robert Moore, a strong patent position was especially important for Nucleon. “Given the enormous costs of developing and commercializing a new drug, potential investors want to see a strong proprietary position before they commit serious capital. Just one strong patent on the right molecule can ensure survival for years by allowing you to attract capital.”[ii] Nucleon’s vice president of R&D, Gordon Banks, added: “That’s why it’s so important for us to be at the leading edge of scientific research.”[iii]

The drug development process includes the following steps: initial research, cloning and purification, pre-clinical research, human clinical trials, and process development and manufacturing. Nucleon’s next major hurdle was to perform human clinical trials, but before they could do that, they had to decide how and where CRP-1 would be manufactured.[iv]

According to our research, we have specified that the main issue for Nucleon in the pharmaceutical industry is that Nucleon, Inc. needs to determine the best course of action for the manufacturing and sale of its first product, CRP-1, in order to grow the budding company and gain sustained competitive advantage against large rivals. [v]

After detailed analysis of Nucleon, we have decided that Nucleon is faced with the following three options for supplying CRP-1 to the clinic. First, is to build a new pilot plant with enough capacity to supply all the CRP-1 needed for the first two phases of clinical trials (Option A). The second option was to contract clinical manufacturing to an outside firm (Option B). And the third option was to license the manufacturing to another pharmaceutical firm (Option C).

By studying this case we believe that Option C would be the best choice because after all it offers the least risk and if CRP-1 is approved by the FDA, profits are almost...
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