Genzyme

Corporation

Dikshant 14P138

Goyam 14P139

Heena 14P142

Minerva 14P148

Samarpan 14P153

Satyam 14P165

Roadmap

Industry Overview

Industry Analysis

Company Overview

Ceredase: Treatment for Gauchers Disease

Challenges Faced

Recommendations

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Industry Overview

Worldwide sales of ethical pharmaceuticals: $157 billion (1991)

Sales of bio-therapeutics: $3 billion

Biotech firms developing bio-therapeutics: high focus | lean firms

Average gross margins in the industry ranged from 70% - 85%

Extensive regulation process : taking upto 8 to 12 years

High R&D costs: for new product development & production

Orphan Drugs

Tax breaks and government assistance for development

7 year exclusive marketing period for selling the same compound

High drug prices led to inflated medical bills:

Resulted into expulsion of various prescription drug costs from insurance cover

3

Industry Analysis(Porters 5 Forces)

Single supplier of the human placental tissue, Imedex, which had an

exclusive contract with Genzyme

No substitutes available

Physicians, HMOs and retail pharmacies had the sole decision making power of prescribing a certaindrug to the patients

High regulation environment is leading to uncertainties

Rivalry/

Competition:

MODERATE

Threat of Substitutes:

LOW

Bargaining Power of Suppliers:

MEDIUM to HIGH

Threat of New

Entrants:

LOW

Bargaining Power of Buyers:

MODERATE

Enzon coming up with similar product

4

Company Overview

Founded by Henry Blair in 1981

Biotechnology company specializing in the R&D;

production of treatments for

rare diseases

Total Revenue: $ 140 million(1992)

5

45

6

13

18

%age of Genyzme's Total Revenues

Biotherapeutics

Fine Chemicals

Division

Diagnostic

Products Division

Diagnostic

Services Division

Biotherapeutics

Companys gem

Drugs for small non-competitive markets

Orphan Drug Strategy

Fine Chemicals

Positioned as high quality supplier

Gross margins below the industry average

Diagnostic Services

Faster service, regional presence and wider

services

Only commercial testing company that

conducted research

Diagnostic Products

Diagnostic kits to companies that

performed clinical tests

Gross margins on some products was 10- 15%

>industry average

Ceredase: Treatment for GauchersDisease

Gauchers Disease:

A rare genetic disease that affected only 20k to 30k people worldwide.

It got the status of an orphan disease due to its rarity

It is caused due to lack of normal form of the enzyme (GCR) in the human body causing spleen and liver enlargement, bone deterioration and fatigue

Genzyme in collaboration with NIH researchers, developed Credase, an enzyme replacement therapy, for cure of Gauchers disease

Credase is developed by purifying and modifying an enzyme extracted from human placental issue

High growth potential for the drug as :

Cost of production: $70 million:: $40 million (R&D) + $30million (Capital Equipment)

Cost of treatment: $200,000 - Critical Patients | $20,000 to $60,000 Moderate Symptomatic patients

Revenues: $95 million in 1992 | Net Contribution Margin : 22%

6

Challenges Faced

Competition:

Enzon Corporation researching a new method by targeting circulating lipids as a treatment for Gauchersdiesease

Their success could put in peril the success projections for the Genzyme until the development of other drugs in

R&D phase

Investor sentiments

New administration might include price regulation on pharmaceuticals and reduce incentives for investment in

the industry

7

Challenges Faced

Different studies as basis to minimize the payments by insurance companies

Despite an exclusive contract with Imedex , Genzyme had only enough enzyme to treat only 3000 patients/ year capping Ceredase revenues at $125 million/year

Low product awareness among the patients and physicians -educating about the product, assisting patients with receiving reimbursement

The issue regarding who paid for Ceredase in countries where it had not been approved was complicated - politics along with a lot of paperwork

New manufacturing plant under construction - faced challenges in hiring people with experience in biotechnology manufacturing

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The Way Forward...9

Market PenetrationProduct

Development

Market Development

Diversification

Develop new products in Fine Chemicals & Diagnostics: as they both have high growth potential (Exhibit 4)

Also, develop geographically new markets for existing products

Recommendations

Lobbying for favorable policies

Increase R & D spend on recombinant form of Ceredase

Partnerships with similar companies with same mission to reduce manufacturing and sales cost

Development of a Centralised Mechanism

To align the goals of various departments in line with the goals of the organization

To refurbish the R&D and communication efforts for generating synergies

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Thank You