The objective of this case analysis is to recognize the potential of Abgenix’s business model(s) and recommend an appropriate alliance deal with either Pharmacol or BioPart. Abgenix, a platform based biotech company, with its $3 billion XenoMouse in its pocket, is thinking of becoming a FIBCO. Abgenix has two business models for generating revenues. First by licensing the XenoMouse platform technology to collaborators for their specific target, and second by developing proprietary therapeutic antibody programs themselves, then selling off the rights to develop and market the drug. One such proprietary product of Abgenix, ABX-EGF, is in its early stage development, with successful preclinical data. Considering various factors such as i) high market potential of ABX-EGF, ii) Abgenix’s desire to improve its skills & capabilities, iii) risk assessment and strategy to grow and have a sustainable revenue stream, iv) along with a foresight of the inherent “unresolvable uncertainty” of drug development, I would recommend Abgenix to partner with BioPart. This joint-venture based shared approach with BioPart will reduce the risk and cost of failure to ‘half’ while enabling Abgenix to acquire skills and capabilities on this journey. On the other hand, the opportunity cost, if successful, will be more rewarding than pursuing a “hand-off” lower risk, quick revenue business deal with Pharmacol.
In the first part of the memo, I will be assessing the alliances qualitatively and in the second part, I’ll be assessing them quantitatively, “side-by-side”.
Common Factors pertaining to Abgenix’s deal with either of the companies:
Potential of ABX-EGF
The EGF receptors are highly expressed in most of the solid tumors, specifically more in prostate, colon and renal cancers. Thus EGF based therapies are considered to have high potential in treating various forms of cancers as well as could potentially become a blockbuster if it passed the safety regulations. The successful preclinical...