Key facts
Nucleon, Inc.
Operates in highly competitive and high stake drug industry Leader in Cell regulating factor Cell regulating protein-1 (CRP-1) ,its first potential product Specialized in R&D (80% employees engaged in R&D) Raised $6 mn in VC and $0.6 mn as research grant till now Cant afford to market its products
CRP-1
Fundamentally different from traditional drug; produced by genetic engineering Potential uses Treatment for burns (Phase I trial will beign in Apr92) Kidney failure (2 yrs + $3 mn to start clinical testing)
Nucleon Inc.
1/29/2014
Challenges
Patents
Extremely difficult to patent process technology Investors want proprietary position before investing Long time for patent application processing High risk in carrying out development before patent was granted
Funding
VC expects 30 % ROI ; Highly selective Raising fund from public is virtually impossible due to poor condition of public equity market Unwillingness of potential corporate partner towards early stage funding Needs $20 mn for research on two new cell regulating factors in next four years
Competitors
Developing drug to cure same disease using alternative technologies
Others
Scaling up the production in 100 litre vessel
Nucleon Inc. 1/29/2014
Current Scenario
CRP-I is under pre clinical research phase Need of manufacturing strategy for human clinical trials and post FDA approval stage Available investment (including VC funding) is $6.5 mn R&D lab working on second generation CRP-I molecules (mammalian cells)
Phase III Commercial manufacturing Licensing manufacturing and marketing rights Commercial manufacturing Licensing manufacturing and marketing rights
New pilot plant New pilot plant Contract manufacturing Contract manufacturing
Nucleon Inc.
1/29/2014
Nucleon Inc.
1/29/2014
Nucleon Inc.
1/29/2014
Financial Analysis
Assumptions: Cost data for pilot facility , contract production and sales are assumed to be at the year end Sales are assumed to grow at 5% after 2002 till perpetuity Expenses of 20 personnel hired for commercial manufacturing are calculated from the variable production expenses and overhead in new pilot plant facility : (1,204,000/6)*20 = $ 4,013,000
$12,000.00
$10,071.03
$3,023.31
1
Alt 3 (C + CM )
4
Alt 4 (C +LM)
3
Alt 5 (L)
Nucleon Inc.
1/29/2014
Analysis
Alt 1 ( P+ CM) NPV (Ranking 1-best) Loss/Gain if patent is not granted Threat of information leak Ease of scale (1Easiest) Funding for other new project Alt 2 ( P +LM) Alt 3 (C + CM) Alt 4 (C + LM) Alt 5 (L) 2 5 1 4 3
-$18,184.50
-$4,668.87
-$15,409.22
-$2,533.45
$3,000.00
Low 5
Low 3
High 4
High 2
High 1
Though NPV is highest for Alt 3 (C+CM), but it has high risk if Patent is not granted and risk of information leak is high Next higher NPV alternative (Alt 1 P+CM) also has high risk if patent is not granted
Nucleon Inc. 1/29/2014
Recommendations
Alternative 5 (Licensing the product to another company) is best suitable under current business scenario
Best in case patent is not granted Upfront inflow of $3 mn cash Flexibility to work on other research projects like mammalian cells and new cell regulating projects Can focus on their core competency - R&D
Nucleon Inc.
1/29/2014
Thank You
Nucleon Inc.
1/29/2014