Genzyme

Corporation
Dikshant 14P138

Minerva 14P148

Goyam 14P139

Samarpan 14P153

Heena 14P142

Satyam 14P165

Roadmap
Industry Overview
Industry Analysis
Company Overview
Ceredase: Treatment for Gauchers Disease
Challenges Faced
Recommendations

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

Industry Analysis
(Porters 5 Forces)
No substitutes available
Threat of
Substitutes:

Physicians, HMOs and retail

pharmacies had the sole
decision making power of
prescribing a certain
drug to the patients
Bargaining
Power of
Buyers:

MODERATE

Enzon coming up with similar

product

Single supplier of the

human placental tissue,
Imedex, which had an
exclusive contract with
Genzyme

LOW

Rivalry/
Competition:
MODERATE

Bargaining
Power of
Suppliers:
MEDIUM to
HIGH

Threat of
New
Entrants:
LOW

High regulation environment is

leading to uncertainties

Company Overview

Founded by Henry Blair in

1981
Biotechnology company
specializing in the R&D;
production of treatments for
rare diseases

Biotherapeutics

Fine Chemicals

Companys gem
Drugs for small noncompetitive markets
Orphan Drug Strategy

Positioned as high
quality supplier
Gross margins below the
industry average

Diagnostic Services

Diagnostic Products

Faster service, regional

presence and wider
services
Only commercial testing
company that
conducted research

Diagnostic kits to
companies that
performed clinical tests
Gross margins on some
products was 10- 15%
>industry average

Total Revenue: $ 140

million(1992)

%age of Genyzme's Total Revenues

Biotherapeutics

18
13

45
6

Fine Chemicals
Division
Diagnostic
Products Division
Diagnostic
Services Division

Ceredase: Treatment for Gauchers

Disease

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%

Challenges Faced
Competition:
Enzon Corporation researching a new method by
targeting circulating lipids as a treatment for Gauchers
diesease
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

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

The Way Forward...

Market Penetration

Product
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

10

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

11

Thank You