Millennium Pharmaceuticals Case Study

Technology & New Product Development S17

(ENTP 6375.501/SYSM 6332.501)

Case Analysis Report

Topic: Millennium Pharmaceuticals

Date: March 2, 2017

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Team 2

Gunjan Vora

Megha Bhandari

Deepima Pathania

Mayur Lagad

Background

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Figure 1 -  Millennium pharmaceuticals logo, office and tech labs

• Millennium Pharmaceuticals was founded by Mark Levin in 1993 at Cambridge, Massachusetts with a Venture Capital Funding of $8.5 million. It was among a group of second-generation biotechnology companies whose business plan was devoted to genomics: translating the knowledge gained from the human genome-sequencing projects to identify genes associated with human disease and, from there, discovering drug targets important in combating these diseases. Mark was the driving force behind the creation of Millennium Pharmaceuticals and he envisioned to set up Millennium as a biopharmaceutical company i.e. a drug development company on the findings emerging from genomics.

• Millennium started by associating with key scientists such as Massachusetts Institute of Technology's (MIT) Eric Lander, the head of the largest genome center in the United States. Company’s arduous efforts in hiring or consulting with top-level scientists and acquiring or licensing state-of-the-art technologies, facilitated their drug target identification process.

• This in turn landed Millennium in highly successful and lucrative research plus development contracts with major pharmaceutical firms. Beginning in 1994, Millennium created more than 20 strategic alliances with leading pharmaceutical and biotechnology companies. These alliances provided Millennium with close to $2 billion of committed funding that was used to develop and enhance its pipeline.

• In 1997, Millennium merged with ChemGenics, a local biotech company that gave Millennium new abilities to validate drug targets and the ability to begin to discover drugs that would interact with Millennium's drugs targets. In 1998, Millennium reported $10.3 million in net income from its large company deals, and was spending $200 million a year on research.

• Partnering with pharmaceutical companies was fundamental to Millennium's early success, and the approach to partnering included aspects of its core values. Steven Holtzman, who negotiated the company's earliest agreements with large pharmaceutical companies, believed that the company's focus on values and ethics was one reason for Millennium's attractiveness to these companies.

• By June 1999, Millennium's payroll had reached 800 employees and its research collaboration commitments totaled $1.25 billion. During this timeframe, Lundberg approached Millennium to sign an agribusiness deal. This deal was like the Millennium-Monsanto deal and required new professionals to be hired by Millennium.

• At the same time, success of previous alliances required overwhelming efforts from Millennium employees and thus company could view sign of strains and stress amongst its employees. Decision regarding this deal also required Millennium to consider the compatibility between Lundberg's alliance and company's strategic intent of becoming a biopharmaceutical firm. The position Millennium found itself in provides the setting for this case study.

Case Overview

• This Case Study covers journey of Millennium pharmaceuticals, a biotech firm, towards its strategic intent of becoming a drug development firm. It highlights the role of strategic alliances in shaping the growth and future of an organization. It showcases how a proper vision plus strategic direction could help a venture capitalist firm to transform into a market leader.

• During 1980’s and 1990’s pharmaceuticals industries were willing to invest on any technology that could speed up the drug development process as it would be a boon for pharma firms. Such investments paved that way for a change in the biotech industry. This case highlights how Millennium recognized industrial changes, tapped such unmet needs and started forming alliances with pharma firms to identify drug targets based on Human genome project. Case also elaborates the various methods used by Millennium to strengthen its technological base on which it signed heavy revenue generating alliances.

• Case lays down the importance of a leadership, values and ethics in executing strategic decisions. Levin’s leadership guided millennium’s employees in transforming revenues from alliances into capabilities that strengthened their drug development process. Millennium experienced growth over time by creating and sustaining corporate values. Such culture was instilled in the company by its founder. During the timeframe of 1999, case describes Millennium in a situation that demands it to formulate decisions which uses its current growth in achieving the company's strategic intent.

Q1. How has the biotechnology industry changed over the last few years?

• Within a span of two decades, biotechnology has experienced dramatic changes, from investment in the new therapeutic modalities for developing biopharmaceutical drugs to application as a set of research tool for discovery and early stage development of new therapeutic products. Particularly over the last decade, the rapid pace of change in biotechnology has resulted in emergence of a new highly networked structure for drug industry. Such changes have been indicated by the growth of alliances in 1990’s in which biotechnology firms acted as intermediaries between upstream public sector research institutions and downstream pharmaceutical firms.

• Application of Biotechnology in the pharmaceutical innovation process began in 1980’s with creation of biopharmaceutical drugs based on the concept of Rapid Drug Design(RDD). In contrast to the highly successful discovery paradigm of random screening, RDD involved, understanding the biology and physiology of the pathological process against which a drug was targeted. Biotechnology techniques like recombinant DNA and monoclonal, were hyped as an alternative to the cumbersome and risky drug development process. This had wide-scale impact on the Wall street investment decisions and led to heavy investment in new biotech firms.

• In 1980’s biotech firms faced difficulties in finding the right receptors and proved incapable of handling the failures in drug development process. Thus, investors were disappointed and started losing confidence in biotech firms until 1990’s era which witnessed the emergence of fields like “combinatorial chemistry” and “high throughput screening”. Such advancement enhanced the potential of biotech firms in identifying disease causing receptors.

• Evolving technologies changed industry dynamics and led to establishment of intricate alliance between biotech and pharmaceutical firms. In these Vertical alliances, biotech firms conducted research plus development through upstream partnerships with public sector research institutions and transferred the output(s) to a pharmaceutical company, which then handled additional development plus marketing of any resulting products. Figure 2 below shows the incremental trends for biotech-pharmaceuticals collaborations during 1990’s.

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                Figure 2 -  Biotech-pharmaceuticals collaborations trend