8/3/2019 Nucleon Notes

1/2

What should Nucleon look like in 10 years (e.g., an R&D boutique, an R&D

boutique with pilot scale manufacturing capabilities, or an integrated

manufacturing enterprise)? Explain your recommendation based upon qualitativeinformation provided in the case.

At present, Nucleon

3 options

pilot plant

advantages

can control all proprietary information, especially prior to receiving a patent

provides the firm with the option of developing/expanding the plant into a larger scale inhouse manufacturing facility

employees can gain the necessary skills and experience related to the manufacturing

process early, so they are equipped and in a position to work with manufacturing in theevent that manufacturing is brought in-house for phase 3.

Scaling up will be easier in the event that they are able to experiment in their own pilot

plant

Can differentiate from solely an R&D firm

Disadvantages

Uncertain about CRP-1s success during human trials, although low probability of failureit was still a possibility and this could result in an idle pilot plant + large investment, with

the next products years away from pilot manufacturing needs

Process uncertainty

Given the firms specialization and focused abilities in R&D, the board/investors

would want them to focus on that etc

Contract manufacturing

Advantages

No major capital investment

Could be easily terminatedCompanies supplying the contract manufacturing services had facilities and

8/3/2019 Nucleon Notes

2/2

personnel in place already

Disadvantages

Costly

Few contractors willing to manufacture pharmaceuticals from bacteriaConfidential information disclosureTakes a long time to put together and negotiate an agreement

Licensing to another company

Immediate cash generation

Dont have to make large capital investments into clinical

development/manufacturing, can focus on R&D

Disadvantages

Only receive royalties if product is successful they receive much lower revenuesthan if they made the investment themselves