Background

Nucleon was founded in 1985 by Dr.Alan Ball,and is known for its extensive in-house
biotechnology R& D programs, and its close reach with academic univeristies. It had found
a niche- very few firms were working on Cell regulating Proteins. NUCLEON was a leader
in cell regulating factors and even banks believed in Nucleon’s ability to identify potentially
theraupeutic cell regulating factors.

However, Nucleon has now been contemplating whether to continue developing its niche
in R&D or also vertically integrate manufacturing processes

About Nucleon Financial Health Current Strategy

 R&D in Molecular biology and To receive a funding of
Immunology $ 6 mn.
 Extensive in-house R&D Total combined wealth
technology would be $6.5 mn
 Collaborative ties with Pharma Uncertain situations as
giants analysts had divided
opinion
 R&D- Competent and In-
house
 Marketing- Integrates
vertically
 Manufacturing Strategy
Dilemma- Inhouse or
Outsource??
nge colors, photos and Text.
ALTERNATIVES
1.Create a new pilot plant
Nucleon had an option of building a pilot
plant that could be used for production of
CRP-1 for Phase I and Phase II.
Pros
 It would develop the nucleus of a future
in-house manufacturing capability.
 Supplying clinical trials would help
accumulate technical and regulatory
experience
 Control over process and quality
procedures firmly in Nucleon’s hands
 Scaling up will be easier
Cons
 High uncertainty of CRP-1 performance
 Process uncertainty – Process using
bacterial fermentation or mammalian
cells.
2. Contract Manufacturing
Pros
 No major capital investments
 Contract can be easily terminated
 Less at stake
 Contract manufacturers had facilities
and personnel in place
Cons
 Biggest risk was confidential information
closure
 Complexity of products and processes,
Technology transfer and scale upcould
slow down the process.
 Time equivalent to building a pilot plant
 Difficult to strike a balance and decide
the right production quantity.
3. License the Product to
another company
Nucleon could license product immediately in
exchange for fixed payments and future royalties
The licensee would take care of all the expenditures
including manufacturing and marketing.
Pros
 Nucleon would retain right to develop CRP-1
 Nucleon would receive fixed licensing fee $3 mn
,reimbursement and royalties as 5% percentage
of gross sales.
 Generate cash immediately, no capital investment
Cons
 Would receive lower revenues
 Employees viewed this as morgatging away
company’s future
ALTERNATIVES
RECOMMENDATIONS
4. Pilot plant or Contract
Manufacturing & Vertically
integrate into commercial
Manufacturing

For Phase 3, invest in full scale manufacturing

plant.
Cost $21 Million
Hiring of 20 people would be needed.

 Easy to raise funds if CRP-1 passes Phase II

 Sole partner to marketing firm
 $ 5 mn payment upon approval plus 40% of
partner’s gross sales.
 Product sold at cost

5.Pilot plant or Contract

Manufacturing & License out
Manufacturing and Marketing
rights

 License out both manufacturing and marketing

rights to the partner.
 $7 mn payment and royalty of 10% of gross
sales