Nucleon Inc.

Nucleon, Inc. is one of over 200 firms founded since the 1970s which are focused on developing
biotechnological pharmaceuticals products. Biotechnology came about with the development in
advances of molecular biology and immunology, hence the new field of R&D is called
biotechnology. Nucleons first product is CRP-1 (cell regulation ein-1) and after several years of
experimentation the time was ready for human clinical trials, which was not going to be an easy
hurdle to get over. Due to the fact that Nucleon did not have any manufacturing facilities which
met the FDA requirements they had to figure out how to jump over the hurdles presented. One
potion was to contract clinical manufacturing to an outside firm. Another option was to build a
new pilot plant for clinical trials. Nucleons third option is to license the manufacturing to another
biotechnology company. Risk was found in their options but they also came with rewards. If
Nucleon could establish a strong paten on a important molecule this could ensure capital for
growth and development which could keep Nucleon alive for years. Recommendations:
Although we see the benefit to investing in having their own production capability in house, we
feel that in the short-term, Nucleon should not overextend itself on its very first drug venture
before it is sure that it will be on the fast track to FDA approval. Furthermore, Nucleon would
have to deal with the difficulty and costs of procuring the right talent to fill all the holes that will
open up in its organizational structure with regards to maintenance, procurement, quality
assurance, technical support, logistics, and other functions in order to operate the
manufacturing plant. Nucleons management team feels strongly that their strongest core
competencies are in the research and development of new therapies using cell-regulating
factors. They are the leader in this arena of research and have relationships with top research
programs and academia. What the company has working in its advantage is that very few other
firms are focusing on developing drugs through this type of research and they have a very
optimistic outlook to future ventures. Rather than trying to hit a home-run with this first drug,
our group feels that it would be more prudent to go for the single in order to ensure that you can
continue plugging away with more chances at bat. The company is not a strong financial
situation given that it has already accepted over $6M of venture capital funding which has
already been spent (and some) in preparing for the FDA filing. Pursuing the option of building its
own production facility would add strain to their balance sheet and force Nucleon to further
dilute ownership of the company by raising more financing, possibly through equity swaps.
The $7M payout once FDA approval comes would be useful in getting Nucleons financial
support of their backs so that they can go back to focusing on what they do best, developing
new therapeutic drugs. Furthermore, with less focus on every dime in the bottom-line results
they could funnel more research dollars into the top institutions with the hope of luring top
research academia to their team for future ventures. Thats why its so important for us to be at
the leading edge of scientific research. This means not only attracting the best in-house
scientists, but also maintaining close contact with universities. With this being said, our group
does not necessarily mean to convey that Nucleon should never pursue in-house production
capability. We just feel that Nucleon should wait until they are in a stronger financial position and
when the capital markets become friendlier to biotechnology financing. In a longer, 10-year

manufacturing strategy outlook, we feel that Nucleon should transition from their current status
as a boutique R&D firm to a fully integrated manufacturing enterprise. Once the company is able
to kick the tires on many more ventures it will be in a more strategic financial position to
capitalize on more streams of revenue within the biotechnology sector. It should then pursue inhouse production capability in order to move along their development much more quickly, in
addition to possibly entering the market for contract manufacturing services. This would diversify
Nucleons stream of revenues and allow the company to sustainably grow and leverage its
capabilities into a brighter future. The main issue is that Nucleon has to be able to find enough
cash in-flow not only for the founding of the clinical trials for CRP-1, but also for the further
development of the two new cell regulating factors and of the mammalian cells fermentation
technology. Therefore, by choosing its manufacturing strategy, Nucleon should not only focus on
the percentage of the forecasted sales revenues, but also focus on the possible synergies. Our
group believes that partnerships have to be part of this Nucleon business strategy: they can
advance the development of its projects, by complementing and optimizing Nucleon technology
platforms. Resource Based View:
The VRIO Framework, is a good tool that helps us establish whether a resource is of
competitive advantage or not. We can use VRIO to evaluate if the new product will benefit the
company. Value: Theres definitely value in a successful drug for burn treatment; it also presents
itself as a possible cure for other ailments as well (i.e. kidney failure) Rarity: Not many
alternatives for burn victim treatment (assumption based on the cases voice); large molecule
research is still new and rare, tough to get into. Imitability: Not very imitable, especially if
Nucleon can gain strong patent protection. Also, the slow development time means that even if
another firm could mimic a similar drug, it would take time. Organization: Nucleon is currently
not organized to begin trials and manufacturing of this drug. They also dont have a significant
amount of financial backing at this point. SWOT ANALYSIS
Strengths
- Tight links with the academic/research community
- Strong patent position on the CRP-1 molecule
- Promising pre-clinical trials of the CRP-1 molecule
- Technical capability to identify potentially therapeutic regulating factors
Weaknesses
- Small size (22 employee) private held company
- Weak patent position on the genetic sequence
- Capital availability
- R&D resources focused on the CRP-1 molecule
Opportunities
- Mammalian cells fermentation
- Strong links with big pharmaceutical companies
- Other therapeutic applications of the CRP-1 molecule
- Two new cell regulators factors in early stage of development

Threats
- Enormous cost of the drug development process
- Uncertain outcome of clinical trials
- Challenge of the patent by the competition
- Uncertain biotechnology patent law
As a result, one of the big issues with Nucleon is that it is a small firm coming into an industry
with several larger, well established firms. In this case, it was highly important for the company
to focus on their core competency and quickly gain a solid reputation within the market through
developing their competitive advantage, instead of attempting to build their own facilities or
focusing energy on activities outside their core competency, among other things.
Work Cited
Al-Karmi, Ahmad. "VRIO Framework." Arabianeurs. Arabianeurs: A Resource for Entrepreneurs
in the Arab World., 9 Oct. 2011. Web. 26 Sept. 2013. WebsiteLinkTagsEditDelete
Chapman, Allan. "Index Examples of Porters Five Forces." Michael Porter's Five Forces
Competition Theory Model. Businessball.com, n.d. Web. 26 Sept. 2013