Genzyme Is a Leader in the Biotechnology

Genzyme is a leader in the biotechnology industry, and established its reputation as early as 1981 by supplying the market with certain chemicals. The company attributes its success to its focus on rather rare or "orphan" diseases and the development of drugs that capture market share for those ailments. However, there are two sides to this issue. The research and development process for these rarer drugs is tremendously expensive, resulting in a price that is well beyond most consumers. Some drugs, for instance, would cost the patient $100-200,000 per year. To bridge this gap, Genzyme has been forced to rely on government subsidies to realize any profit margin, and to continue work on these orphan diseases. Due to its focus, the company has developed rather close relationships with Non-Governmental Organizations (NGOs) and governmental health care organizations. Thus, the company has a niche market, but must continually work to ensure that this side of its business is positioned appropriate to maximize the global market. Genzyme knows that it can only generate revenues if NGOs and governmental agencies will support their work and if the orphan diseases are serious enough for investment. Thus, there is a marketing edge for finding certain disease vectors that tend to congregate and interrupt Third World populations or those in which the disease is hampering economic development (Bartlett, et.al., 2009).

Analysis of Dilemma- Genzyme knows that in the long-term, the strategic partnership between Genzyme and most government agencies (whether foreign or domestic), cannot exist based on commerce. One example is the country of Brazil -- truly a gem in modernizing and using its economic resources to help alleviate social suffering in the country. Brazil accounts of about 10% of Genzyme's revenue (about $108 million). The Brazilian government subsidized 92% of the cost ($100 million) on Cerezyme, a drug used to treat Gaucher disease. Critics believe that the time and money could be better spent on a disease like tuberculosis, affecting far more people globally. From both a strategic and tactical perspective, then, Genzyme must maintain and even enhance its image as an organization that is primarily interested in eradicating disease and discomfort and worried about profits second. To do this, Jim Gerahty, Senior VP at Genzyme, imitated the HAND initiative that focuses on the development of medications for diseases defined by the World Health Organization as neglected tropical diseases. HAND is not about profit, but will even make all intellectual property regarding research and development available to all partner organizations, interested academics, and government agencies. Under the current HAND initiative, there are three diseases that are serious enough to require attention: Malaria, Chagas/Sleeping Sickness, and Tuberculosis. However, Genzyme has perhaps overextended itself a bit in trying to push the HAND initiative due to decreased resources, too many projects, and too many ancillary partnerships.

Analysis of Proposals- Each of the three diseases is serious, more or less serious depending on region. A brief analysis of each shows us that:

Issue

Malaria

Chagas

TB

Population Impact

3.3 billion at risk, 1 million dead annually

160 million at risk, less than 100,000 dead annually

More than 4 billion at risk, 2 million dead annually

Geographical Impact

Africa, Equatorial Asia, Latin and South America

Central and South America, Sub-Saharan Africa

Global

Current Research

Limited, funded by others

Local R&D, little affective drugs

Use of drugs from 50 years ago; very little new research

Genzyme Internal

Skilled to address issue

Skilled to address issue

Skilled to address issue

Genzyme External

Stable partnerships local and abroad

Stable with Fiocruz Corp.

Untested and lacking development

Commercial Issues

Primarily help for Indian subcontinent

Focused help mainly in Brazil

High market potential in China, Russia, Central and South America

Risk and Cost

Medium

Low

High

(Case Study, Exhibit A).

SWOT

Strengths

Weaknesses

Opportunities

Threats

Strong scientific background

Too many irons in the fire

Prove model works globally

Overextended resources

Proven track record with governmental agencies

Lack of cash flow and R&D funding

ROI could be significant

Untried or lack of appropriate partnerships

Niche markets

Expert in drugs that require governmental sponsorship

Positive impact globally

Competitive pressures from other research-based organizations

Each particular HAND project has both positive and negative sides. If we look at them objectively we find:

Issue

Positive

Negative

Analysis

Malaria

Huge global affect (about 250 million/annum). Mortality rate is about .004; Relatively low risk opportunity.

Confined to tropical (mosquito) belt; limited gross economic affects for developed world

Stable partners; most deaths occur in Sub-Saharan Africa; does not fit profit generating strategy and is treatable with current medications if delivered to affected areas.

Chagas

Aligns with strategic interest, and even though 1% result in death, the impact is long lasting and creates individuals who cannot contribute to their economic welfare.

Only has PR and economic impact in certain parts of the world. May not be challenging enough, Genzyme already has a drug in place that might have impact.

This would show Brazil and other South American governments that Genzyme is committed to the eradication of problematic diseases. High PR impact, low risk.

TB

Affects 25 million per annum with about a 2% mortality rate; prevalent throughout developing world; Russia and China, too. Aligns with company strategy.

May require additional bureaucratic work to secure adequate partnerships. This would involve untried relationships -- may take extra time.