Millennium

Pharmaceuticals, Inc. (A)

Umakanta Sahu PGP/16/294
Sanjay Bhatt
PGP/15D/111
Janmejay Das PGP/16/262
Parichita Kapoor PGP/16/275
Charlotte Faure IE/16/014
Yoann Dattolo IE/16/040
Camille Le Bian IE/16/013

Biotechnology Revolution
STRATEGIC INSIGHTS

Mid 1970s- biological breakthrough

Rising importance of genetic technology (DNA)
Synthesis of compounds and interrelated chemical
reactions in human body contingent on DNA
(competitive advantage of Millenium)
Heavy investment in 1970s and 1980s
commercialization of tech. without due diligence

Biotechnology firm could not bear the blow of high rat

drug failure in comparison to pharmaceuticals due to
large size

for

R&D expenditure ~ 15-20% of sales

Main aim of biotech companies to become fully

integrated pharma companies

230mn$ spent on the drug which has a average time to

market- 14.8 yrs- (high breakeven time ), (huge risks
involved)
But still promising returns to investors attracted
scientists
Key-and lock theory

Hence, Market Structure

partnerships and mergers,1990s saw more intricate
alliances, emergence of tool companies

Biotech wanted to access rich cash and downstream

synergies for manufacturing and marketing ( as can be
seen from millennium- Bayer Deal)
I:basic
Research (2
yrs)

II: Pre-clinical
screening (3
yrs)

3: human
clinical trials
(6 yrs)

4: FDA review
(2-3 yrs)
1997- 228 collaborations
Noalliance biotech firms- bankrupt (very few successful),
unsuccessful biotech firms picked by pharma companies

Introduction to Millennium Pharmaceuticals

Started in 1993 with initial investment of $8.5 million through venture capital
funding
Aim was to create better research facilities better than the best universities &
creating a technology platform from the best available, infusing capital in the
platform to stay ahead of competition
Assembles an impressive array of various technologies lie robotics, information
system and molecular biology
Team include Chief Technology officer, Michael Pavia who is a pioneer in
Combinatorial Chemistry revolution, Chief Business officer, Steven Holtzman is an
Oxford trained Rhodes Scholar who helped Millennium in making good acquisition
deals

Vision: To marry molecular biology with automation and informatics

Advantage Discovering and processing big information about genes
Making it possible for finding treatment for thousands new targets
Its Genomics based approach reversed the traditional process by first identifying &
understanding the role of genes implicated in causing a disease

Managing Growth
Focus of growth: To take the highest downstream share of a
drugs profit
Key Success attributes
Research collaboration
with other biotech
firms and universities

Ability to attract good

employees based on
scientific merit and
interpersonal skills

Set the pace for a

hardworking
environment

Low internal politics

among top
management

Stock options for all

employees which in
turn resulted in
significant capital gains

Managing Growth (Continued)

Strategy to remain independent

Funding

Eschewing Full-Time-Equivalent Funding

Led to Clock-puncher attitude: Researchers focused on meeting goals

of individual partnership projects rather than the goal and mission of
the company as a whole.

Partnerships Required for R&D

Sought partnerships that would fund R&D which would help
Millennium to become a major drug development firm
Signed only those partnerships that would enhance rather than hinder
the goal for future growth

Managing Growth (Continued)

Strategy to remain independent
Managements negotiation strategy for Strategic Alliances
reflected companys long-term goals by carefully carving out
enough choice cuts for the firm itself

Millennium sought to retain rights to unforeseen discoveries

in the course of a partnerships
Allowed the company to reserve select rights for its own future drug
development such as particular geographic market, specific therapeutic
application which are not of immediate interest to alliance partners

In 1997, Millennium had 5 alliances with drug firms for finding

specific gene targets

Managing Growth (Continued)

Rationale for starting alliances and mergers

Major obstacle from being a drug development firm: Lack of

expertise in going from drug targets to actual lead
components
Acquired ChemGenics: Gave Millennium an upper edge while
negotiating with big firms
Millenniums advantage:
Drawing on world class personnel

Tough negotiating strategies leading to key mergers and acquisitions

Value adding relationships with other universities and firms

Major Alliances

Catered the
need for
venturing into
agricultural
tech systems

Catered to
need for drug
pipeline
development
and market
reach

Lundberg Deal ( into

consideration)
Pharmaceutical
Alliance :

Technological Alliance
:
Monsanto Deal

???

The Bayer Deal

Largest alliance
between biotech and
pharmaceutical firm

The Bayer Deal

Millennium currently
development

present

in

upstream

drug

target

From Millenniums point of view

Weakness-> capability to take drug to market,

Weakness-> efficient pipeline of drug development

Opportunity-> responsible for 50% of all targets going into
Bayers drug development pipeline
Opportunity-> rights to several targets found accidentally
resulted in high investor confidence with stocks bullish in wall
street

The Bayer Deal

(pharmaceuticals accounted for 30bn$ business of Bayer)

Vision 2000 launched for finding appropriate alliance targets

From Bayers point of view

Weakness-> target discovery and biotechnology

Opportunity-> 225 new drug targets will be found out by
Millennium for Bayer

Opportunity-> 465$ mn over 5 years , 14% equity stake

Bayer

Millenium

Alliance with Monsanto

Monsanto : US based giant multinational
What was in the deal for Monsanto:
They wanted to capitalize on the state of the art technology of Millennium. After
acquiring ChemGenics Millennium was looking to extend its reach in the agriculture
field through biotechnology
What was in the deal for Millennium:
it was looking to leverage the integrated platform for agriculture and create near
term value
The Alliance:

Creation of Cereon Genomics, a Millennium subsidiary which will transfer the technology for
Monsanta to develop its product
Transfer of 100 employees from Millennium platform to Cereon platform
Total worth of the alliance: $218 million ($118million up front and rest in yearly $20million
installments based on achieving milestones)
Milestone was set to be 80% achievable This deal was established to avoid the biotech firm from being conservative and the
pharmaceutical from being aggressive

Monsanto deal cont.

Advantages of Monsanta deal to Millennium:
Association with Monsanta can give them a stronghold in the Agri-biotech business
Huge potential for growth in the agriculture field
Symbiotic relationship for the middle ranking scientist and technologist
Help Millennium to document its protocol and software formally which can be utilize for future
references
Generating useful information in the process
Increase team bonding among the employees

Disadvantages of Monsanta deal to Millennium:

Shuffling of employees from Millennium
Increase workload for the scientists and technologists of Millennium

Diversion of the complete focus which Millennium management has on the human health
Need to hire more employees may lead in the managing issues
May encourage Millennium management to get into more such alliances which may not be successful

Pulling up socks (new drug paradigm)

To

industrializing drug discovery process, millennium

approached technique of extensive research and
development and hiring people that question the
assumptions held by the industry for decades.

Being a new firm and untouched by normal corporate

inertia, Millennium learnt how to challenge conventional
wisdom

Lessons in drug development were brought from recruits

from large firms

Revolutionizing Drug Development

Speed up individual Steps
Speed up steps involved in isolating, characterizing and understanding DNA
through automation experts and engineers with manufacturing experiences
Major bottleneck: ability of scientists to assimilate and make sense of
staggering amount of data made available.
Focus on bioinformatics was essential to tackle the issue

Carrying out serial steps in parallel wherever possible

To compress drug development timeline by conducting more steps in
parallel for target validity, organ-specificity, bio-availability and toxicity.

Find new technologies that could front-load critical problems

Tried to find out potential failure modes thereby increasing the
predictability of success

HR Management issues
Stress for high- rank
scientists
Extensive
responsibility for
supervising
marketing skills for
more outside
partners

Stress at lower levels

HRDs latest semiannual survey, 1999
Employees faced
unmanageable
workload, higher
expectations,
difficulties in
manageability of
stress

Further Issues:
Frustration due to Higher
expectations in comparison to
other industries
Work of 2 scientists performed
by 1 person
Impact:
Dilemma in employees to do all
work in a mediocre way or
some part but in a perfect way
Can lead to low performance
Can disrupt the culture

Stress management:
Managers made responsible for holding individual stress sessions with subordinates
Question :
Is Millennium entering into alliances more than it can actually manage??
Is the focus being lost??

Lundberg Deal
Pros and cons from point of view of Lundberg

Sought to access genomic technology, much in a manner of the

Millennium-Monsanto deal
Access to technology that would help identify plant genes as well
as for high throughput screening capabilities

Very much desperate for deal: Had done little due diligence and
little examination of the previous deal of Millennium-Monsanto
Lundbergs senior management very kin on showing strong
consensus and were ready to make major financial commitment
right away
People management will be a stressful activity

Lundberg Deal
Pros and cons from view point of Millennium

Software documentation from Lundberg which in not enough in

comparison to the benefits provided to Lundberg

Strategic fit: Lundberg has to help create software for the new venture

It could pay for some of the work it needed to do for itself anyway

Impact on its R&D productivity

Documentation : Not so necessary in short term

To set up system that would allow Lundberg to receive the technology

Potential conflict with its prior relationship with Monsanto

Sharing all the prior technical expertise gained from previous alliances
just for the sake of agri-business

Mismatch with vision and goal

Vision misalignment
Vision of Millennium:
To focus on activities that allow us to take the highest downstream share
of a drugs profit- wherever these profits may occur

Extension to vision:

becoming a genomics firm and helping revolutionize the drug

development process
Deal with Lundberg doesnt contribute to pipeline of drug
development process specially
It also doesnt help gain expertise in human genomics firm

(additionally it doesnt help in marketing or distribution side of process)

But only deviation from the main aim of Millennium.

Conclusion
The consensus:

Millennium should not finalize the deal with Lundberg

as

Deal will result in losing competitive advantage

Not major help in drug development process
Not in alignment with vision
Not much help in achieving any of corporates vision
Not much synergy would be gained

Thank You