Genzyme Case Study free essay sample

1. How does Genzyme’s focus on orphan drugs affect the degree of competition it faces? How does it affect the bargaining power of customers? For a drug to qualify as an ‘orphan drug’, a disease must only afflict less than 200,000 people worldwide. From this we can understand that Genzyme’s target market is a very small niche and consequently there is very little competition. Big pharmaceuticals primarily focus their resources on ‘blockbuster’ drugs because there is a large market to target. Since Genzyme’s target market does not appear to be attractive for most pharmaceuticals in that regard, it gains significant leeway from competition by focusing on orphan drugs. Also, the Orphan Drug Act provides 7 years of market exclusivity which virtually eliminates competition for Genzyme for at least a while. As an orphan drug, there is minimal threat of substitutes and potential entrants into the market, as explained above. Also, the nature of t he drugs made by Genzyme are of a very critical nature; the drugs save lives of people with very rare genetic disorders. We will write a custom essay sample on Genzyme Case Study or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Considering these points, the bargaining power of customers in this case are minimal to none. 2. How does focusing on orphan drugs affect the types of resources and capabilities a biotech firm needs to be successful? Rare genetic disorders is a highly specialised area, and so is the research and development of orphan drugs. The kind of resources needed will definitely be difficult to procure and a biotech firm needs to have access to relevant technology to be successful. However, in the pharmaceutical industry, orphan drugs can also mean smaller clinical trials, approvals take shorter time, lesser need for focus on large scale marketing and the freedom to have a more direct sales force, allowing the biotech firm to be more focused on its core competencies. 3. Does Genzyme’s focus on orphan drugs make sense? Do you think Genzyme has a long-term strategic intent? Genzyme’s focus on orphan drugs does make a lot of sense, especially since The Orphan Drug Act has been passed. The Act allows better protection than a patent and gives Genzyme 7 years to develop more drugs and capabilities. With improved technology, 7 years is a lot of time. Also, the orphan drug market is one where customers have very limited bargaining power, and this enables Genzyme to transfer the costs incurred to customers. Despite the small size of the target market, it is a highly profitable one and Genzyme managed to capitalise on it. Genzyme does appear to have long-term strategic intent, but it was difficult to say so at the  time they started out. Their strategic position was to stick to the orphan drug market, and through their initial years they’ve proven that such a position can be profitable. They’ve managed to come up with a business model that was successful and scalable. As mentioned in the case, their success even attracted the attention of others. Out of the 5000-8000 rare genetic disorders out there (currently known), only 300 orphan drugs have been successfully placed into the market. There is plenty of scope in the orphan drug market, and Genzyme’s position to focus on orphan drugs does qualify as long-term strategic intent. 4. Why do you think Genzyme has diversified into other areas of medicine? What are the advantages and disadvantages of this? Genzyme diversified into other areas of medicine primarily to generate funds to sustain research and development costs for the orphan drugs. The advantages to this are that Genzyme could generate more revenue. Its existing competencies were supported by the diversification and stick to its decision to stay independent. Also, Genzyme could divide its liabilities, and it has something to fall back on. The disadvantages to this is that Genzyme does risk losing focus on its core competencies i.e. research and development of orphan drugs. 5. What recommendations would you offer Genzyme for the future? Genzyme can apply for research grants from the government due to the nature of the market it is focusing on. This will enable Genzyme better access to resources and facilities for research and development. Genzyme can also focus on investing and developing some of its side business which complement Genzyme’s core objectives, for example the diagnostic centres which are also crucial points for collecting data beneficial for research. Genzyme should also consider taking additional measures to secure its intellectual property, which can enable Genzyme to stay ahead after the 7 years of the Orphan Drug Act has passed.