Business Case of Ducati.

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partner, nucleon would have value for its research with less risk and can be known to many venture capitals. Based on successful completion of Clinical trial Phase I and II, I would predict that many Venture Capitals will provide necessary funding for Nucleon’s future research and manufacturing Process.

* Nucleon also needs to think of long term vertical integration with manufacturing and marketing. By looking at the history, most of the biggest pharmaceutical drug company has in house manufacturing facilities and by saying that Nucleon should pursue for in-house FDA approved manufacturing facility for clinical trial III to have exclusive right on the drugs and eventually to have competitive advantages over its competitors.

At first glance of the Nucleon decision tree (Figure 1), it would appear that based on the values under the net present value (NPV) column that option C would result in the most financial gain and future success. Option C would involve Nucleon passing Phase I & II of clinical trials through contract manufacturing methods and then by scaling up in Phase III to produce the amount of product needed to pass FDA requirements and meet market demand. However, choosing innovation strategies is based not only on quantitative results like that of the NPV, but also qualitative results in order to weigh factors that are not so easy to quantify.

When quantitative and qualitative factors are then analyzed, one can see that option E is in fact the most beneficial to Nucleon’s success. Option E involves Nucleon licensing out both pilot and large scale manufacturing for clinical trials, so why then is this true if option C yields an NPV nearly 3x larger than that of option E? The answer to this question comes through the following supporting qualitative factors:

• Nucleon is a small company and would therefore need to stretch its resources to fit tangible and intangible requirements, as well as funding and personnel.

• Nucleon has no previous manufacturing experience and the critical timing of this project does not allow the extra time for Nucleon to advance up the manufacturing learning curve.

• Obtaining quick funding due to the decision to license the product from the beginning would allow Nucleon to funnel these funds back into R&D and moving more of their projects into the pipeline.

• Licensing product also transfers the risk of creating a manufacturing process that may soon be obsolete. This is in respect to using bacteria cells for cultures versus mammalian cells.

• In order to survive potential failure of CRP-1 in FDA clinical trials, selling of risk in the form of licenses is more beneficial than losing all the invested capital of R&D.

• Nucleon needs to play into their core competency of R&D. They have unique and strong academic ties and company culture, as well as top talent in the industry. Play to your advantages and outsource the rest, so to speak.

• Licensing their product to Company A, could result in a strategic alliance with Company A. Not only would Nucleon benefit from learning methodology, but also a proven track record would increase their chances of financial support.

Based on these qualitative factors, as well as the quantitative factor of NPV being large enough to cover the cost of this strategy, option E would be my personal recommendation.