Case Study Description of AM-Pharma: Creating Value (A)
AM-Pharma is a biotech company developing a medicine for patients with acute kidney injury. The case describes the company's journey from inception in 2001 to a large deal with Pfizer in 2015. The aim is to discuss the value creation of AM-Pharma through its strategic decisions over time. It highlights the patient journey, company challenges, market size potential, and how the management team was able to raise multiple financing rounds from venture capitalists. It further provides the readers with a unique insight in the key risks and operational challenges of a biotech company and the value of an experienced management team backed by strong investors. The drug development process is inherently risky, long and expensive and the probability of commercializing a new drug is very low. The company's CEO is the protagonist and the case is split in three parts to provide the readers with surprises and open strategic questions which are time related. The case is semi-chronologically and a patient story is intermingled to provide a different perspective on clinical trials, ethical dilemmas and the high unmet medical need for new therapies. The case ends with a valuation simulation, in which the readers can negotiate the AM-Pharma/Pfizer deal themselves. Learning objective: The aim of the case study is to evaluate the value creation of AM-Pharma strategic decisions over time. 1/ The strategy diamond and Porter's Five Forces will be applied as a tool for understanding the industry and the company's strategy. 2/ The key success factors are also assessed for this challenging setting of a biotech startup. 3/ Role of Serendipity and management vision in opening new doors. 4/ Different exit options are discussed, highlighting pros, cons and what actually happened. 5/ How clinical outcome, and exit timing highly impact the valuation. The case will trigger discussions on the strategic options listed, and engage the students into exit negotiations simulation.
Authors :: Jim Pulcrano, Tim Knotnerus, Marion Owczarczak-Fogli, Mohammed El Ansari
Swot Analysis of "AM-Pharma: Creating Value (A)" written by Jim Pulcrano, Tim Knotnerus, Marion Owczarczak-Fogli, Mohammed El Ansari includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Pharma Biotech facing as an external strategic factors. Some of the topics covered in AM-Pharma: Creating Value (A) case study are - Strategic Management Strategies, International business, Mergers & acquisitions, Negotiations, Venture capital and Strategy & Execution.
Some of the macro environment factors that can be used to understand the AM-Pharma: Creating Value (A) casestudy better are - – challanges to central banks by blockchain based private currencies, there is backlash against globalization, digital marketing is dominated by two big players Facebook and Google, increasing inequality as vast percentage of new income is going to the top 1%, cloud computing is disrupting traditional business models, supply chains are disrupted by pandemic , talent flight as more people leaving formal jobs,
wage bills are increasing, increasing government debt because of Covid-19 spendings, etc
Introduction to SWOT Analysis of AM-Pharma: Creating Value (A)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in AM-Pharma: Creating Value (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Pharma Biotech, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Pharma Biotech operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of AM-Pharma: Creating Value (A) can be done for the following purposes –
1. Strategic planning using facts provided in AM-Pharma: Creating Value (A) case study
2. Improving business portfolio management of Pharma Biotech
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Pharma Biotech
Strengths AM-Pharma: Creating Value (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Pharma Biotech in AM-Pharma: Creating Value (A) Harvard Business Review case study are -
Diverse revenue streams
– Pharma Biotech is present in almost all the verticals within the industry. This has provided firm in AM-Pharma: Creating Value (A) case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Analytics focus
– Pharma Biotech is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Jim Pulcrano, Tim Knotnerus, Marion Owczarczak-Fogli, Mohammed El Ansari can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Learning organization
- Pharma Biotech is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Pharma Biotech is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in AM-Pharma: Creating Value (A) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Highly skilled collaborators
– Pharma Biotech has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in AM-Pharma: Creating Value (A) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Organizational Resilience of Pharma Biotech
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Pharma Biotech does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Effective Research and Development (R&D)
– Pharma Biotech has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study AM-Pharma: Creating Value (A) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Sustainable margins compare to other players in Strategy & Execution industry
– AM-Pharma: Creating Value (A) firm has clearly differentiated products in the market place. This has enabled Pharma Biotech to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Pharma Biotech to invest into research and development (R&D) and innovation.
Ability to recruit top talent
– Pharma Biotech is one of the leading recruiters in the industry. Managers in the AM-Pharma: Creating Value (A) are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Successful track record of launching new products
– Pharma Biotech has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Pharma Biotech has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Cross disciplinary teams
– Horizontal connected teams at the Pharma Biotech are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
High brand equity
– Pharma Biotech has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Pharma Biotech to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Operational resilience
– The operational resilience strategy in the AM-Pharma: Creating Value (A) Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Weaknesses AM-Pharma: Creating Value (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of AM-Pharma: Creating Value (A) are -
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study AM-Pharma: Creating Value (A), is just above the industry average. Pharma Biotech needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Capital Spending Reduction
– Even during the low interest decade, Pharma Biotech has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Aligning sales with marketing
– It come across in the case study AM-Pharma: Creating Value (A) that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case AM-Pharma: Creating Value (A) can leverage the sales team experience to cultivate customer relationships as Pharma Biotech is planning to shift buying processes online.
No frontier risks strategy
– After analyzing the HBR case study AM-Pharma: Creating Value (A), it seems that company is thinking about the frontier risks that can impact Strategy & Execution strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Skills based hiring
– The stress on hiring functional specialists at Pharma Biotech has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Slow to strategic competitive environment developments
– As AM-Pharma: Creating Value (A) HBR case study mentions - Pharma Biotech takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study AM-Pharma: Creating Value (A), in the dynamic environment Pharma Biotech has struggled to respond to the nimble upstart competition. Pharma Biotech has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Pharma Biotech is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study AM-Pharma: Creating Value (A) can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Lack of clear differentiation of Pharma Biotech products
– To increase the profitability and margins on the products, Pharma Biotech needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow decision making process
– As mentioned earlier in the report, Pharma Biotech has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Pharma Biotech even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the AM-Pharma: Creating Value (A) HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Pharma Biotech has relatively successful track record of launching new products.
Opportunities AM-Pharma: Creating Value (A) | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study AM-Pharma: Creating Value (A) are -
Buying journey improvements
– Pharma Biotech can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. AM-Pharma: Creating Value (A) suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Pharma Biotech in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
Leveraging digital technologies
– Pharma Biotech can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Better consumer reach
– The expansion of the 5G network will help Pharma Biotech to increase its market reach. Pharma Biotech will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Building a culture of innovation
– managers at Pharma Biotech can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Strategy & Execution segment.
Manufacturing automation
– Pharma Biotech can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Pharma Biotech to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Pharma Biotech to hire the very best people irrespective of their geographical location.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Pharma Biotech can use these opportunities to build new business models that can help the communities that Pharma Biotech operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Strategy & Execution industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Pharma Biotech can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Pharma Biotech can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Pharma Biotech can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Using analytics as competitive advantage
– Pharma Biotech has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study AM-Pharma: Creating Value (A) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Pharma Biotech to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Pharma Biotech is facing challenges because of the dominance of functional experts in the organization. AM-Pharma: Creating Value (A) case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Learning at scale
– Online learning technologies has now opened space for Pharma Biotech to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Threats AM-Pharma: Creating Value (A) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study AM-Pharma: Creating Value (A) are -
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Pharma Biotech will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Pharma Biotech business can come under increasing regulations regarding data privacy, data security, etc.
Regulatory challenges
– Pharma Biotech needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Strategy & Execution industry regulations.
Stagnating economy with rate increase
– Pharma Biotech can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Consumer confidence and its impact on Pharma Biotech demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study AM-Pharma: Creating Value (A), Pharma Biotech may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Pharma Biotech.
High dependence on third party suppliers
– Pharma Biotech high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Pharma Biotech in the Strategy & Execution sector and impact the bottomline of the organization.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Pharma Biotech needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Technology acceleration in Forth Industrial Revolution
– Pharma Biotech has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Pharma Biotech needs to keep up with the evolution of technology in the Strategy & Execution sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Pharma Biotech can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study AM-Pharma: Creating Value (A) .
Weighted SWOT Analysis of AM-Pharma: Creating Value (A) Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study AM-Pharma: Creating Value (A) needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study AM-Pharma: Creating Value (A) is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study AM-Pharma: Creating Value (A) is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of AM-Pharma: Creating Value (A) is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Pharma Biotech needs to make to build a sustainable competitive advantage.
