Case Study Description of AM-Pharma: Creating Value (C)
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 (C)" 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 (C) 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 (C) casestudy better are - – competitive advantages are harder to sustain because of technology dispersion, increasing transportation and logistics costs, there is increasing trade war between United States & China, increasing commodity prices, wage bills are increasing, increasing inequality as vast percentage of new income is going to the top 1%, increasing government debt because of Covid-19 spendings,
customer relationship management is fast transforming because of increasing concerns over data privacy, talent flight as more people leaving formal jobs, etc
Introduction to SWOT Analysis of AM-Pharma: Creating Value (C)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in AM-Pharma: Creating Value (C) 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 (C) can be done for the following purposes –
1. Strategic planning using facts provided in AM-Pharma: Creating Value (C) 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 (C) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Pharma Biotech in AM-Pharma: Creating Value (C) Harvard Business Review case study are -
Operational resilience
– The operational resilience strategy in the AM-Pharma: Creating Value (C) 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.
Diverse revenue streams
– Pharma Biotech is present in almost all the verticals within the industry. This has provided firm in AM-Pharma: Creating Value (C) 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.
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 (C) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to lead change in Strategy & Execution field
– Pharma Biotech is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Pharma Biotech in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Strong track record of project management
– Pharma Biotech is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
High switching costs
– The high switching costs that Pharma Biotech has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Superior customer experience
– The customer experience strategy of Pharma Biotech in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Low bargaining power of suppliers
– Suppliers of Pharma Biotech in the sector have low bargaining power. AM-Pharma: Creating Value (C) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Pharma Biotech to manage not only supply disruptions but also source products at highly competitive prices.
Sustainable margins compare to other players in Strategy & Execution industry
– AM-Pharma: Creating Value (C) 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.
Innovation driven organization
– Pharma Biotech is one of the most innovative firm in sector. Manager in AM-Pharma: Creating Value (C) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Training and development
– Pharma Biotech has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in AM-Pharma: Creating Value (C) Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
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.
Weaknesses AM-Pharma: Creating Value (C) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of AM-Pharma: Creating Value (C) are -
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.
Increasing silos among functional specialists
– The organizational structure of Pharma Biotech is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Pharma Biotech needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Pharma Biotech to focus more on services rather than just following the product oriented approach.
Products dominated business model
– Even though Pharma Biotech has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - AM-Pharma: Creating Value (C) should strive to include more intangible value offerings along with its core products and services.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Pharma Biotech supply chain. Even after few cautionary changes mentioned in the HBR case study - AM-Pharma: Creating Value (C), it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Pharma Biotech vulnerable to further global disruptions in South East Asia.
Interest costs
– Compare to the competition, Pharma Biotech has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
High operating costs
– Compare to the competitors, firm in the HBR case study AM-Pharma: Creating Value (C) has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Pharma Biotech 's lucrative customers.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the AM-Pharma: Creating Value (C) 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.
Aligning sales with marketing
– It come across in the case study AM-Pharma: Creating Value (C) 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 (C) can leverage the sales team experience to cultivate customer relationships as Pharma Biotech is planning to shift buying processes online.
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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study AM-Pharma: Creating Value (C), 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 (C) can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Opportunities AM-Pharma: Creating Value (C) | 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 (C) are -
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Pharma Biotech to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Pharma Biotech in the consumer business. Now Pharma Biotech can target international markets with far fewer capital restrictions requirements than the existing system.
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.
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 (C) 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.
Creating value in data economy
– The success of analytics program of Pharma Biotech has opened avenues for new revenue streams for the organization in the industry. This can help Pharma Biotech to build a more holistic ecosystem as suggested in the AM-Pharma: Creating Value (C) case study. Pharma Biotech can build new products and services such as - data insight services, data privacy related products, data based consulting services, 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.
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.
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.
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.
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.
Loyalty marketing
– Pharma Biotech has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Pharma Biotech can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
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 (C) 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.
Threats AM-Pharma: Creating Value (C) 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 (C) are -
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.
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.
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 (C) .
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.
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.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Pharma Biotech with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Pharma Biotech can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 (C), 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 .
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Pharma Biotech in the Strategy & Execution industry. The Strategy & Execution industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Weighted SWOT Analysis of AM-Pharma: Creating Value (C) 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 (C) 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 (C) 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 (C) 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 (C) 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.
