Chapter 8

1. MIT OpenCourseWare
http://ocw.mit.edu
15.912 Technology Strategy
Fall 2008
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2. Value Capture in Abgenix
Professor Jason Davis
MIT Sloan School of Management

3. Value Capture: What should Abgenix
do?
How will we
Create value?
How will we
Capture value?
How will we
Deliver value?

4. What Happened?
• JV on ABX‐EGF with Biopharm=Immunex Corp. announced in July 2000
• Phase II clinical studies have been started in multiple cancer indications
• Abgenix’s stock price affected by failure of AstraZeneca’s small
molecule in Phase II
• Ray Withy became CEO in April 2002; Wants to implement shift from
an “ideas‐market strategy” to a “product‐market strategy”
• Acquired by Amgen in 2005

5. Value Creation
“Just another drug”?
Performance
Time

6. “A whole new way of doing things”?
Value Creation
Performance
Time

7. Ubiquitous Partnering
$Millions
Alliance as %
of total financing:
14000
12000
10000
8000
6000
4000
2000
0
91 92 93 94 95 96 97 98 99
13 25 35 53 56 -- 56 77 41
Sources of R&D funding at biotechnology companies
Alliances
Private equity
Public equity
Image by MIT OpenCourseWare.

8. Value Capture: Where is the money?
Target Target Antibody Preclinical Clinical Process
Discovery Validation Creation Dev. Dev. Dev.
Mfg. Mktg.

9. Value capture:
Where is the money?
Complementary assets are:
Freely Tightly
available held
Uniqueness is:
Easy to
maintain
Hard to
maintain

10. Selling to big pharma
• Pros:
– Maximizes “entrepreneurial energy”
– Minimizes extraneous investment
• Cons:
– Leaves value on the table?
– Problems in the market for IP?
– Does not maximize value: coordination important
• Problem of paying for P and hoping for Q?
– Different views of the future make pricing difficult?
– Integration changes the future
• P vs. Q revisited?

11. Joint Ventures
• Pros
– Allows access to unique capability
– Reduces risk, capital investment
• Cons
– Leaves value on the table?
– Reduces entrepreneurial energy by increasing
coordination burdens?
– Potential coordination difficulties
• Problem of paying for P and hoping for Q?

12. Looking Forward:
• Introduction to Value Capture in Technology
Strategy:
– Uniqueness
– Complementary Assets
• Bring your reflections to class.