cultured meat

Genzyme (Sample responses)1. What is Genzyme’s strategy (use the generic strategy framework)
● Focused differentiation – focus on developing drugs for rare, debilitating
diseases that respond to Genzyme’s enzyme approach – explain what
types or rare diseases and why, differentiation because providing an
added value product – likely to be the only treatment for many of these
life-threatening diseases.
● Address why this strategy is viable, given others (esp. Big Pharma) have
ignored it.
o Time consuming and specialized technology to develop
o Market size may not be large enough to support multiple players
o IP protection extended by the orphan drug act
o Small market size perceived to be unviable from a business
perspective.
o Drug therapy is critical to sustain quality of life and extend life span
for these patients
● What capabilities and resources are needed to implement this strategy?
Briefly explain Genzyme’s approach in each of the functions below and
what was needed to implement it.
o R&D
o Mfg.
o Marketing
o Sales
o Distribution
2. How does Genzyme’s focus on specific orphan drugs affect the degree of
competition it faces? How does it affect the bargaining power of
customers?
● Focused differentiation strategy – differentiation means it has less
competition with a focus on a narrow segment of the pharma market,
enzyme related devastating diseases. Less pharma firms focused on
orphan drugs area due to a smaller customer and lower potential
revenue base.
● Pricing and margins can be higher since it is a specialized drug and is
typically needed to maintain the lives of patients afflicted.
● Less costly and less time-consuming clinical trials due to urgency of
product development. Target market also easy to identify.
● Technology focus is on enzyme disorders so narrows development.
● Tax breaks for R&D in orphan drugs.
● Some funding support for development by foundations.
● IP protected market for extended period due to legislation.
● Marketing and sales can be focused on a few physicians that deal with
these rare diseases, thus lower cost and more effective.
● Distribution – well identified target market and provider groups
Buyer power? Low – Why? See below
● Physicians and patients – low
o Few to no substitute drugs or therapies
o No cures
o Patients cannot live without treatment. Short life spans with
debilitating pain.
o Few to no rivals (competitors)
o Need treatment to maintain life
o Difficult for others to enter given IP protection and specialized
knowledge required to develop drug therapies
3. How does focusing on specific orphan drugs affect the types of resources
and capabilities a biotech firm needs to be successful?
● Limited number of technologies to develop and maintain expertise.
● Genzyme has decided to conduct all stages of the supply chain which
increases costs, but maintains IP protection, quality, and connection
with the end-user. It’s atypical for a biotech to do all the supply
chain activities so they need to develop mfg. and other capabilities to
test, mfg., market and distribute the drugs.
● However, their ramp-up costs are smaller because they have fewer
drugs, fewer patients, and less regulatory oversight.
● By conducting all supply chain activities in-house in a very focused
area, Genzyme is developing unique capabilities/competences, which
increase the difficulty of competitive encroachment. These
capabilities may also be protected.
● At the time, it was debatable if big Pharma would invest in clinical
trials, mfg. and selling of orphan drugs. The general belief was the
orphan market was not large, so others focused on chronic diseases.
However, over time if the market proves to be substantial, others
may consider entry especially after the IP protection ends.
4. Does Genzyme’s focus on specific orphan drugs make sense? Do you think
Genzyme has a long-term strategic intent?
● The norms that Genzyme chose to ignore include:
o Belief that orphan drugs were not a large enough market.
o A blockbuster drug was the primary way to achieve financial viability
in the pharma mkt, thus players focused on blockbusters for chronic
diseases.
▪ Genzyme’s growth had increased 29% CAGR since 2001 and was
on track to reach $3.1 B in revenues by end of 2006.
o Belief that orphan drugs were not a large enough market.
▪ True that the target group was much smaller, but prices, margins,
criticality of requiring treatment to live and life-long need for
these therapies made the market viable.
o Orphan drugs are too risky.
▪ True, but higher risks can lead to higher margins. Also, IP
protected, and competitive threats reduced due to Orphan Drug
Act. Finally, Genzyme’s focus on enzyme related illnesses reduced
their development costs.
o Biotech must partner with Big Pharma.
▪ Undoubtably, initially not partnering increased Genzyme’s costs.
However, over time they could develop unique expertise in the
supply chain activities. Also, by not partnering they could recoup
all profits, protect IP and stay closer to their customers. Approach
might not be viable for blockbuster drugs.
o Belief that a firm could not be profitable early on.
▪ Genzyme recognized the long-term revenue stream opportunity
of these drugs and the life necessity of these therapies. Likely
research was supported by foundations. Insurance companies and
others had reduced ability to negotiate lower prices given limited
options for patients.
● Long term Strategic intent? Evidence to support this intent?
o Genzyme has maintained its target on debilitating illnesses, which
can be treated with their enzyme approach.
o Limited their technical focus.
o Chose to conduct all the supply chain activities.
o This target focus has narrowed their resource needs in all the supply
chain areas. For example, they focus on hiring scientists with the
specific expertise they need. Similarly needed the expertise in mfg.,
but clinical trials and sales were less burdensome given the smaller
target market.
o This focus has also allowed them to develop specialized expertise,
garner superior IP protection and capture higher revenues.
5. Why do you think Genzyme as diversified into other areas of medicine?
What are the advantages and disadvantages of this?
● Reasons for diversification –
o Leverage and build on their expertises/ competences.
o Reduce the effect of cyclicality of product introductions (few
products and little growth).
o Opportunity to pursue “higher” growth markets, garner
additional revenues.
o Allows them to diversify their risk.
o Provides added sales growth without straying too far from their
expertises.
● Disadvantages
o Takes away resources (funds, people etc.) from core businesses.
o Takes management time and expertise. Adds complexity to the
business.
o Can require additional expertise which they may need to
acquire.
o May dilute corporate image.
6. What recommendations would you offer Genzyme for the future?
Questions you may want to consider and expand upon. Note, when you
offer a recommendation, also note why it is “superior” to other options!
That’s one of the questions a board of directors will ask.
● Should they expand beyond their focus on enzyme technology? Why or
why not? What would it take to branch into other areas?
● Should they work with others including Big Pharma? If yes, who and
why?
● Should they license their technologies to others? If yes, which ones and
why?
● How should they manage growth expectations if technical barriers arise,
competition increases, or market opportunities decrease?
2023 The Rise of Cultured Meat Analysis
1. What are the potential advantages of developing Cultured/Clean Meat? What are the
challenges of developing and bringing it to market?
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Advantages (Key ones noted, but others exist)
o Healthier (cite both) – less fat, and no contaminants (e.g., pesticides or antibiotics)
o More efficient usage of country/world resources
o Environmentally more friendly and less externalities.
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Challenges of bringing it to the market. (Key ones noted but others exist)
o Unknown if consumers accept a cultured meat
o Is this type of product safe long-term for our bodies?
o Will this product be approved by the FDA and other regulatory groups?
o Will additional funding be available to move beyond proof of concept?
o Will mfg. be scalable and at a price that consumers will purchase?
•
Cultured meat did not produce greenhouse gases (globally, cows generate as much
greenhouse gas as cars), utilized far less water and land, and was more efficient on a
calorie-in calorie-out basis. It also does not entail animal suffering.
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Challenges include the high development costs, getting the clean meat to have the same
taste and texture as traditional meat, and overcoming aversion people might have to trying
meat grown in a lab. This raises the question, who might raise opposition to cultured meat
(e.g., farmers, slaughterhouses, etc.)
2. What kinds of organizations were involved in developing Cultured/Clean Meat? What
different resources did each organization bring to make this innovation happen? Sample
examples provided below:
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Universities – provide funds, labs, cross-disciplinary experts, info diffusion and IP protection.
Government funding – provide funds, technical resources, and credibility to the project.
Private entrepreneurs – Valeti – medical expertise, credibility, and research contacts from
Mayo. Entrepreneurs in general bring a passion for creating new solutions, can-do attitude
and often bring solve problems from different perspectives.
Corporate investors – Agri-business and Tyson brought funds but also extensive experience,
management talent and contacts in the supply chain activities.
Non-profit organizations provided funding as well as connections to other venture groups,
managerial talent, and contacts in ancillary fields.
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Matheny’s organization is a private non-profit. He provided the motivation and an initial
organization to promote the idea. He collaborated with a university scientist and
government who provided technical expertise and some funding, and then in the end large
corporations (e.g., Tyson, Cargill) and individual investors got involved to provide additional
funding and public attention to the project.
3. Do you think people will be willing to eat Cultured/Clean Meat? Why or why not? Can you
think of other products and services that faced similar challenges?
• Those that might be most inclined to try it – Early adopters who-o Concerned about the environment.
o Have health concerns about traditional meat.
o Have religious objections (assuming cultured meat doesn’t violate their beliefs).
o Have concerns about humane treatment of animals.
o Willing to experiment (early adopters?).
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Those who might have potential objections – impediments to early adoption
o Concerns about the health safety of this new food.
o Those who feel the product is not comparable (taste, texture, cost, form etc.) to
raised animals.
o Those that are more cost sensitive (assuming product is premium priced).
o Those in strong support of agri-business or other supply chain companies.
• Other products that faced similar challenges – List 2-3 – below are some examples. Note
students should provide some non-food examples (if possible) and the similar challenges
they faced and how those challenges could inform CM. Note that radical innovations are
typically poorer in performance early-on, require considerable user feedback and
development of complementary products to appeal to the mass market.
o Mobile phones versus traditional landlines, online versus local or branch
banking, 35mm versus digital cameras, cloth versus disposable diapers
4. Conduct a five forces analysis- Which forces are strongest and why? How does that impact
Clean Meat’s likelihood of success? The power of each and why –
Strongest
• Power of buyers (Who – e.g., grocery chains, restaurants, and food processors) – Use the
Porter model to support power
• Power of substitute products (Who – plant-based options are the primary ones) – Use
the Porter model to support power
• Regulation – Potentially a powerful source if CM is considered a possible harmful
product
Moderate
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Rivalry (Who – CM alternatives – few at present, or traditional meat firms. If traditional
meat companies, rivalry could be intense. Explain why) – Use the Porter model to
support power
Weakest
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4.
New entry (Explain the barriers to entry and briefly how they impede entry_ – Use
Porter model to support know at this stage, rt entry barrier.
Suppliers (The suppliers are not known at this stage. Add what would make a supplier
power using the Porter model)
What is Clean Meat’s source of advantage assuming they can be successful beyond a small
burger? How sustainable is it?
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Source of advantage refers to the resources and capabilities that CM possesses that
allow it to rebuff encroachment by competitors. What are those capabilities and how
difficult are they to create?
How sustainable is it? Sustainability refers to the ability of others to replicate or imitate
Clean Meat’s differentiated product. Identify factors that strengthen their
sustainability, or if not sustainable, why.
5. What additional steps should Clean Meat be taking above and beyond raising funds and
conducting research? What should they do and why? Key early steps •
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Identify initial target markets and primary product attributes for those markets.
Reduce costs and demonstrate cost effective scalability of production.
Enhance taste, texture, and form to make more comparable to traditional meats.
Ensure in-house technology is protected and secured.
Begin developing understanding of the product approval process thru the FDA and
similar agencies in the US and other countries.
Others?
2023 The Rise of Cultured Meat Analysis