Case | HBS Case Collection | May 2007 (Revised September 2008)
by Krishna G. Palepu and Ananth Chepuri
Biocon Limited was facing significant pricing pressure in their cash cow business, that primarily consisted of manufacturing Active Pharmaceutical Ingredients (APIs). To combat this commoditization, Biocon's leadership had chosen an innovation-led strategy. This new strategy consisted of licensing and developing proven molecules from strategic partners to leapfrog competition and create large molecule biologics in India. The company understood that its transition from an API to an innovation-led company focused on new biologics would require patience and a risk-taking mindset. Although there was some commonality in the bioprocessing aspects of both approaches, the regulatory approvals, product development paths, and market-access timelines were dramatically different--almost diametrically opposed. Analyzes Biocon's strategic decisions, as well as the risks and challenges associated with migrating from a manufacturing to an innovation-led enterprise. How would they balance short-term pragmatism versus long-term vision? Do they have the appropriate human resources to scale and innovate? Is their India-centric strategy appropriate, since 86% of their end-market demand is in the U.S., Europe, and Japan? Fortunately, early indications with their innovation-led strategy were showing positive signs and demonstrable results--such as their biogenetic insulin and monoclonal antibody launch in India. Their lead oral insulin project, with a planned $100 million budget, was meeting its milestones and deliverables. Many critical business challenges are detailed in this case. Nevertheless, given their fully integrated business model and significant manufacturing base, the odds are in Biocon's favor to overcome these challenges and lead India's biotechnology revolution.
Keywords: Globalized Firms and Management; Innovation and Management; Leading Change; Growth and Development Strategy; Risk Management; Organizational Change and Adaptation; Biotechnology Industry; India;
Situation Analysis Biocon was the first Indian company to manufacture and export enzymes to US and Europe in the year 1979. It was primarily into enzyme manufacturing from 1978 to 1997. Eventually, in 2001, it started manufacturing insulin. Formed a Joint Venture with CIMAB to develop and market BIOMAb in IndiaAbout BIOMAb: First proprietary drug to be launched by an Indian Company. Provided an opportunity for Biocon to learn about the mammalian cell technology. Would help Biocon to build new research and marketing capabilities. Specially aimed at head and neck cancer treatment. Target segment for BIOMAb wasthe strongest in India with 21% of cases and 27% of deaths worldwide from head and neck cancer occurring here. In India, head and neck cancer constituted 28.1%of total cancer incidents and 26.73% of cancer deaths.