A. Introduction: Abgenix was a company founded in California who had a unique method for generating antibodies useful in treating a number of diseases, one of which was cancer. They named this unique method XenoMouse. Abgenix spent 7 years and $40 million to produce XenoMouse which was a genetically engineered mouse which could produce antibodies that would treat illnesses like cancer, transplant rejection and inflammation. B. Abgenix Ways To Generate Revenue: Abgenix generated revenues in two different ways: 1- It licensed XenoMouse technology to numerous corporate collaborators including leading pharmaceutical companies.
A collaborator paid an upfront fee, agreed to payments as the drug development program reached certain milestones and a royalty on sales should the drug be commercialized. 2- The second way Abgenix hoped to generate revenues was by pursuing the early stages of XenoMouse-based drug development, meeting with some success and then selling off the rights to develop and market the drug. C. Abgenix XenoMouse Generated Drugs in various stages of the FDA Process: First of all we have to mention the Food and Drug Administration (FDA) processes.
Before testing in humans was permitted, Preclinical Trials had to show sufficient evidence of safety and desired biological activity to gain FDA approval. Testing then proceeded through three phases with humans. Phase I focused on safety, Phase II on effectiveness against designated diseases and Phase III was large scale testing with the doses to be prescribed when product was sold commercially. Abgenix had four XenoMouse generated drugs in different stages of the FDA process: These are: 1-ABX-CBL used in graft versus host disease in Phase III -ABX-IL8 used in psoriasis and rheumatoid arthritis in Phase II 3-ABX-EGF used in dependent cancers in Phase I 4-ABX-RB2 used in organ transplant rejection in preclinical phase. D. Abgenix Business Model: Abgenix conceptualized the antibody product development value chain to have eight steps. These steps are as follows: 1- Target discovery 2- Target validation 3- Antibody creation 4- Preclinical development 5- Clinical development 6- Process development 7- Manufacturing 8- Marketing In terms of this value chain model, Abgenix’s two businesses were just including some of the steps.
When we recall them; these two businesses were technology licensing of XenoMouse and proprietary product development programs. Technology licensing of XenoMouse was solely doing Step 3 (Antibody Creation). Proprietary product development programs were doing Step 3 and Step 4 and some but not all of Step 5. (Antibody Creation, Preclinical Development and some part of Clinical Development) Abgenix four development programs had proceeded to different stages although Abgenix had not yet even neared the point of filling a New Drug Application with the FDA for any of them.
The licensing process had no risk at all. Investigational New Drug applications filed with the FDA to get approval for human testing and Phase I trials were not big deal for antibody therapies like Abgenix because Abgenix methods had no safety problems. Phase II was the inflection point where you get the big bump in value. Intrinsically there were still things to work out in Phase III and with FDA but Abgenix believed that once you handled Phase II you could come over Phase III as well and captured a lot of value. E. Status of ABX-EGF and ABX-EGF Decision:
ABX-EGF performance in preclinical trials with animals was outstanding. Mice as the treatment subjects were injected with human epidermal cancer cells. No treatment was administered initially and the cancer tumors began to grow. After about two weeks, the test mice were injected with ABX-EGF twice a week for three weeks. Mice received no other cancer treatment; thus this was a test of ABX-EGF as a monotherapy rather than as a complement or chemotherapy or radiation. The result was perfect. ABX-EGF completely cleared the tumors.
Testing to date had proceeded through the first several levels and no toxicity/safety problems had been noted. Abgenix was in the eve of its big decision. ABX-EGF program was perhaps the biggest decision management. In preclinical trials; ABX-EGF was so successful that it had attracted a number of potential partners. Abgenix had three different options. Pharmacol, Biopart and go it alone. Abgenix had to decide whether to: -License ABX-EGF to a pharmaceutical company which would do all further testing and commercialization. (This was the option of Pharmacol.
Abgenix would bear little risk and receive license royalties. ) -Use a joint venture with a biotechnology company to complete the testing and commercialization. (This was the option of Biopart. Abgenix would bear moderate risk but split profits. ) -Pursue the ABX-EGF project as a solo venture. (This was the option of going alone. Abgenix would bear all risks but gather all the profits. ) F. Conclusion and Recommendations: Abgenix was about to make an important decision. The advantages of having a partner are as follows: -Additional resources and cash to develop ABX-EGF properly, -Decreasing the isk of Abgenix if ABX-EGF runs of either not developing it properly or that the product turns out to be unsuccessful after Abgenix invests a large amount of cash. -Partner’s help to get through the testing and regulatory approval phases -Developing knowledge that could be very useful in future innovations. – A partner might help Abgenix bring ABX-EGF to market faster. The disadvantages of having a partner are as follows: – Sharing the returns on the product – Lose the control over development process. – The partner will expropriate some technology or knowledge proprietary to Abgenix.
There will be no or limited learning for Abgenix. In the Pharmacol option; Pharmacol would be totally responsible for all the risks. Abgenix just received the license royalties. Even if everything went according to project it would take 5 years to get ABX-EGF to market. The total estimated cost for the first 5 year was $125 million. On the other hand projected sales by year after the introduction of the product were much higher than the costs. In the first three years after introduction the total projected sales were $225 million.
In Biopart option Abgenix was sharing the risk with Biopart but the future profit would be shared. In go-it alone action Abgenix were bearing all the risks. It had no commercial presence by the time and probably new facilities were needed to handle the other steps of business plan. Abgenix were inexperienced about the process development, manufacturing and marketing steps. In my opinion; Abgenix management team should have chosen the solo option. The reasons for choosing the solo option for me are as follows: * The preclinical tests were outstanding.
The invention seemed to change the paradigm of cancer treatment. However acquiring a FDA approval is very difficult and Abgenix had no experience about the process, the invention seemed so strong and likely to acquire FDA approval after definite processes. * When we benchmark the total development cost of ABX-EGF and the total projected sales of ABX-EGF; it was worth to bear all the risks. Because the possible reward was so high. * About the manufacturing and marketing processes Abgenix can use outsourcing. At least at counselor level. This could balance the lack of experience.
