Genentech Industry Analysis In its 2007 Form 10-K Annual Report to the United s Securities and Exchange Commission, Genentech, Inc. described itself as “a leading biotechnology company that discovers, develops, manufactures, and commercializes pharmaceutical products to treat patients with significant unmet medical needs” (p. 1). It has been a front-runner in the development of anti-cancer drugs such as Avastin for colon cancer, Herceptin for breast cancer, and Tarceva for lung cancer, which are also among its leading drugs in the world market together with Rituxan for rheumatoid arthritis, Lucentis for age-related mascular degeneration, and Xolair for severe asthma.
Key to its success, Genentech has expended a significant portion of its operational expenses into Research and Documentation purposely to broaden its product development and patent licensing effort covering a wide range of medical conditions, including immune diseases. From its patent licensed products alone, it reportedly received $712 million of royalty revenue in 2007. “A world leader in oncology with estimated 2008 revenues of $13.5 billion (Capell, 21 July 2008, para. 3), ” Genentech has secured a established position in the pharmaceutical industry and biotechnology company, not to mention its highly equipped facilities in the different parts of the globe, highly skilled personnel, and a worldwide market.
Together with Roche Holdings, Inc. , “the leader in the emerging field of molecular diagnostics (Ibid), ” Genentech, Inc. is truly a drug powerhouse. But the pharmaceutical industry progresses as it responds to the fast changing world. “While Genentech has been a front-runner in development and production within the biotech industry, new companies are rapidly closing in and showing signs of achievements (Millon, p.
2). ” In fact, “Avastin, ” one of the leading anti-cancer drugs of Genentech “with $2.3 billion in US sales is now competing against 3 other FDA approved drugs from Pfizer, Onyx Pharmaceutical, and Wyeth (ibid. ).” Many more new pharmaceutical companies are working hard to slice even a small piece of the anti-cancer therapies market from what Genentech has been enjoying for decades. These new entrants in one way or another threaten Genentech’s well entrenched position in the market in terms of lost market share, reduced utilization of products, and/or lower prices.
However, it will not be easy for the new entrants to beat or even equal the success rates and excellent performance Genentech has earned for over three decades. Also, developing and implementing a new drug is very costly, very sensitive, and very rigorous, especially with the changing government regulations all over the world, the new entrants still have a long way to go compared with a very experienced Genentech. On the other hand, this does not also mean that Genentech should be complacent.
Instead, with new trends challenging the industry, it should be more aggressive. It should intensify extensive research and develop new drugs to strengthen its leading position in the market, which today, as the environment poses more risks to its inhabitants, is more health and environmental conscious product users. Aside from this, just like any other pharmaceutical company or biotechnology company, Genentech is also confronted with different challenges such as changing government regulations, which could either slow down work incurring additional unnecessary expenses or would even mean more litigations; fast changing technology including biotechnology, which may either open or close opportunities; fast changing culture of the market and so does the industry, which could mean opportunity or added pressure; and more to reckon with.
As new trends open up, competition becomes stiffer, thus companies employ different tactics to reposition themselves to gain better or more in the industry. “Acquisitions, mergers, outsourcing of non-core activities and strategic deals with drug delivery companies, biotechnology companies, Pharmacy Benefit Managers (PBMs) and Health Maintenance Organizations (HMOs), are some of the ways in which firms in this industry are responding to be able to maintain their high profitability ratios (Millon, p.
3, para. 3). ” These may have been useful in some ways, but these could likewise be necessary risks just like the case of Genentech’s affiliation with Roche Holdings, Inc. , which owns more than half of the companies stocks. Given the biotech’s promising pipeline, “eighteen years after taking a majority stake in U. S. biotech Genentech (DNA), “ Roche’s CEO, Severin Schwann, “announced plans to buy out minority shareholders for $43.7 billion (Capell, 21 July 2008, para.
1). ” This confirmed one of Genentech’s fears as stated in its 2007 Form10-K Annual Report, that “Roche Holdings, Inc. , our controlling stockholder, may seek to influence our business in a manner that is adverse to us or adverse to other stockholders who may be unable to prevent action by Roche Holdings, Inc. (Item IA: Risk Factors, p.21). This mere plan of Roche Holdings has already put Genentech, Inc. , a perceived giant among global biotechnology companies, into an unstable situation. Pharmaceutical industry truly promises high profitability, especially today when ailments seem to thrive everywhere in the planet, yet it is a high risk and highly volatile business.
To enjoy this promise, as Genentech’s success story has illustrated, companies must keep abreast with the changing needs of the market. The key here is a dynamic research and development. Also, companies must have the guts to enter into calculable necessary risks. If in 1990, Genentech, which was then a small San Francisco biotech with a handful of promising cancer treatments but could not fully develop them because of financial constraint, did not affiliate with Roche Holdings, which has the financial capacity and clinical development expertise, Genentech could have not reached its position in the industry today.
Also in this business, learn to share. This will bring your products closer to the market. Little charity will bring in more profits. Reference List Capell, Kerry. (2008, July 21). Roche-Genentech: A drug power house. Business Week. Retrieved from http: //www. businessweek. com/globalbiz/content/jul2008/gb20080721_780237.htm? campaign_id=europe_related. Genentech, Inc. (2008, February 26). Form 10-K annual report to the United States Securities and Exchange Commission.
Retrieved from http: //yahoo. brand. edgar-online. com/displayfilinginfo. aspx? FilingID=5755286-865-542270&type=sect&dcn=0000318771-08-000004 Consolidated statements of income. Retrieved from http: //yahoo. brand. edgar-online. com/displayfilinginfo. aspx? FilingID=5755286-316119-320924&type=sect&dcn=0000318771-08-000004 Consolidated statements of cash flows. Retrieved from http: //yahoo. brand. edgar-online. com/displayfilinginfo. aspx? FilingID=5755286-321212-327325&type=sect&dcn=0000318771-08-000004 Consolidated balance sheets. Retrieved from http: //yahoo. brand. edgar-online. com/displayfilinginfo. aspx? FilingID=5755286-327613-332666&type=sect&dcn=0000318771-08-000004 Consolidated statements of stockholders’ equity. Retrieved from http: //yahoo. brand. edgar-online. com/displayfilinginfo. aspx? FilingID=5755286-332954-343898&type=sect&dcn=0000318771-08-000004 Millon, Chris. (2008, July 13). Porter’s five forces analysis. Street Directory. Retrieved from http: //www. streetdirectory. com/travel_guide/1376/business_and_finance/porters_five_forces_analysis. html Pharmaceutical company. (2008, July 20) In Wikipedia online. Retrieved from http: //en. wikipedia. org/wiki/Pharmaceutical_companies