Joint Ventures in the Field of Biotech Research - Essay Example

? Joint Ventures in the Field of Bio-Tech Research Table of Contents Table of Contents 2 Biotechnology- The Science Behind 3 Joint Venture in Bio technology Research 4 Joint Venture between Metabolix and Antibioticos S.A 4 Metabolix 4 Antibioticos S.A 5 Recommended Joint Venture Model 6 Reference 7 Biotechnology- The Science Behind Chiesa, and Chiaroni (2005) have defined biotechnology as the technological and scientific application on living or non living and organic or genetic substances in order to produce knowledge, new product or services. In simple words, bio technology research is closely related to evolution of biological science and application of modern technology to reveal biological facts of life (Sherpa Group, 2011). To understand the impact of joint venture or partnership between research companies in the field of bio-technology the essay will try to highlight those sectors in the domain of bio technology, which have emerged as lucrative dimension for conducting research with the help of strategic alliances. The study has following domains of bio-technology research which have emerged as lucrative domain for strategic alliance between research partners. Research on DNA/RNA In many cases, it has been observed that biotechnology players form strategic alliances in order to conduct research on DNA/RNA amplification, synthesis, sequencing or gene expression profiling in order to develop a new medicine which can cure critical diseases or fillip the scientific development for a particular domain. According to Sherpa Group (2011), almost 64% of bio-tech and Enzyme companies are directly or indirectly related to DNA/RNA research. Research on Proteins Bio-tech companies are also focusing on conducting research on proteomics, engineering or synthesis of proteins and peptides, fabrication of cell receptors etc in order to develop enzymes or medicines for both research and commercial purpose (Sherpa Group, 2011). Joint Venture in Bio technology Research Furman et al (2002), Iammarino and McCann (2006) and Casper (2007) have pointed out that, bio-technology industry knowledge driven industry, which means that, companies go for syndicated financing, collaboration with government, strategic tie-ups with universities, outsourcing in order to develop capabilities and fill up the knowledge gap in order to develop new offering and move ahead in the competition. However, Andersson et al (2004) and Vassolo et al (2004) have argued that, strategic alliances between biotechnology companies help them to develop new processes, access to patents and access to knowledge resources but also mutually help both the companies to achieve competitive advantage. This is the reason why research collaboration activities by bio technology companies are growing at constant pace for last few years. To take the discussion forward the study will cite strategic alliances between US company Metabolix and Spanish company Antibioticos S.A which is a renowned Pharmaceutical Active Ingredients manufacture (Seiffert, 2012). Joint Venture between Metabolix and Antibioticos S.A In the year 2012, Metabolix Inc has announced that it has signed a collaboration agreement with Madrid based Antibioticos S.A for developing biopolymer resin. Both of the company have signed a letter of intent in order to in order to conduct research on biodegradable Mirel which is plant based alternatives for non-biodegradable plastics. According to bio technology specialists, bio polymer can act as suitable alternatives of plastics and it has minimum environmental impact due to its recyclable and bio degradable nature. Apart from the environmental benefits, commercial value of bio polymer has also attracted bio-tech companies to invest money on developing it. For example, demand for bio-polymer is growing at double digit growth rate for last consecutive years in both Europe and USA, which is another reason why bio-tech companies are banking on bio polymers as the next big thing (Seiffert, 2012). Metabolix Although strategic partnership with Antibioticos S.A will help the company manufacture bio polymers but there are possibilities that deal might create similar kind of predicament that has faced by the company with its earlier strategic alliances with Archer Daniels Midland Co. According to analysts, the strategic partnership with Antibioticos S.A will help Metabolix to manufacture bio polymer in large scale and also open the door for the USA based company to penetrate in European bio polymer market (Seiffert, 2012). At present, the company has not much access to European enzyme and bio-polymer market which is dominated by German and Spanish bio-tech companies. In 2012, the Cambridge based company has earned revenue of $400,000 from its bio-polymer products but it is expected by the analysts that strategic partnership will help the company to achieve 50% rise in the revenue for forthcoming years. Only problem with the deal is that, the deal will not help Metabolix to increase access to European enzyme market because currently the deal is only restricted to bio-polymer production, which raises doubt over the long term success of the deal. Antibioticos S.A Although the deal with Metabolix will help Antibioticos S.A to gain access to the knowledge and financial resource of the American biotech player but there is possibility that the deal might cannibalize the market penetration of Antibioticos S.A in their home ground. According to the agreement, Antibioticos S.A needs to validate the technology of Metabolix in their manufacturing system at own cost which will increase financial risk for the company. However there are benefits which can be exploited by Antibioticos S.A such as diversification of the business portfolio, enhancement of technical capacity to manufacture not only bio-polymers but bio-similar also. According to Daniele Pucci Di Benisichi (president of Antibioticos S.A), the strategic agreement will help the company to diversify Mirel biopolymer resin in different segment in order to cater demand of various industrial players (4-traders, 2012). Major player in the strategic partnership is Metabolix, the study will analyze financial performance of the company after the announcement of the deal. (Source: 4-traders, 2012) It is clear from the forecasted financial performance of the company that the strategic partnership with Antibioticos S.A will not increase net profit margin in future years hence it can be said that the deal might not prove as a profitable one for Metabolix in the future years. Recommended Joint Venture Model As mentioned by Kirin-Amgen JV model, two companies should have equal stake in the joint venture model in order to develop polyhydroxyalkanoate (PHA) resins or Mirel (Guzman, 2012). Another important thing is that, financial performance of Metabolix in the last few quarters is not good enough to ensure the fact the company will successfully finance the strategic partnership in long run. Antibioticos S.A needs to check the financial viability of the deal and also needs to take time to validate the processing technology of Metabolix in their research process. Reference 4-traders., 2012. Metabolix, Inc: Metabolix Signs Letter of Intent with Antibioticos for Production of Mirel Biopolymer Resin. [online] Available at: [Accessed 25 April 2013]. Andersson, T., Serger, S., Sorvik, J. and Hansson, E. W., 2004. The Cluster Policy Whitebook. Malmo: International Organization for Knowledge Economy and Enterprise Development. Casper, S., 2007. How do technology clusters emerge and become sustainable? Social network formation and inter-firm mobility within the San Diego biotechnology cluster. Research Policy, 36, pp. 438-55. Chiesa, V. and Chiaroni, D., 2005. Industrial Clusters in Biotechnology: Driving Forces, Development Processes, and Management Practices. London: Imperial College Press. Furman, J. L., Porter, M. E. and Stern, S., 2002. The determinants of national innovative Capacity. Research Policy, 31, pp. 899-933. Guzman, D. D., 2012. Metabolix to produce PHA with Antibioticos. [online] Available at: [Accessed 25 April 2013]. Iammarino, S. and McCann, P., 2006. The structure and evolution of industrial clusters: Transactions, technology and knowledge spillovers. Research Policy, 35, pp. 1018-36. Seiffert, D., 2012. Metabolix signs agreement with Madrid manufacturer. [online] Available at: [Accessed 25 April 2013]. Sherpa Group., 2011. KET – Industrial Biotechnology. [pdf] Available at: [Accessed 25 April 2013]. Vassolo, R. S., Anand, J. and Folta, T. B., 2004. Non-additivity in portfolios of exploration activities: A real options-based analysis of equity alliances in biotechnology. Strategic Management Journal, 25, pp. 1045-61. 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