The CRO Pharmaceutical Business - Essay Example

"The CRO Pharmaceutical Business" is an engrossing example of a paper on drug development. The CRO business works in a very specific way.  Previously, pharmaceutical companies worked to achieve FDA approval by phases. Each phase plays an important role. These phases help pharmaceutical companies develop a drug that is safe and meets FDA approval. FDA approval is achieved through a lengthy process. The case states that this process could take 8 – 15 years before FDA approves a drug. It is more beneficial for pharmaceutical companies to outsource this type of work so that they can save time and money. Outsourcing can also lead to better results.

            Since the development of CRO business, this has made drug approval easier. CRO stands for Contract Research Business. A contract research business is a business that is outsourced by pharmaceutical companies. This contract research business allows for much liability, high-profit rates, but lengthy trial times. Pharmaceutical companies using a CRO could minimize their costs. Being able to minimize cost made CRO businesses an ideal choice for outsourcing.

            Kendle is able to offer that outsourced contract research business. Being able to offer a service based on the contract has made Kendle successful. Kendle is based out of Ohio and well known in the pharmaceutical industry. Kendle has earned a reported $13 million in sales since beginning in 1981. What is significant about the success of the business is that sales are split between husband and wife. The split is 45% and 55%.  This means that working together allows 100% ownership and income to the same household. Having the ability to earn like this between husband and wife has likely pushed the two to increase contracts and become more successful.

            Expanding to a foreign market is something that many businesses consider. Expanding or selling shows that Kendel has grown to full potential in an area and in order to gain more sales requires expansion. This is a good indicator that there is a market out there for Kendle, which makes Kendle a profitable business that could easily be sold or expanded.

2) What strategic choices does Kendle face? Can it survive as is or does it need to become a much bigger firm?

            There are many strategic choices that Kendle faces. The choices include going under, selling the business or expanding overseas to a foreign market. Each one of these choices is very important in determining the future of Kendle. Going under and just quitting is an option for any business. This option is not the most favorable position but can result in leaving before things get worst. If a business foresees circumstances that predict failure for the business, the owners may consider shutting the business down before any further losses are acquired.

            A second choice is to sell the business. Sometimes owners will choose to sell a business because they have grown the business to its full potential and do not wish to expand the business where it needs to go. This is typical since many business founders have created a business, carried it over many years, made a profit, and simply wish to sell. Selling to the right buyer can benefit both the current business owners and the buyer.

            The final strategic choice is to expand the business. Expanding the business is not favorable for owners who are not willing to start over again. Expanding to a foreign market is like staring the business over again. Starting the business over again requires outside funding and hard work. Founders who wish to take on a foreign market and expand are willing to make more profit and take a chance at even more success. With a changing market and new CRO business being created, Kendle likely needs to survive in order to remain successful. Kendle has reached its full potential and expanding to a larger market will continue Kindle's success.

3) Should Candice Kendle and Christopher Bergen consider selling their firm to another company in early 1997?

            Candice and Christopher should consider selling the firm if they do not wish to expand the business. The company has reached its full potential and requires expanding to another area in order to gain more success. Candice and Christopher should only sell if the price is right and should consider different types of options. Some of these options could include a sale with a certain percentage of equity, a sale with an option to help with expansion or a complete sale to break all ties.

4) Do the acquisitions of U-Gene and game make sense? Are the proposed deals fairly priced? What strategy would you recommend regarding the acquisitions?

            The acquisitions of GMI and U-Gene make sense on different levels. It seems that the market for their services is not as strong in the same areas. Each firm has different phases that it focuses on and can offer different services to each pharmaceutical company.

            The deals are not fairly priced because it seems the market is a falling market. The market has dropped dramatically shown by the chart and the proposed amount is based on figures that are too high.  A strategy to use dealing with prices would include negotiating different terms until both the buyer and the seller can come to a conclusion.