Overview of Endocyte Inc - a Biopharmaceutical Company - Research Paper Example

Risk Assessment: Endocyte Inc. Overview of the Company Operations of Endocyte Inc, a biopharmaceutical company, are centered in the establishment of therapies to aid in the treatment of inflammatory diseases and cancer. The company’s vision, “seeking precision in medicine for better patient outcomes” has become a reality with the assistance from advancements in technologies within the healthcare industry. The company’s main product that facilitates efficient operations is the Small Molecule Drug Conjugates (SMDCs). The SMDCs are administered on diseased cells and binds them on target cells; while avoiding the healthy cells. The company has gained a competitive advantage over the years by efficiently addressing the diverse needs within the healthcare industry. Hazard Identification-Vulnerability Assessment-Impact Analysis There are multiple business and industry risk factors that would create a disparity between the forecasted results and the actual results. Such risk factors may expose the financial statements to material misstatements and bias. The main risk factors for the company are; Lack of approved products, Dependency on the success of Vintefolide, Compliance with environmental laws and regulations, Risks concerning intellectual property, Reliance on third parties to develop the product candidates, and Research and development risk factors. Lack of Approved Products Since 31 December, 2013, Endocyte Inc has been unable to attain regulatory approval to develop commercial-scale products. The company has been focused on human personnel, developing technology, and conducting comprehensive research and development in compliance with the European Medicines Agency (EMA). Lack of commercial-scale products has significantly reduced the revenue from the company’s sales. Endocyte Inc. is among eleven companies within the healthcare industry that deal with Bio-Therapeutic Drugs. The company’s sales have diminished during the three-year period, from 2011 to 2012. There has been a significant loss from operations, raising the going-concern abilities for the company. Operating expenses from research and development have reduced the revenue generated to (38,636,723), (16,042,676), and (18,341,783) for the years 2011, 2012, and 2013 respectively. If the company attains regulatory approval to manufacture and develop its products, it may still be unable to penetrate the market if it does not adopt efficient sales and marketing strategies. Any delay in the commercialization of its products will have a material effect in the future product revenue, and the company may incur additional losses. Dependency on the Success of Vinatafolide Vintafolide has been the lead SMDC for Endocyte Inc. The drug has been analyzed it a randomized clinical trial (phase 2) for the treatment of Platinum-Resistant Ovarian Cancer (PROC). Currently, the company is evaluating the drug in a randomized phase 2b (TARGET) and phase 3 (PROCEED) clinical trial; to ascertain whether it can be used in treating non-small cells lung cancer (NSCLC). The clinical trials indicate the inability of the company to develop new SMDCs. The trial may be unsuccessful since Vintafolide may not attain regulatory approval for it to be successfully commercialized. The company may lack the necessary market approvals for the drug from the regulatory authorities (Food and Drug Administration, FDA; the European Commission). The development programs for the drug may fail to satisfy such authorities because the drugs may not be safe and effective. Failing to obtain approval from the regulatory authorities on the use of Vintafolide may have material effects on the company’s financial operations. The company lacks diverse products that would increase its revenue portfolio. In addition, the company may be unable to keep up with the forces of competition within the industry. An analysis of the competitive forces within the industry indicates that other companies continue to develop clinically-tested and cost-effective alternatives to supplement the SMDCs. Reliance on Third-Parties to Develop and Manufacture Product Candidates Currently, the company cannot independently conduct the phase 2b and phase 3 clinical trials. The company depends on third parties (contract research organizations and medical institutions) to conduct clinical trials on its product candidates. The third parties may fail to successfully conduct their contractual duties or even meet the specified deadline. Business operations may be delayed and may have a cause-and-effect relationship with regulatory approval. A delay in the commencement, completion, and approval of the product candidates will impact the business operations and the financial operations in the long-run. The company may fail to produce adequate quantities of the SMDCs to meet the demand within the market. Over-reliance of third parties for the manufacture and supply of product candidates may raise quality concerns for the SMDCs. If the contract manufacturers failed to achieve the required quality standards, the products might result in injury or death among patients, cost overruns, and product recalls. Lack of independence for the manufacture and supply of product candidates may, therefore, have a negative impact on business operations. Existing Property Rights May Not Protect the Current Technologies and Product Candidates The commercial successes for the company depend on how well it can protect its existing patent position and attain additional patents. In addition, it needs to maintain sufficient protection of the intellectual property for its technologies and product candidates within and outside the United States. Operations in foreign countries may be constrained due to inadequate protection of the company’s property rights. Competitors may use the company’s technologies to ‘cancel-out’ the little competitive advantage that the company has in the foreign markets. The inability to sufficiently protect its intellectual property in foreign countries may harm business operations due to unfair competition from the competitors within the industry. This may have adverse effects on the revenue derived from the sale of product candidates and technologies. Compliance with Environmental Laws and Regulations The main business operations for the company are concerned with the controlled storage, utilization, and disposal of bio-chemical materials that may be hazardous when mishandled. Endocyte Inc. is bound by the federal laws that govern how hazardous materials ought to be manufactured, stored, used, and disposed. The company adopts efficient measures for handling and disposing of its products. However, it has limited control over incidences of accidental contamination from such materials. If an accident is reported, the federal authorities may restrain the company from producing such materials. The company may also be held liable for cases of accidents, injury, or contamination. The environmental risk of contamination requires that the company takes insurance to cover the hazardous materials clean-up cost. Such insurance may over-burden the financial resources available for the company to offset business operations costs. The financial resources may be limited and fail to cover such costs to the sufficient level for typical risks regarding how its handles its products. A severe accident may force the company to shut down its operations indefinitely. Research and Development (R&D) Risk factors Research and development costs make-up the bulk of the company’s expenses. The company must conduct R&D processes to develop its SMDCs and maintain its competitive advantage within the healthcare industry. Failure to conduct and implement research and development programs will have an adverse effect on the business operations regarding the quality of the product candidates. Currently, the company is conducting phase 2b and phase 3 clinical trials for Vinatafolide to ascertain whether it can treat NSCLC. If it does not undertake sufficient research and development programs, it would have limited information and expertise on how to develop its SMDCs. Low-quality products would lead to callbacks and withdrawals. In the extreme cases, low-quality drugs may have adverse effects on the patients and may result in a lawsuit; hence indefinite closure. Reference "UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549." Endocyte. 5 Mar. 2014. Web. 3 Nov. 2014. . Read More