Current event exercise for Chapter 3

Current events exercises
Article/Source Details: Small cap profile – Pharmaxis, Jane
Lindh, BRW, June 21-27 2007.
Chapter in text article related to: Chapter 3
Article Summary: A small but fast growing Sydney drug
company, Pharmaxis, has gained approval to sell one of its products
in 13 European markets from August 2007. The company spent
over $1 million and two years gaining approval for its lung function
testing product, the first to be approved Europe-wide.
The company believes that the approval will increase its market by
3.3 million asthma sufferers, and has appointed distribution
partners in all countries except Germany.
Pharmaxis listed on the Australian stock exchange in 2003, and
chose not to follow the conventional business model for
biotechnology companies that usually sell their successful research
developments to one of the large global pharmaceutical firms before
clinical trials begin. Founder Alan Robertson wanted to ‘build a
business that was profitable and internationally competitive’ and did
not want to dilute the value of the company’s research by licensing
the research results to large existing companies.
The company is not yet profitable, but has seen its share price rise
by 50% since June 2006. It hopes to make a profit by 2010.
Critical Thinking Questions:
Question 1. Create a strategic group map for the pharmaceutical
industry. Where does Pharmaxis fit?
Question 2. What stage of the industry life cycle do you think the
biotechnology industry has reached?
Current Events: Hubbard Strategic Management 3e © 2008 Pearson Education Australia
Suggested Answers
To map strategic groups in the pharmaceutical industry, it is
important to understand what the competitive factors are for
that industry. The article contrasts Pharmaxis with traditional
pharmaceutical companies in that they have not only
developed the product, but intend to manufacture and
distribute it. The strategic group in which Pharmaxis would
belong would include other companies doing the same thing.
Therefore, strategic grouping could be along the lines of supply
chain integration and size. The article suggests that Pharmaxis
might be in a very small group, or even unique.
The biotechnology industry is a very diverse arena that covers
many areas relating to the exploitation of many facets of
biology. It would therefore be difficult to plot its exact position
as a single industry. Those engaged in the discovery and
exploitation of plant-based products could be seen to be in a
well-developed industry, perhaps even approaching maturity.
In contrast, those parts of the industry searching for means of
exploiting the knowledge embedded in the human genome
could be seen to be more pioneering, and these companies
might make up a separate sub-industry that is only in the early
stages of the industry lifecycle.
The industry life cycle, as with most models, is designed to
give clarity of thought but does not necessarily represent
reality. Even defining the ‘biotechnology industry’ is
Current Events: Hubbard Strategic Management 3e © 2008 Pearson Education Australia