Taking Genentech to the Next Level
Between 1995 and 1999, Genentech focused on getting products to market and spent heavily on clinical development. That investment helped produce an impressive product pipeline that is the envy of the industry. But now it faces some major challenges as it attempts to increase its stature as a global player and prepares to sell its first mass market product.To help it achieve its ambitious goals, Genentech brought in Myrtle Potter, who has held senior management positions at Merck and Bristol-Myers Squibb, as COO and EVP, Commercial Operations.In this interview, Potter argues that Genentech's success in integrating the commercial and scientific ends of the business will serve the company well as it ramps up its commercial capabilities. She also says that because Genentech is facing head-to-head competition for the first time, it will require dramatically new commercialization strategies.
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During Art Levinson's five-year tenure as CEO, Genentech has enjoyed its greatest period of commercial success. To get there, the company jump-started its pipeline by pouring huge sums into R&D. It was able to do so, in part, because of a put/call provision contained in its agreement with majority stakeholder Roche that, by setting a floor and a ceiling on share prices, insulated it from the usual market pressures to demonstrate earnings growth. With that protection now gone, and having given Roche an option on worldwide rights for its products, Genentech must either increase the productivity of an already impressive R&D operation or for the first time look to M&A to grow earnings, in order to achieve its goal of a five-fold sales increase by 2005. Still, Genentech's recent successes make a solid case for the viability of mid-sized companies and R&D -focused strategies in an era of consolidation.
A December 1996 US Court of Appeals ruling opened the door for companies such as Eli Lilly and Novo Nordisk to compete with Genentech on human growth hormone, currently a $200 million franchise. But Genentech has fought back, at least against Novo Nordisk, by hiring the executive most familiar with Novo's strategy to sell hGH.
Genentech has the product candidates, and is looking for partners to help develop them. It's targeting biotech's "fallen angels"--companies with underutilized development capacity thanks to the failure of their own programs.