Is it an uncertainty reducing strategy? If so, how can the uncertainty be reduced? Assume that you are the CEO of Century Pharmaceuticals, Inc., and that you are seeking a strategic alliance with Excel Research, an independent, full-service research organization. Excel Research specializes in working with pharmaceutical companies to efficiently and effectively navigate the regulatory approval process and bring new drug therapies to market. Excel will help Century with the three-stage clinical trials process for its submissions to the Food and Drug Administration (FDA) for new drug products. Excel will also help with Century’s projects working on investigational new drugs (IND) that are not ready for clinical trials but still are overseen by the FDA. As CEO, you believe that Century Pharmaceuticals and Excel Research can successfully work together to create novel therapies to fill unmet needs in dermatology and other therapeutic arenas with greater speed and at lower cost.

In pharmaceuticals, as elsewhere, firms have one year from invention to apply for a patent. The patent life begins to run at that time, but unlike other inventors, the pharmaceutical firms have to further develop the drug target as an IND and then go through a series of tests to show that the drug is safe and effective prior to marketing before they can exploit their patent. This can eat up several years of the effective patent life. Upon expiration of the patent, generic firms can quickly enter the market, as the drugs are well understood combinations of basic chemicals. Delays in the approval process can cost firms billions of dollars a year in unrealized revenue during the patent period.

You expect that the strategic alliance between Century Pharmaceuticals and Excel Research will provide enhanced benefits for both companies. Century, under your leadership, is committed to continuing to grow by implementing its differentiation strategy, which specifies the objectives of acquiring new products and introducing new indications (FDA-approved uses for which limited patent extension can be given) for therapies in specific markets.

Excel Research has an established and proven track record of success in supporting and providing the evaluation required to bring new therapies and new uses for existing therapies to market.

Based on this information, determine answers to the following questions using the concepts in Chapter 9, and make a brief presentation to the class as the board of directors: