Genzyme/Geltex Pharmaceuticals Joint Venture

12 Pages Posted: 21 Oct 2008

See all articles by Robert F. Bruner

Robert F. Bruner

University of Virginia - Darden School of Business

Samuel E. Bodily

University of Virginia - Darden School of Business

Pierre Jacquet

Arthur D. Little Inc.

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Abstract

In March 1997, an executive vice president of Genzyme Corporation must develop the terms by which the $518 billion (revenue) firm will form a joint venture with a small biotechnology firm to make and market a new drug. The tasks for the decision maker are to estimate the enterprise value of the new joint venture, recommend how large an interest to acquire in the venture, and determine what price to pay for that interest and when. The case may be used to pursue some or all of the following objectives: (1) exercising analytical techniques, (2) introducing a framework for creating value and reducing risk, (3) exploring the impact on value of a hidden option (staged investing), and (4) visualizing risk and its implications.

Excerpt

UVA-F-1254

Rev. Jun. 29, 2016

Genzyme/GelTex Pharmaceuticals Joint Venture

In early 1997, Greg Phelps, EVP of Genzyme Corporation, met with members of a joint-venture negotiating team to develop proposed terms of a joint-venture agreement. The venture would combine capabilities of Genzyme and GelTex Pharmaceuticals to market GelTex's first product, RenaGel. GelTex was an early-stage biotech research company with two products in its pipeline. GelTex had neither the capital nor the marketing organization to launch RenaGel. Therefore, the company had been looking for a partner that would contribute cash and marketing expertise in exchange for a share of profits in a joint venture.

Genzyme had revenues of $ 518 million in 1996, and had grown rapidly through the innovative use of joint ventures and alliances. The joint venture with GelTex was attractive to Genzyme for several reasons. In addition to the benefit of increasing earnings through the sale of RenaGel, the joint venture would represent an excellent fit for Genzyme's specialty therapeutics and allow the firm to tap new markets. Also, building a strong partnership with GelTex might enable Genzyme to strike the same kind of deal for GelTex's second product, CholestaGel, which was targeting a much larger segment, the multi-billion-dollar market of anticholesterol drugs.

Phelps was eager to conclude a deal and launch the venture with GelTex. Important questions, however, had to be addressed before consummating an agreement.

. . .

Keywords: joint ventures, Monte Carlo simulation, research and development, risk analysis, valuation

Suggested Citation

Bruner, Robert F. and Bodily, Samuel E. and Jacquet, Pierre, Genzyme/Geltex Pharmaceuticals Joint Venture. Darden Case No. UVA-F-1254. Available at SSRN: https://ssrn.com/abstract=1279279

Robert F. Bruner (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-3823 (Phone)
434-924-0714 (Fax)

HOME PAGE: http://faculty.darden.edu/brunerb/

Samuel E. Bodily

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4813 (Phone)
434-293-7677 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty/bodily.htm

Pierre Jacquet

Arthur D. Little Inc.

Acorn Park
Cambridge, MA 02140-2390
United States

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