Business Models for a Successful BioEconomy
ID: 3934

Abstract: Larry Lenhart

Roughly 5 percent of chemical sales depend on industrial biotechnology today and that number is estimated to grow to 20 percent by 2010. This rapid growth is recognized by investors. In 2007 North American venture capitalists invested a record $4 billion in cleantech - biochemicals were an important driver.

However, the field is not without its investment challenges. While many new businesses rely on startup capital before they begin generating revenue, this is especially true for industrial biotech companies that require extensive research and production scale-up before launching commercial production .

Many of these startups are born in academic research labs and the founders face a number of critical challenges. They need to raise the capital required to prove out and scale the technology. They need to build the team with the right skills – technical, entrepreneurial, industry domain experience – and right personal chemistry to succeed. Partnering with a good venture capital firm can be extremely helpful on these critical dimensions and in preparing for the critical decisions that need to be made in building a successful company.

Startups also need to be prepared to produce their chemicals at the volume demanded by industry and critical decisions need to be made regarding manufacturing partnerships. Startups need to decide at what point in the manufacturing process partners need to be brought in. They should also determine how much of the manufacturing they can take care of alone and how much should be shared with industry partners.

In addition to questions regarding partnerships, startups need to be prepared to address the following questions. How to you prepare for and begin the manufacturing process of product? What is the process of transitioning from the lab and into the industry? How do you build the personnel for your company? What kind of company ecosystem is crucial for success?



In this presentation, “Starting up in the Industrial Biotech Industry”, Marianne Wu, will discuss the many challenges faced by industrial biotech startups face and the many critical decisions that need to be made when bringing new technologies to market.



William Knudson

Due to several factors, the financial system in the U.S. has undergone a serious crisis throughout the late summer and fall of 2008, although some of the fundamental problems took several years to develop. Among the sources of the problems were the subprime mortgage market and the relationships between the housing markets and other financial markets; the credit swap market, and the various policies that created additional financial instruments without regulation and policies that reduced the level of regulation of financial markets.

As a result of these problems several emergency measures have been instituted. Fannie Mae and Freddie Mac received $200 billion in support from the government. The federal government also paid $85 billion to obtain an 80 percent share in the American International Group (AIG) in order to keep that firm in business and preserve savers who had money in insured money market accounts. The Federal Reserve (the Fed) has also increased the money supply and reduced interest rates. However, despite these actions interest rates are relatively high, credit requirements are becoming more stringent, and even credit worthy customers are increasingly unwilling to borrow. As a result economic activity is declining.

Due to the level of integration of global markets, the problem has spread throughout the world. Despite reductions in interest rates and widespread government intervention in financial markets some countries, such as Iceland, are effectively bankrupt or are facing severe difficulties. As a result international trade has declined. Among the countries that asked for aid from the International Monetary Fund are Pakistan, Iceland, Hungary, Serbia and Ukraine. The situation is deteriorating throughout the world, and there is a strong likelihood that the world faces a protracted recession.

This has impacted and will continue to impact the bioeconomy. Commodity prices have already declined from their unsustainable highs of the spring and summer of 2008. Firms may find credit more difficult to obtain. Another impact of the global economic slowdown is the decline in the price of oil and oil based products such as gasoline. This in turn has affected the ethanol market which as also adversely impacted the price of corn, and other biobased substitutes for oil.



This paper will analyze the factors that have led to the current global economic situation, with particular attention to the U.S. housing market, and the regulatory environment that fostered the current situation. How this impacts the bioeconomy sector will then be analyzed. Finally some policy prescriptions will be offered. Given the current situation monetary policy will not be as effective as fiscal policy in promoting an economic recovery.



Christophe Noguere

The business model is a complementary approach to corporate and business strategies that focuses on activities and synergies. We examine within a study of the biopharmaceutical industry in Europe and four deep case studies of firms how the value chain is reshaped and how companies manage business models portfolios. This paper identifies three core competences on the value chain of drug development and proposes a typology of business models. It concludes by considering how small biotechnology companies manage a business model portfolio.



Business models are defined as a set of elements and their relationships that express the business logic of a specific firm and the way it adapts the value chain: It is a description of the value a company offers to one or several segments of customers and of the architecture of the firm and its network of partners to generate profitable revenue streams.



In the pharmaceutical industry the arrival of biotechnology companies reconfigured the value chain and led to a specialization of activities. The business logic of today’s biotechnology companies is no longer based on one single competence (the drug discovery), but on three: discovery, knowledge architecture and support for drug development. Thus three types of actors can be defined: the discoverers, the architects of knowledge and the makers. A firm’s core competence conditions its possible activities because it determines which new pathways can be opened where it can add value. Each business model conditions for a company the time-to-market, the risks, the alliances and the expected value. For example the business model of the technology brokering belongs to the architects type and conjugates a short time to market, a low level of risks, a high need for alliances and a low expected value.

The typology proposes eight business models depending on three possible positioning on the value chain.



The second set of result concerns the four case studies of firms. These small innovative biotechnology companies demonstrate an ability to manage several business models and core competences efficiently which enables them to survive in an environment dominated by big players.

Managers who initially developed the concept of the business model where searching for a strategic tool that could take into account the problems of how to address several markets with a pertinent value proposition for each and how to develop a flexible architecture to make business in complex environment. In fast changing industries, the value chain may get permanently reconfigured and new zones of profit appear. With a business model portfolio a company can easily construct and reorganize its activities in coherence both with the firm and with the evolving environment. Managing a business model portfolio helps piloting time-to-market, risks, alliances and expected value, and gives clear indications of synergies that exist, or that should exist, between activities.













Andrew Shafer

This paper will focus on our approach to accelerating business development and market penetration of renewable based products through collaboration and partnership. Our collaborations focus on leveraging critical skills, infrastructure and technology to efficiently deliver innovative products aligned with market requirements. Additional partnerships allow us to efficiently manufacture, expand product scale and diversity, and access a global market. Elevance will provide examples of how we are implementing this model to achieve rapid commercialization of new products in our functional oils platform.







Moderator: Christophe Noguere, PX Therapeutics (United States)

Presenter 1: Starting Up in the Industrial Biotech Industry
Larry Lenhart, Mohr, Davidow Ventures, (United States)  [Confirmed]

Presenter 2: The Global Financial Situation and Its Impact on the Bioeconomy 
William Knudson, Michigan State University, (United States)  []

Presenter 3: Business Models in the Biopharmaceutical Industry: A Typology 
Christophe Noguere, PX Therapeutics, (United States)  [Confirmed]

Presenter 4 (if necessary): Accelerating Business Development through Collaboration and Partnership 
Andrew Shafer, Elevance Renewable Sciences, (United States)  []

Panel Organizer:
Matthew Carr, Biotechnology Industry Organization, (United States)

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