Ares Serono Case
...h) centres, biotech pipeline of six products, average five-year R&D spending of 18.3% of sales. – Well over half of Serono’s sales are in the area of infertility; Serono is also committed to the areas of growth and methabolism and immunology, with products such as Saizen®, Geref® (growth releasing factor), and Rebif® (recombinant beta-interferon 1a). Importance of R&D Some key statistics from the pharmaceutical industry as a whole reveal the high uncertainty and investment required in the pharmaceutical industry to bring new products to the market: 1 in 5’000 compounds reach the end-user. Of the products on the market, 30% recover the average research investment. Average time for development is 10 to 15 years. Average cost of development for one drug is USD 350 million (vs. USD 250 million in the mid-eighties). 50% of development costs are typically spent on products that fail. The biotech industry has mushroomed from USD 0 sales in the beginning of the eighties to USD 7 billion in 1993 (plus another USD 3 billion in other income). Some estimate that by the year 2000, the biotech market could be as large as USD 60 billion. Biotechnology typically requires an even higher capital investment than conventional pharmaceuticals, yet out of 2’000 biotech companies world-wide, only about 2% have sales of more than USD 200 million. This figure helps to explain the trend whereby larger, resource-rich companies are acquiring smaller biotech companies. – For Ares-Serono, the decision to enter into biotechnology meant that the competence needed to be built “from scratch”. Biotechnology would help to reduce supply constrictions which result from the logistical challenges of gathering the raw materials for production; for example, in the area of fertility some 50 to 60 million litres of menopausal urine were collected last year for processing in order to extract the valuable fertility hormones in minute quantities. Unconventional solutions As a case study, one area where Serono has had an advanced approach has been in the area of information. Serono has put systems in place since the late seventies to ensure broad availability of information to Serono employees which encourages sharing, participating and contribution from everyone. The installation of such systems has been world-wide and had a guaranteed visibility and input from the very top of the organisation as well. Serono also started many years ago with the promotio...