Case Review: Organization and Strategy at Millennium (A)

Introduction

This case examines Millennium's strategic and organizational responses to the rapid evolution
of the biopharmaceutical industry. In the early 2000s, as Millennium's competitive advantage
in early-stage research slipped away and its losses mounted, founder and CEO Mark Levin
moved the firm downstream away from research and towards drug development and
commercialization, while narrowing horizontal breadth from over a dozen therapeutic classes
to just three. In 2005, Levin hired Deborah Dunsire from Novartis as CEO to lead Millennium's
continuing transformation. Students are asked to put themselves in the shoes of incoming CEO
Dunsire and to provide organizational recommendations to execute the new strategy.

Topics covered in the Analysis

Corporate Reorganization, Leading Teams, Organizational Transformations, Pay for

m
er as
performance, Strategy Formulation and Technology

co
eH w
What makes Millennium different from traditional biotech firms?

o.
Technology & Patenting
rs e
ou urc
Millennium was different from most other biotech firms that usually became dependent on
large pharmaceutical firms because they did not have the resources to take their products to
o

market or have a broad technology platform. Millennium sought to build varied technological
capabilities i.e. a broad technology platform.
aC s
vi y re

One of the key focuses of building technological capabilities was making the drug production
process more efficient. This involved the use of advance technology like robotics &
automation. Thus Millennium sought to build a technology platform and that was one of the
ed d

capabilities that helped it become more successful in the 1990s.

ar stu

This capability allowed them to focus on finding the most promising DNA and patenting it.
Specifically it involved patenting the gene sequence, the specific protein produced by that
gene & the engineered drug that was produced from the gene. Thus Millennium used its
sh is

technological expertise to find out the most promising gene related to curing a particular
disease or illness & then patented the discovery.
Th

Effective use of technology and patenting the most important genes relating to specific illness
made it essential for the company to have a highly skilled employee base. It managed to
attract top notch talent by keeping politics to a minimum, providing stock options to its
employees & being very selective in hiring individuals. Employees also saw that top
management set the stage when it came to having a strong work ethic.
Skill Set
The skill set that Millennium had build had to be used effectively to ensure growth.
Millennium decided to move away from the FTE model because that didn’t allow it to focus on
the long term health of the organization. The FTE model led to agency costs as scientists were
more focused on meeting individual goals rather than focusing on the benefit of the whole
organization.
https://www.coursehero.com/file/60892990/Assignment-No4-Millennium-Case-Studydocx/
 On the other hand it used the skill set it had created to build partnerships that would the lead
to R&D that was most beneficial to Millennium. Millennium was also smart enough to retain
rights of unforeseen discoveries. In summary Millennium was able to achieve synergies
between the structure it had, the culture it created, the people it employed and the strategy it
used to leverage these resources.
Strategy, Structure and Culture
As organizations grow they need to change their structure & their strategy. The key concern in
Millennium’s case is the organization’s structure. To become into a fully integrated
pharmaceutical firm Millennium needs a structure that allows for the most efficient allocation
of resources. Currently the workforce at Millennium feels overburdened. This is a classic case
of burnout i.e. not being able to manage growth. Millennium has a loosely defined corporate
structure that is based on the business areas it operates in. Thus Millennium needs to be able
to create a more robust structure for it to succeed & without one it won’t be successful over
the next 10-years.

m
er as
A traditional pharmaceutical firm has the capabilities to take the drugs it creates to market

co
which is currently lacking in Millennium. This is a fundamental disadvantage to Millennium &

eH w
the acquisition of ChemGenics only solved part of the problem. Millennium doesn’t have the
capability of taking a drug to market and that makes its success dependent how successful it

o.
is in creating alliances & partnerships. Traditionally Millennium has been very successfull at
rs e
creating good partnerships and that has led to it being successful. However Millennium has
ou urc
become very good at the process of discovering genes & ensuring that they can become
marketable drugs. It has an advantage compared to pharmaceutical firms in this process as
that is why it has been successful at forming good partnerships.
o
aC s

Traditional pharmaceutical firms are also much larger than Millennium and that makes them
vi y re

less vulnerable to failures in the drug development process. This is a disadvantage; however
Millennium is much more nimble than its peers when it comes to capitalizing on available
market opportunities. The culture & the structure that Levin has managed to create is
something that provides Millennium an edge over large pharmaceutical organizations. The
ed d

creation of an efficient drug development process is the goal of Millennium & the
ar stu

pharmaceutical organizations. Millennium is definitely the more innovative of the companies

involved in achieving this goal however all pharmaceutical companies have more resources at
their disposal.
sh is

Funding, Alliances and Acquisitions

Th

The primary disadvantage of securing funding through alliances & partnerships is that it
limits an organizations ability to allocate resources as it seeks to do so. Thus every alliance
has to be made keeping in mind what the company’s vision is. This is quite difficult to
implement because once an organization enters into an alliance its revenue stream is
dependent upon its ability to fulfill the goals set at the outset of the alliances. Thus
organizations may seek to fulfill these goals even if it means deviating from the objective.
On the other hand deals & alliances ensure that the organization manages it resources
effectively because it has to meet its deliverables. This is different from raising money from
the capital market. In this case once an organization has been successful at raising money
through the market it is relatively free to utilize it as it seeks to do so. This could lead to an
inefficient allocation of resources. Raising money also means giving away ownership rights to
the organization. This would mean that the new equity holders will have a say in company
https://www.coursehero.com/file/60892990/Assignment-No4-Millennium-Case-Studydocx/
 strategy. This can hamper an organizations ability to choose what it believes to be the best
course of action.
The key criteria is that does it allow Millennium to focus on the R&D that it wants to focus on
and will it enhance Millenniums ability to meet its ambitious growth targets. Millennium
should pursue the Lundberg deal. Millennium wants to create an efficient drug discovery &
development process. This requires that its process be codified & that it have substantial
funds at its disposal that can be used to master the drug discovery & development process.
Thus this deal will allow it to focus on the R&D it seeks to pursue. There are elements of the
deal that require effort in areas that are not of interest to Millennium. This should be expected
in any alliance that an organization seeks to undertake as it is unrealistic to expect complete
alignment of goals of both organizations.
Millennium hopes to create a sustainable competitive advantage by creating an unrivaled drug
discovery & development process. It has invested significant time & effort in making the
process as efficient as possible. The success of this process is going to allow Millennium to

m
become a fully integrated pharmaceutical company in the future. The acquisitions provide

er as
capital recourses to Millennium that are invaluable for the company’s success. Considering the

co
fact that sound strategic alliances are very difficult to come by & they are the source to the

eH w
company’s growth Millennium should pursue the acquisitions.

o.
Core Problem: rs e
ou urc
 With a shift in the industry trend and technology being available to common people
through government and private sponsored scientists, Millennium needed to grow as a
o

better forward integrated company which was capable of commercializing its own
aC s

products from a typical R&D root based organization. However, as the basic
vi y re

organization structure of Millennium was informal, with no performance management

system, lack of managerial accountability and influence of Levin at the top making
majority of decisions, it was difficult for Millennium to change its organizational
ed d

structure and core business strategically.

ar stu

 Regaining of Millennium stock price which was $85.60 in 2000 and now on 31st Jan,
2005 it was trading at $9.21 per share and largest long term investor lowered its
sh is

stakes from 14.3% to 7.6 % so how gain faith among long term investors and share
market. More focus on two drug marketing and revenue generate and create
Th

profitability of organization.
Situation Analysis:

 Mark Levin founded Millennium in 1993, he was biomedical engineer with experience in a
biotech company and also worked in a venture capital firm. So he possessed both
technical as well as commercial acumen. His vision to create a genomic company to
revolutionize drug development technology was very relevant in the prevailing general
environment.

 Millennium leveraged its proprietary technologies such as RADE, large scale DNA
sequencing and high throughput expression cloning for forming strategic alliances with
Pharma firms for Drug development and commercialization.
https://www.coursehero.com/file/60892990/Assignment-No4-Millennium-Case-Studydocx/
  Millennium tried to increase the value appropriation through diversifying into
development and commercialization of the drugs. This helped in enhancing the Economy
of Scope. Millennium tried to leverage knowledge to create patient management services.

 The Genetic drug had inherent disadvantages such as Lower productivity, heavily time
consuming and extremely expensive. Only 1 of 10,000 drugs was marketable and out of
that for only 30% the revenues generated exceeded the R&D cost. Avg. cost of Marketable
drug was $800 million. So there was great opportunity for technological intervention.

 The technology and tools getting widely diffused as govt. and international players
venture in this business in late 90s compelled Millennium to move towards forward
integration to survive. Millennium embarked on the journey through quick

m
acquisitions in order to save time and to avoid other difficulties of organic expansion.

er as
co
eH w
 Millennium started making heavy losses since 1999 due to the technical bubble burst in

o.
2000 and subsequent fall in stock prices by 78% of its highest value. Dunsire, the
rs e
prospective successor of Mark Levin had to ensure the following:-
ou urc
- Profitability
o

- Productive Relationship with Management

aC s

- Disease class re-evaluation

vi y re

- Optimal resource deployment

Analysis of Sources of Problems:

ed d

Key issues:
ar stu

1. The Organizational Structure of Millennium also needed transformation from Unitary

or functional structure to a Multidivisional form as they pursued vertical
sh is

integration. Due to Levin’s extensive control over the decision making, the senior
executives did not have much autonomy and hence were resigning in quick succession.
Th

It seems the company lacked the Organizational learning, Cultural change is not easy it
needs time and effort for institutionalization.

2. Other Performance Management issues such as lack of an effective appraisal process

and the central tendency problem often led to frustration among top performers. The
managers also lacked the sense of accountability. The managers had to overstretch but
the compensation was not linked to their performance. There was very narrow
dispersion of remuneration of a High performer and a low performer.

3. The company had built its business with state-of-art proprietary technology as a core.
However, the changes in the general environment made the technology, tools and
information used by Millennium easily accessible and imitable.

https://www.coursehero.com/file/60892990/Assignment-No4-Millennium-Case-Studydocx/
 4. Too many alliances demanded huge capital commitments and did not allow Millennium
to focus on R&D in depth as committed in agreements to avoid conflict of interest.

5. Though the company had diversified into the development and commercialization of
the drugs but the core culture of commitment to science and clinical data left marketers
with no room for expressing opinions on competing in marketplace. Their approach of
market development through education and promotion were not accepted. A mere
aggregation of resources doesn’t result in success unless they are congruent.

6. Lesser focus on commercialization led to lean and overstretched commercial team

which compelled sales representatives to often go to the market unprepared.

7. High resource and fund allocation to non-feasible projects Project-241 due to personal
biases did hurt the company badly.

m
8. The two new drugs VELCADE and INTERGRILLIN did not do as well as expected.

er as
co
9. The sudden growth and success of Millennium through alliances such as one with

eH w
Monsanto attracted many competitors who also ventured into genomics to encash the

o.
opportunity which intensified the competition.
rs e
ou urc
Way Forward:

Way Forward Pros Cons

o

1. Formalize the  Give a direction to employees  Since the

aC s

performance and motivate the high employees are

vi y re

management in the performers. used to an

organization and link  It will also solve the Agency informal culture,
individual targets to problem that the researchers it is likely that
organizational targets. have trying to extend employees may
ed d

unprofitable projects with resist to such a

ar stu

individual lobbies. change.

2. Dunsire can absolve the  Direct reporting would be  It would require
Head-R&D position and beneficial as Dunsire could significant time of
sh is

make the 3 SVPs report directly control the R&D Dunsire.

directly to her. expenses  It would distract
Th

 The three SVPS would not be her from other

demotivated pressing areas.

3. The current spending on  This will help the company to

R&D is almost 4 times of control the immediate issue
the total revenue which of cash bleed.
needs immediate
optimization
4. Provide the already  The concerned  The sudden
existing divisions with departments(specially autonomy could
autonomy to take marketing) will get sense of lead to rash
cognitive decisions responsibility and ownership decision making.
regarding their area of and will strive to perform
function better
https://www.coursehero.com/file/60892990/Assignment-No4-Millennium-Case-Studydocx/
 5. The company should  Increase in the projected  These efforts
focus more on increasing sales would help the firm would incur extra
the market share for its regain its shareholder’s trust costs.
increasing products; this  It would also help them
could be achieved by strengthen their position on
strengthening of the commercial front
specialized sales force
and proper training and
development.

m
er as
co
eH w
o.
rs e
ou urc
o
aC s
vi y re
ed d
ar stu
sh is
Th

https://www.coursehero.com/file/60892990/Assignment-No4-Millennium-Case-Studydocx/

Powered by TCPDF (www.tcpdf.org)