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247397764 napo pharmaceutical questions

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Discussion of Napo Pharmaceutical Case Questions
Healthcare in the 21
st
Century MBA297a.1/PH223a Amrit Acharya
1. What is the difference between Napo’s model and the typical biotech? What do you think
of Napo’s business model?
The differences between Napo’s business model and that of the typical biotech can be
synthesized under the following broad categories:
Product: Focus on Neglected diseases Only 104 biotech companies worldwide,
or less than 3% focused on neglected disease R&D. In fact, the BVGH report on
Neglected diseases cited in the paper (citation #5) estimates that on average, these
104 biotech companies are working on an average of 1.4 neglected disease
products. In contrast, Napo’s R&D pipeline included multiple products for
gastrointestinal and metabolic disorders, as well as polycystic kidney disease in
addition to crofelemer and NP-500 (for type-II diabetes).
Focus on long-term versus short-term Napo decided to partner with other
companies to sell and distribute crofelemer. Sometimes companies retained co-
marketing and co-promotion rights to position them as acquisition-attractive. Napo’s
strategy made it less financially highly valued, which indicates a long-term focus on
value generation through royalty revenues. This strategy reflects in Napo’s choice of
seeking mission-based investors who agreed to such long-term investment horizons.
Addressable markets: Both High-value Western markets and high-volume
emerging markets Most biotech firms would seek FDA approvals in the US and
then expand to emerging markets after attaining profitability. Napo chose the
alternate approach first seek developing market partners, attain a critical mass of
volume and then move to established Western markets.
Partnerships: Both Salix and Glenmark, Napo’s partners had equity participation in
Napo; this philosophy was used to generate alignment of the partner’s incentives
with that of Napo; however, this was an unusual choice. Additionally, Napo
outsourced the responsibility of regulatory approvals to their partners who had better
competencies in their respective markets; hence it could focus solely on innovation.
Social change: Triple Bottom-Line: Napo’s core strategy was to ensure their drug
was available to all the people who needed it, wherever they were in the world;
profits would follow. Additionally, through the HFC (Napo’s non-profit wing), Napo
would return 2% of net profits to cultures that were the source of the drug’s raw
materials through social forestry programs. This sustainable model would, therefore
protect both their raw-material supply chain as well as the environment.
Additionally, Napo’s emergence from Shaman resulted in an atypical approach towards
commercialization where Napo chose to pivot its core crofelemer product into as many
alternate use-cases as possible such as Irritable Bowel Syndrome (IBS) and infectious
diarrhea in children. This strategy allowed them to focus only on Phase-III clinical trials
enabling them to be a less risk-based R&D company than Shaman. Napo can therefore
be classified as a Business Development company whose distribution is handled by
partners in all the international markets simultaneously.
Specific aspects of Napo’s business model reminded me that of Toyota who also chose
to have equity investments in their chasis/other raw-material suppliers in order to align
incentives, a strategy which worked for them very well. In principle, I agree to such
design of partnerships; however here the relationship was reverse of that of Toyota
Napo’s distributors invested in them rather than Napo investing in them. As a result,

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Discussion of Napo Pharmaceutical Case Questions Healthcare in the 21st Century MBA297a.1/PH223a Amrit Acharya 1. What is the difference between Napo’s model and the typical biotech? What do you think of Napo’s business model? The differences between Napo’s business model and that of the typical biotech can be synthesized under the following broad categories: • • • • • Product: Focus on Neglected diseases – Only 104 biotech companies worldwide, or less than 3% focused on neglected disease R&D. In fact, the BVGH report on Neglected diseases cited in the paper (citation ...
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