In the first phase, Nucleon undertook to build a pilot facility to produce the Cell Regulating Protein 1 (CRP-1). It was noted that the company did not have immediate personnel to sustain the functionality of the facility, such as quality assurance, logistics and repairs. This is despite the fact that the company worked with scholars in the field that the facility would serve.
The other risk was that if the clinical trial failed, the plant would not generate the other products immediately. This manufacturing facility was not yet ready to engage in most of the products (Roy 8). It is recommended that the company carries out a gap analysis on the goal, facility and implementation of its projects (International Facility Management Association 6).
This will enable the company to plan for the possibilities of failed trials or technical mishaps in its projected functions. A gap analysis would reveal the capacity of Nucleon Inc. in terms of human resources and the means of developing on-job skills. The analysis will determine the difference between the actual potential of the company and its ideal potential (International Facility Management Association 6).
It is also recommended that Nucleon determines the time that it would require to set up the facility, in addition to the time required to recruit and train the personnel of the designated responsibilities (International Facility Management Association 6).
This would require working with the existing experts in a different facility and using strategic simulations. After all, the contract option would require a company with such expertise and personnel (Roy 9).
In contraction, Nucleon should have a selective approach by agreeing with the potential contractor on the level of information disclosure. It should be recommended that for every level of information disclosure, the prospective contractor should make a corresponding commitment to the program (Kirk 202).
It is also recommended that the company considers the limits within which it may engage in legal battles, in case of a breach of contract. The other costs may arise in form of monitoring and evaluation and transactional fees (Kirk 202).
The third phase of the CRP-1 project would involve licensing the product to another company. Roy observes that Nucleon would have numerous benefits in form of money, reduced costs of production, and marketing (Roy 10). It is recommended that Nucleon should license the product to another company. This would allow the company to concentrate on strengthening its technology and thus, promoting innovation (Friedman 285).
However, Nucleon Inc. must put in place measures to ensure that the licensed company operates within the agreement. Licensing would also allow the company to prepare for more complex and capital demanding projects.
The pilot facility would cost Nucleon about $7.394 million and the estimated cost of the clinical trial was $4.795 million. The estimated gross sales would be $53.7 million, $99.5 million, $125 million, $130 million, and $150 million in 1998, 1999, 2000, 2001, and 2002 respectively (Roy 15).
To determine the net value of the project, the company and its stakeholders must establish the monetary costs in the three phases. Some of the parameters to include are the cost of approval, the costs of material and facility, and the costs of training personnel. The non-monetary costs may include the costs of improving the technology, environmental factors and the average time of preparation and piloting (Stewart 7-8).
The value of the project increases with the approval of each phase. This should be determined over time in phase 1, 2 and 3 (Stewart 11). Although the valuation is done per stage, it is vital to factor in the risks of the project. The risk-adjusted cash flow is explained in an empirical formulation or in qualitative parameters of various operations (Stewart 10).
Works Cited
Friedman, Yale, Intellectual property and biotechnology innovation: To protect or not to protect 15.4: 285-286. 2009. Print.
International Facility Management Association, Strategic Facility Planning: A white paper. Houston, TX: IFMA. 2009. Print.
Kirk, Dorothy, Selecting University technology Transfer Modes: An examination of Biotechnology Firms’ Entrepreneurial Orientation. Journal of technology management and innovation 8.2: 189-208. 2013. Print.
Roy, Raja “Nucleon, Inc.” Harvard Business School 692.41 (1994): 1-16. Print.
Stewart, Jeffrey, Biotechnology valuations for the 21st Century, Milkens Institute 17.2: 1- 12. 2002. Print.