Targanta Therapeutics: Hitting a Moving Target

4 Pages   |   1,348 Words


The case at hand explores the various external factors such as regulations, policies and product testing that can affect the business strategy of Targanta Therapeutics. Targanta is a biotech company, which is preparing to look forward to its first new drug application to Food and Drug Association. Mark Leuchtenberger, the CEO and president of Targanta, is looking to weigh out different options available to the company after its first successful IPO. The company has a period of ten months to review and develop a strategy plan after the company hands over its application to the FDA. The case examines the origins of the company and its strategy of de-risking the drug, oritavancin. Oritavancin is an antibiotic therapy applied for the treatment for drug resistant infections. The drug was originally invented by Eli Lilly and later it was spun out to InterMune. This strategic development was conducted mainly because of the fact that Eli Lilly’s strategic actions and policies are strongly influenced by its idea of revenue generation. Rather than selling oritavancin on a commercial level, Eli Lilly sold the product to divest itself from the business of antibiotics. However, Targanta acquired the drug under its label in late 2005.

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The case further develops to focus upon the effect of regulatory policies on business strategy of Targanta. In addition to that, the case describes the number of possible choices available to the company. The options available to the firm mainly include staffing of sales and marketing group, apply for approval to enter its business into European market, carry out further  clinical testing to make sure that the company expands the approved indications or lastly keep a reserve of funds in case if Food and Drug Association requires additional information from Targanta.

Employing two business model generation canvases compare and
contrast the original revenue generation business model developed by
Eli Lilly & Co. with Targanta's approach to its revised business

Eli Lilly & Co and Targanta worked on completely two different business models and strategies for their company operations. First of all, Eli Lilly & Co applied the business model which depended highly upon inventions and pioneering of drugs. Eli Lilly adopted the strategy to market the drug in such a manner to generate revenues from the drug right from its invention. This meant that Eli Lilly invested heavily in the research and development segment to invent new drugs (Hwang, 2009). Further, all the drug invented went through all the three stages of clinical trials under the supervision of Eli Lilly. This means that Eli Lilly’s business strategy can be categorized as a high risk tactic because not many drugs usually pass the stages of clinical trials in their first attempt or altogether. The company’s policies are aligned with the strategic objectives laid out. On the other hand, Eli Lilly would also sell the excellent drug if it does not comply with the strategic goals of the company. In this case, the drug was oritavancin.

However, on the other hand, Targanta was a small business with not as high resources available to them. Therefore, Targanta would not invest in producing new drugs rather it will buy off the successful drugs from the market and sell it under its own label. After getting the drug under its ownership, Targanta would focus on to strategically market the drug to generate revenues. This is a less risky business strategy as it eliminates the risks of product failure in the trials. (Anonymous, 2008). Moreover, under this business model, company like Targanta was able to save high costs of investment to be allocated to research and development department to invent new drugs. As presented in this case, Targanta bought the successful oritavancin off the market to sell it under its own label.

From an investor's perspective, discuss why InterMune paid $50
million + royalty commitments and why Targanta was able to buy
oritavancin for only $ 1 million?

InterMune paid 50 million dollars along with the royalty commitment yet Targanta was able to buy oritavancin for one million dollars only. From an investor’s point of view, the transaction can have twofold interpretations. Firstly, InterMune bought the drug from its investor rather than from a second party. As a result, InterMune had to pay fifty million dollars along with the royalty commitments. On the other hand, at the time when Targanta bought the product, it did not have to encounter any transaction from its inventor (Kimberley, n.d.). This means that InterMune’s fifty million dollars and royalty commitments were compensated for research and development investment put in by Eli Lilly. Since InterMune had not to invest in research and development, Targanta did not pay InterMune a huge some money.

Secondly, the transaction is also mainly associated with the objectives and policies of the companies involved. For instance, Targanta is mainly involved in the business of buying off products from other companies and sell it in the market to generate revenues. It can be assumed that InterMune was not able to generate revenues to the level that oritavancin had the potential of. This resulted in the drop in value of the drug because InterMune was not able to gain maximum out of oritavancin. Further, Targanta bought the drug at such a low price because oritavancin was going in a big loss for InterMune and the company was to sell off the product to prevent further reporting of losses.  In the end, Targanta purchased the drug at a price as low as one million dollars because the company believed that the drug has the potential of making big profits out of this investment (Horn, 2004).

Did Targanta successfully de-risk the drug? What is the meaning/significance of de-risking a drug?

The main purpose of de-risking the drug was to make sure that Targanta gets the oritavancin drug under its ownership. The drug was invented by Eli Lilly. However, after acquiring the InterMune it was necessary for Targanta to acquire the ownership rights of the drug. To do so, Targanta underwent the de-risking of the drug. For this, Targanta had to adhere and fulfill high number of regulatory policies and procedures. In the end, FDA declared the drug to be under the ownership of Targanta. This means that Targanta had successfully achieved the de-risking of oritavancin drug. The company had to follow this strategy because oritavancin drug was one of the higher revenue generating drugs on its portfolio with big potential in the market (Aluri and Palakurthi, 2011).

De-risking is the business strategy, which implies that a corporation removes all the buffs of previous ownership from the product; in this case oritavancin was the drug. De-risking means that if a product or drug is bought by a company then its previous owners and investors will lose their rights on the product or drug in the future. De-risking is important from the business point of view because Targanta will now be able to improvise and market the drug under its own company’s policies and goals (Chambers and Semple, 2006). As a result, all the revenues earned by oritavancin will not be shared by Eli Lilly and InterMune. However, on the other hand, Targanta would be solely responsible for any negative impacts of the drug in the future. This includes, counterproductive and strong side effects on patients due to the usage of oritavancin and Targanta would be held responsible and accountable. Similarly, Targanta would be liable for the failure of the drug in the future, as well.


Aluri, A. and Palakurthi, R. (2011) 'The Influence of Demographic Factors on Consumer Attitudes and Intentions', Journal of Hospitality and Tourism Technology, vol. 2, no. 3, pp. 188-203.
Anonymous (2008) 'Fair Value Accounting Works Well', The CPA Journal.
Chambers, C. and Semple, J. (2006) 'Quality-Based Competition, Profitability, and Variable Costs', Journal of Management Science, December, pp. 1884-1895.
Horn, S.S. (2004) 'The Modern Roots of Strategic Management', European Business Journal, pp. 136-137.
Hwang, I.K. (2009) 'Design issues in non-inferiority trials', Drug Information Journal, vol. 33, pp. 1205-1218.
Kimberley, J.R. (n.d) 'Managerial Innovation', Handbook of Organizational Design, pp. 84-104.

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