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Strategic Why the High Failure Rate? Over the years, analysts have tried to explain the high failure rate of strategic alliances. One explanation for problems which may occur when two distinct and separate companies collaborate on a strategic initiative is the absence of a supporting framework which includes a formal alliance management process, including the stages of partner selection, structuring, operation, and performance evaluation. (Das, T. & Teng, B. (1999). Successful Alliance Framework at Abbott Laboratories Abbott Laboratories, a leading pharmaceutical company, has maintained their leadership in the healthcare industry through a robust framework for choosing and cultivating alliance partners. This successful partnership model mirrors the companys growth and diversification into four key areas: healthcare, diagnostics, pharmaceutical products, and nutrition.
A look at Abbotts timeline reveals a history of successful alliances with other companies in pursuit of innovation, many of which led to mergers and acquisitions. The company is primarily focused on concentric growth through acquisition, and completed 6 new mergers in 2009 alone. Abbott strengthens its global competitive position with six significant strategic acquisitions: Ibis Biosciences, a provider of leading-edge technology in d iagnostic testing and surveillance; Advanced Medical Optics, an established global leader i n vision care; Wockhardt Limited, Indias leading local manufacturer of nut r i tional p roducts; Visiogen, Inc., a leader in next-generation cataract technology; Evalve, Inc., the g lobal leader in the development of devices for minimally invasive repair of cardiac mit ral valves; and Solvay Pharmaceuticals, the global pharmaceutical business of the Solvay G roup. (Abbott.com, 2010).
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Despite this concentric vertical focus, Abbott has also entered into marketing initiatives with partners, especially with businesses that offered specific geographic or scientific expertise. Strategic Alliances to Expand Regional Markets Lundbeck was a partner with regional assets. Its strong ties and understanding of the Latin American market was a key factor in Abbotts decision to enter into a joint marketing arrangement in order to market Lundbecks anti-depression drug Lexapro in Latin America. (Lundbeck.com, 2002). Abbott benefits from operating in stable and secure society, with rules of law, respect for human rights, sound institutions and a fair and predictable regulatory framework. Abbott benefit from having access to a healthy and competent workforce, to prosperous consumers and investors, and to open markets, within non-discriminatory trading and financial systems and non-corrupt and well-governed economies. Failure to achieve these conditions is likely to undermine business success, and cannot be achieved without alliances.
Strategic Alliances to Leverage Core Competencies Millennium, another global leader in bio-pharmaceutical research and development, was chosen to participate with Abbott in a co-marketing arrangement that leveraged both companies footprints Millennium in Europe and Abbott in the United States and their respective core competencies. Millenniums strengths were in its R&D and scientific discoveries and Abbott has a more developed distribution channel and marketing expertise. This new strategic alliance was recently formed to address the global epidemic of obesity. Each partner has agreed to focus all research and development on obesity within the alliance. Modeling the Way with a Successful Partnership Framework
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Considering the importance of a formally structured framework within any strategic alliance, Abbott and Millennium meet all qualifying criteria: They went through a vetting process and carefully evaluated existing assets, resources, corporate cultures, and opportunities. Each publicly company elaborated on the terms and conditions of the strategic alliance in a press release filed on each of their websites. The operations component includes a plan and management team for guidance.
During the five-year collaboration, M illennium and Abbott will share equally in all p hases of the therapeutic discovery, research, development and commercialization of p roducts for metabolic disease. In addition, both companies will share costs related to the development of drug candidates already in their metabolic disease pipelines. The primary focus of this alliance will be small molecules, although the companies may also choose to develop proteins, antibodies, and antisense products. The initial research program will be jointly staffed by more than 225 scientists and plans call for expansion over the term of the agreement, making the Mi llennium-Abbott alliance one of the largest metabolic research p rograms in the industry. Mi llennium and Abbott will share profits worldwide as well as commercialization activities in the United States. Abbott will be responsible for commercialization in the rest of the world, Millennium having the r ight to co-promote in major European markets. Other financial terms of the agreement have not been disclosed. T he genomic discoveries identified as part of the therapeutic program could have an equally important impact on the development of diagnostic products for use in obesity and d iabetes. This agreement includes the development of pharmacogenomic and t raditional
4 diagnostic assays that are directly related to gene targets and drugs that emerge from the a lliance. Abbott will sell these diagnostic tests to the research community and clinical l aboratories, while both companies will promote these diagnostics to physicians and patients. These products would be inst rumental in the development of predictive medicine p rograms, including the joint development and commercialization of pharmacogenomic p roducts. The information gained from predictive medicine products can provide for a more i ndividualized and comprehensive course of t reatment for those patients suffering from metabolic diseases. (PR Newswire Europe Limited, 2010).
According to the World Health Organization, worldwide cases of diabetes are expected to grow from over 150 million today to 300 million by 2025. According to the American Diabetes Association, there are 15.7 million people who have diabetes, or 5.9 per cent of the population, in the United States. (PR Newswire, 2010). Considering the scope of the obesity issue, with more than $100 million in health-related costs . . . associated with the morbid consequences of both obesity and type 2 diabetes in the United States and a predisposition to hypertension, stroke, heart disease, increased incidence of certain cancers, as well as diabetes, (PR Newswire, 2010), Abbott Laboratories and Millennium Takeda Oncology have a solid five year initiative that will challenge both companies to bring new solutions to this global epidemic while modeling the way for other successful strategic alliances worldwide.
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References
Abbott.com (2010). Our History. Accessed February 23, 2010. http://www.abbott.com/global/url/content/en_US/10.30:30/general_content/General_Cont ent_00069.htm Das, T. & Teng, B. (1999). Managing Risks in Strategic Alliances. Accessed February 23, 2010. http://www.jstor.org/pss/4165586 PR Newswire Europe Limited (2010). Millennium and Abbott form strategic alliance in metabolic disease. Accessed February 23, 2010. http://www.prnewswire.co.uk/cgi/news/release?id=64275 Lundbeck.com. (2002). Lundbeck and Abbott Laboratories Enter Strategic A lliance to CoP romote Lundbecks Anti-Depression D r ug Lexapro in Latin A merica. Accessed Februa ry 23, 2010. h ttp://www.lundbeck.com/investor/releases/ReleaseDetails/Release_7 9_EN.asp