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Novazyme Pharmaceuticals Inc

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A Father's Love:

Novazyme Pharmaceuticals, Inc.

1) How does developing and commercializing an Orphan Drug such as Novazyme's "LSD" products differ from a regular "mass market" drug in terms of: a) clinical trial and regulatory review process (e.g., "fast track" vs. "standard" clinical trial process), and b) commercialization strategy (e.g., sales and marketing approach)?

Developing and commercializing an Orphan Drug such as Novazyme's "LSD" products differ from a regular "mass market" drug in several critical ways. These differences are rooted in the fact that because so few individuals are affected by an orphan disease, a pharmaceutical or biotechnology company must have sufficient financial incentives [from the government] to want to invest in the research and development of such a drug that would otherwise generate relatively small sales and consequently incur a financial loss. Recall that an orphan disease, by definition, is one that affects a small percentage of the population (fewer than 200,000 patients).

The following tables summarize the differences between orphan drugs and "mass market" drugs in terms of the clinical trial and regulatory review process as well as the commercialization strategy:

Exhibit I: Comparison of Orphan Drug vs. "Mass Market Drug":

2) In a clear and concise manner, compare Novazyme's three strategic options: go-it-alone, JV with Genentech, and sale to Genzyme. Analyze from the perspective of: a) LSD patients (time to market of a safe and effective drug(s), and b) Novazyme's shareholders (value, timing, certainty, risks). Which option would you recommend to shareholders, and why? How would you change the salient terms of the Genentech JV to roughly equate to a sale to Genzyme (i.e., make Novazyme shareholders largely indifferent between the two transactions)?

Novazyme's three strategic options are as follows: go-it-alone, JV with Genentech, and sale to Genzyme. Each option offers benefits and drawbacks for Novazyme, its shareholders, patients, and other constituents. Before delving into strategic and financial comparisons of the options for LSD patients and Novazyme's shareholders, let's first briefly define each of the options and compare the benefits and drawbacks for the firm at a high level:

Exhibit II: Definition of strategic options and high-level comparison from Novazyme perspective

a) Now that we have a better understanding of each of the options, let's compare each for LSD patients. For LSD patients, the most critical component for comparison of each strategic option is timeliness of a safe and effective drug. The timeliness (or how soon the drug is available to patients) is a function of the success of the regulatory and approval process. The safety and efficacy of the drug are a function of the regulatory and approval process as well as the availability of state-of-the-art manufacturing capabilities to mass produce the highly complex drug. When comparing the options, I find that the Genzyme acquisition is the most beneficial for LSD patients. The critical factors for timely approval of a safe and effective drug are:

* Protein manufacturing and operational expertise as well as state-of-the art manufacturing equipment to ensure safe and consistent development of the drug;

* Pre-existing relationships with relevant physicians, KOLs, and patient advocacy groups in order to expedite marketing process and increase awareness;

* Strong



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