This favors Nucleon building its own plant which means higher costs and more time, although it also implies greater control. Contracting also involves more time and an estimated expense of about 4 million dollars. Moreover, there is the danger of confidential information about manufacturing leaking out, although it would free Nucleon’s R&D people to focus exclusively on their specialty which is research – this is also the factor that has propelled Nucleon to the top.
However, in my view, vertical integration is not favored in this case. The reason is that Phase I and II trials are still an experimental stage of development of the drug and all investments made on the pilot plant could be lost, while also deflecting funds from other research work. Contracting out is not a good option due to loss of confidentiality. However, the licensing option offers an excellent situation because it allows risks associated with clinical trials and expenses related to development, marketing and sales of the drug to a third Company, while also protecting Nucleon’s patent on the product. This will allow the Company to focus on its core competencies, i.e, research, and development. One of the developments in management theory is the belief that most firms have only a few “core competencies” where they possess exceptional skills and abilities.