Impact of genomics on biopharmaceutical industry: rare diseases as disruptive innovation

Abstract

Purpose

Using a dynamic capabilities lens, this paper aims to study the impact of genomics generally and gene therapy specifically on the rare disease sector of the biopharmaceutical industry.

Design/methodology/approach

In this study, 24 genomics-based, rare disease-focused biopharma companies were studied and several variables were tested with respect to enterprise value growth. The companies were analyzed as a group of rare disease firms, as well as by size.

Findings

The authors found that number of employees, revenues, number of pipeline and marketed products and retained earnings are strongly correlated (in that order) with enterprise value in rare disease focused biopharma companies. These correlations seem to be weaker as a company’s market capitalization size decreases, indicating that there tends to be increasing returns to scale.

Research limitations/implications

This study found that increasing rates of cumulative returns to enterprise value growth depends on accumulating knowledge-based employees and expanding product portfolios of disruptive genomics-based technologies for treating rare diseases. Aggregating skilled and innovative employees (especially in bigger companies) can be seen as a cumulative bolstering factor in leveraging dynamic capabilities which can be recognized, understood and transformed into commercial success (i.e. increasing returns in enterprise value). In other words, technology managers’ job is to manage not only the financial aspects of the technology but also human resources, asset configuration and strategic alliances efficiently toward faster and better innovation. Strong dynamic capabilities can be formed with the accumulation of experience, articulation and codification of knowledge and an adaptive ability to change the way they solve problems as their environment transforms.

Originality/value

This is the first study to demonstrate and measure a relationship between dynamic capabilities and enterprise value in genomics-based rare disease firms. Further, this study highlights the importance of building the capability and capacity to absorb expertise and accumulate knowledge for new product innovations and sustainable competitive advantage in industries characterized by disruptive innovation.

Citation

Ahn, M.J., Shaygan, A. and Weber, C. (2020), "Impact of genomics on biopharmaceutical industry: rare diseases as disruptive innovation", International Journal of Innovation Science, Vol. 11 No. 2, pp. 241-260. https://doi.org/10.1108/IJIS-01-2018-0006