Veera K. Gonagundla

Exhibit 2a: Resource-Based View (RBV Analysis) for the Core R&D Market & Biotech Manufacturing

Resources Core Market

(Biotech R&D) Biotech Manufacturing Assessment

V R I O V R I O

Genetic Engineering: Technical Competence Favors R&D Specific Competence: CRP Formula Favors Both Research Scientists Favors Both Strong Patent position on CRP Favors Both Financial Standing Favors R&D Ability to identify Therapeutic CRF Favors Both Specialized R&D Laboratories Favors R&D Mammalian Cell hosting technology Favors R&D Academic Partnerships Favors R&D Market Leadership in CRP Favors R&D Risk-taking attitude; motivation to expand Favors Both Relations with Venture Capitalists Favors R&D Market Size and presence of Demand Favors R&D Promising Pre-clinical trials Favors Both

Overall, it is very clear the Nucleon has a unique expertise in R&D but no special expertise or resources or Competitive Advantage in Biotech

Manufacturing industry.

Veera K. Gonagundla

Exhibit 2b: Resource-Based View (RBV Analysis) for all the expansion options

Resources

Pilot Plant for

Phase 1 & 2

Contract Mfg. for

Phase 1 & 2

Licensing for

Phase 1 & 2

Commercial Mfg.

For Phase 3

Licensing for Phase 3 & there

on Assessment

V R I O V R I O V R I O V R I O V R I O Needs improvement

Genetic Engineering: Technical Competence Needs improvement Specific Competence: CRP Formula Promising Resource Research Scientists Promising Resource Strong Patent position on CRP Promising Resource Financial Standing Needs improvement Ability to identify Therapeutic CRF Promising Resource Specialized R&D Laboratories Favors in-house mfg. Mammalian Cell hosting technology Needs improvement Academic Partnerships Needs improvement Market Leadership in CRP Promising Resource Risk-taking attitude; motivation to expand Favors in-house mfg. Relations with Venture Capitalists Needs improvement Market Size and presence of Demand Promising Resource Promising Pre-clinical trials Promising Resource

From the RBV Analysis, it is clear that the following are most promising resources of Nucleon for all the options of expansion:

1. Technical competence: CRP Formula

2. Research Scientists

3. Strong Patent Position on CRP

4. Ability to identify the Therapeutic CRF

5. Market Leadership in CRP

6. Market Size and presence of Demand

7. Promising Pre-clinical trials

These resources which are valuable, Rare, Inimitable and aligned with the Organization together forms the greatest competitive advantage for

Nucleon for all the expansion options.

Veera K. Gonagundla

Exhibit 3: TCE to assess the expansion decision:

Features Biotech R&D Biotech Manufacturing

Hierarchy Market Hierarchy Market

Asset Specificity -----O----------------------- --------------------O------------

Human Capital Specificity ---O------------------------- ------------O--------------------

Location Specificity ---O------------------------- ----------------O----------------

Quality Uncertainty --O-------------------------- ----O----------------------------

Supply Uncertainty ---O------------------------- -----------------O---------------

Post-Opportunistic Behavior issues ---O------------------------- -----------O---------------------

Cost & frequency of interactions ---O------------------------- ---------------O-----------------

IP issues & concerns ---O------------------------- -------O-------------------------

Non-communicative issues (tacit) -----O----------------------- ------------O--------------------

Financial Risk & availability -------------O--------------- -----------------------------O---

Flexibility to Exit ---------------O------------- --------------------------O------

Information Processing ---------------O------------- ---------------------------O-----

Long-term Costs ----O------------------------ ------O--------------------------

Freedom for expansion, decisions & rights ---O------------------------- ----O----------------------------

Management Control & Costs ---O------------------------- ---------O-----------------------

Technology Holdup costs --O-------------------------- ----O----------------------------

Lemons Problem ---O------------------------- ------O--------------------------

Coordinate internal & external operations ---O------------------------- ------O--------------------------

Regulatory concerns ----------O------------------ -------------------------O-------

Agency Costs -------------O--------------- -------------------------O-------

Technology Transfer ---O------------------------- ----O----------------------------

Marketing efforts -----------------O----------- -------------------------O-------

----------------------------- ---------------------------------

Overall, it is clear that the R&D should be in-house and manufacturing should be outsourced or partnered with other corporations, who can

provide the marketing efforts to Nucleons products.

Veera K. Gonagundla

Exhibit 4: Options Available:

Option 1: Pilot Plant & Commercial Manufacturing

Option 2: Pilot Plant & Licensing

Option 3: Contract Manufacturing & Commercial Manufacturing

Option 4: Contract Manufacturing & Licensing

Option 5: Complete Licensing

Option 6: Licensing & Commercial Manufacturing (not possible & not available)

Phase 1 & 2

Pilot Plant Contract Manufacturing Licensing

Phase 3 and Manufacturing

Commercial Manufacturing Licensing(In-house Manufacturing)

Veera K. Gonagundla

Exhibit 5: Complete Financial Analysis:

Cost to obtain Phase -2 Clinical Trial Data for CRP-1

Pilot Plant Contract Manufacturing

7,394,000 4,795,000

Estimated Gross Sales of CRP-1

Year Sales

1998 53,700,000

1999 99,500,000

2000 125,000,000

2001 130,000,000

2002 150,000,000

2002 --> Future Assuming 10% discount rate and 5% increase in sales annually, the present value of total sales in future would be

3,000,000

Total 561,200,000

Pilot Plant & Commercial Mfg

Pilot Plant & Licensing

Contracting & Commercial Mfg

Contracting & Licensing Complete Licensing

Cost for clinical trials 7,394,000 7,394,000 4,795,000 4,795,000 0

Capital requirements 21,000,000 0 21,000,000 0 0

Revenues on sale of CRP-1 224,480,000 56,120,000 224,480,000 56,120,000 28,060,000

(40% of gross sales) (10% of sales as

Royalties) (40% of gross sales) (10% of sales as

Royalties) (10% of sales as

Royalties)

Up-Front Payments 0 7,000,000 0 7,000,000 3,000,000

Totals 196,086,000 55,726,000 198,685,000 58,325,000 31,060,000

Pilot Plant&

CommercialMfg

Pilot Plant& Licensing

Contracting&

CommercialMfg

Contracting& Licensing

CompleteLicensing

Series1 196,086,000 55,726,000 198,685,000 58,325,000 31,060,000

196,086,000

55,726,000

198,685,000

58,325,000

31,060,000

0

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

Financial Analysis - Net Cash inflows

Veera K. Gonagundla

Assumptions:

The gross sales are expected to grow at 5% annually

The Discount rate is assumed to be 10% (required to converge the perpetuity of gross revenues)

The salaries of 20 persons are not taken into consideration (Assuming that might not affect the Commercial Manufacturing option much)

All the costs are included, including the cost of acquisition and disposal of all physical & human resources for the estimate of cost of

clinical trials

The cost of capital, interest rates and VC funding (explicitly) is not included in the analysis

VC funding is assumed to be included (implicitly) in the Capital requirements of $21 M (20 + 1)

Exhibit 6: Options Evaluation:

Options Strengths & Advantages & Opportunities Weaknesses & Disadvantages & Challenges

Pilot Plant (for Clinical Trials in Phase 1 & 2)

Favors future large-scale in-house manufacturing

Experience with technical & regulatory issues is gained

Good control over process & quality procedures during Manufacturing

Easier to scale-up with the pilot plant in place

CPR-1 has got several therapeutic applications

Building manufacturing capability as a Competitive advantage as differentiating on R&D alone is difficult

Plant is not useful for Phase 3 clinical trials

No Financial capability to build such a plant

No human resources & capabilities available

Most drugs that entered clinical trials didnt reach the market

Huge financial risk if the clinical trials are failed

Process uncertainty: Bacterial cells or Mammalian cells for future hosting

Company is only research-intensive and not manufacturing specialized

Contract Manufacturing (for Clinical Trials in Phase 1 & 2)

No major Capital investments required for clinical trials

Contracts could be easily terminated

Suppliers have facilities and personnel in place

Ability to build relationships & partnerships with other companies

The excess capacity of suppliers can be a negotiated for price

Low risk with the failure of clinical trials

Confidential information disclosure issues as the information is provided before contracting, for the sake of time & cost estimates

Reaching an agreements takes several months

Technology transfer & scaling-up takes upto 9 months

Time to launch is critical

Pricing uncertainty due to volume uncertainty

Veera K. Gonagundla

Licensing (for Clinical Trials in Phase 1 & 2)

Start the deal immediately for licensing and no future uncertainty

No cost for Clinical development, manufacturing, regulatory filing, commercial manufacturing & marketing

Receive up-front fixed licensing fee of $3M and any reimbursements applicable

Low risk of failure of clinical trials

Intended for partnerships

Specialize in R&D activities with more focus

No hassles and easy operations

Lower revenues even if the clinical trials are successful

Mortgaging away the companys future

Less royalties as a percentage of sales (5%)

Information sharing with the licensee is risky

Commercial Manufacturing (For Phase 3 & then on)

Huge profits of close to $200 M

Best way to capture value for the formula

Sole supplier to its Marketing partner

Builds brand, reputation and corporate relationships

Easy to raise the capital if the clinical trials are successful

Huge capital investments of $21M is required

No facilities & manufacturing expertise

Build everything from the scratch

High financial, operational & reputation risk if failed

Investments need to be made even before the beginning of Phase 3

Licensing (for Phase 3 & then on)

No Capital requirements

No financial risks

Get $7M as an up-front payment

Good partnerships and corporate relationships

No responsibility for manufacturing and low marketing stake and efforts

Low revenues with royalty payments of only 10%

Information sharing with the licensee is risky