823 ISSN 1746-0751 10.2217/RME.10.66 © 2010 Future Medicine Ltd Regen. Med. (2010) 5(5), 823–835 Special RepoRt Advanced Tissue Sciences Inc.: learning from the past, a case study for regenerative medicine History After operating for several months under bankruptcy protection, Advanced Tissue Sciences (ATS) was liquidated on 31st March 2003. The company’s liquidation raised sev- eral questions among observers and analysts. It had enjoyed a promising beginning when it developed a new treatment for replacing the skin of patients suffering from burn wounds, as well as diabetics with foot ulcers. Over its 17-year history, it had produced several tech- nical breakthroughs, which had enabled it to garner as much as US$309 million of funding from various sources. The company’s founder had also been honored with awards such as the Inventor of the Year from the Intellectual Property Owners Association [1] . In July 1992, the health industry journal had hailed ATS’ new approach as follows “Treatment for severe burns is moving out of the dark ages and pro- viding multimillion dollar market opportu- nities as advances in biotechnology spawn the irst generat ion of permanent, living skin replacements” [2] . During its active existence from 1988 to 2003 ATS was granted over 40 patents by the US Patent Ofice. Its products had also won praise from physicians who had used them on victims of the September 11th terrorist attacks. In 1992, the inancial projections for ATS’ products were excellent. A ‘conservative rev- enue model’ of the irm pred icted that the irst-year sales would touch $37 million and grow to $125 million by 1998. A more aggres- sive model put the igure at $280 million by 1998. Investment bankers, PaineWebber Inc. (NY, USA), predicted that ATS’ irst-year sales would be $26.3 million and would further rise to $120 million by 1996 [2] . With this expected growth, the company’s average spending of approximately $17 million on research every year seemed worthwhile [3] . These sales fore- casts resulted in a company value of approxi- mately $9.1 billion on 28th December 1998. By 10th December 2002 this value had plum- meted to $4.8 million without a major global inancial crisis being involved, hence at that point the company entered into Chapter 11 bankruptcy protection. What factors, then, brought about ATS’ downfall? Was it a victim of circumstances or the inexperience of management? Had the numerous joint ventures formed by it sapped management attention and consumed precious inancial resources, ultimately leading to bank- ruptcy? [4] Was the failure of ATS inevitable? How had its value been so overestimated by the market? Regardless of the exact causes, it On 31st March 2003 Advanced Tissue Sciences (ATS) was liquidated, with the effect that in excess of US$300 million of stakeholder inancing was destroyed. Although successful in the development of breakthrough technologies in the regenerative medicine arena and the building of a substantial portfolio of patents, the company never made a proit. In this case study, ATS’ business strategy, market and competitive environment will be discussed in the context of the company’s historical development. A number of important lessons from this case are discussed. From a management perspective the most critical lesson is the importance of effective inancial planning and management of costs, and in particular R&D costs, including the signiicant costs associated with clinical trials. In addition, a clear strategic focus is extremely important due to the signiicant resources required in the development of a new therapy. From an investor’s perspective the lessons to be gathered from the ATS case are related to the risk involved in investing in the ield of regenerative medicine. This case indicates that both professional and private investors did not fully question the validity of ATS’ business strategy and inancial forecasts. A clear and focused strategy based on long-term investor commitment is essential for the successful commercialization of regenerative medicine. KEYWORDS: Advanced Tissue Sciences n business model n business strategy n Dermagraft ® n investment n regenerative medicine n tissue engineering Niin Pangarkar 1 , Marc Pharoah 2 , Avinav Nigam 3 , Dietmar W Hutmacher 4 & Simon Champ †2 1 Naional University of Singapore Business School, Singapore 2 Proago Consuling, Zurich, Switzerland 3 Procter & Gamble Japan, Japan 4 Queensland University of Technology, Queensland, Australia † Author for correspondence: Tel.: +49 623 892 0840 simon@proago.ch For reprint orders, please contact: reprints@futuremedicine.com