THE MEDFIELD PHARMA CASE: FIRM VALUATION AND ETHICAL CONSIDERATIONS OF REFORMULATION
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Understand that the Medfield case has 2 major problems: 1) Firm Valuation – Impact of Patent Loss and Reformulation; 2) Ethical Considerations – How to Ensure Patients and third-party payees are not hurt
Organize your paper around the case questions, use them as an organizing device. This will benefit you in several ways: 1) provide a framework for constructing your paper; 2) ensure I (your reader) understand exactly what question you are answering; and 3) ensure you answer every question.
Use examples from Pfizer, AstraZeneca and other firms in EXHIBIT 3 to substantiate your thought.
- What is the current value of Medfield as a company? Use the exhibit 4 spreadsheet to calculate the NPV of Medfield. Compare this result to the offer price and provide your reasoning for the difference.
- If we consider the sale of Medfield as the sale of existing assets how does the elimination of R&D, investment in future assets, change the valuation of Medfield? (Using the exhibit 4 spreadsheet distinguish between the NPV value of existing products and R&D)
- What is the value that would be created by a reformulation? Complete and explain the table below.
Incremental Special Marketing
Marginal Sales (New Sales – Original Sales
New Cost of Sales
Marginal Cost of Sales
New Direct Marketing
Old Direct Marketing
Marginal Direct Marketing
Marginal Cash Flow pre Tax
- What factors explain the value created from the reformulation for Fleximat?
- Who reaps the financial benefits?
- Who bears the financial costs?
ONLY ANSWER ONE OF THE QUESTION 7’S:
IF YOU SUPPORT REFORMULATION:
- What facts would change your mind and cause you to recommend against reformulation?
IF YOU ARE AGAINST REFORMULATION
7. Under what conditions might you be in favor of reformulation?
- How would you change your thinking if Medfield’s reformulation approach were more substantive (e.g. drug works faster, works longer) than cosmetic?
- Could Medfield use the extra value created by the reformulation to generate new and helpful products?
- When you consider Medfield’s stakeholders, what are the key issues. Choose three from the following list and discuss the key issues.
- Shareholders of Medfield
- Patients using the drug
- Third-party payees (Medicare, private insurance companies, etc.)
- Employees of Medfield
- What ethical issues need to be considered in making a reformulation decision? Which are more pressing? Reference the ethics concepts discussed earlier in the semester, include at least one of the Right vs. Wrong explanations presented: Consequences, Duty, or Virtues. Use external references sources to support your discussion of the ethical issues.
- What should Susan Johnson do? Explain your choice of a, b, c, or d. If you have another approach, discuss it here.
- Don’t pursue the reformulation, but accept takeover offer
- Initiate the reformulation and accept the offer
- Refuse the offer but initiate reformulation
- Refuse the offer and not reformulate
Your Turnitin Score needs to be 0-30% tops. Try to get it down there. If it is higher, I will read your paper, and see why the score is high but your grade will reflect the score.