THE MEDFIELD PHARMA CASE: FIRM VALUATION AND ETHICAL CONSIDERATIONS OF REFORMULATIONUnderstand 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 hurtOrganize your paper around the case questions. Use them as an organizing devise. 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.20112012201320142015201620172018201920202021202220232024Incremental Research3535Incremental Special Marketing2525252525Growth2%-50%2%2%2%2%2%2%2%2%-50%-50%-50%New Sales214.77Marginal Sales (New Sales – Original Sales0.00New Cost of Sales49.40Marginal Cost of Sales0.00New Direct Marketing57.99Old Direct Marketing57.9959.1529.5714.797.39000000000Marginal Direct Marketing0.00New G&A8.59Old G&A8.598.764.382.191.10000000000Marginal G&A0.00Marginal Cash Flow pre Tax(60.00)29.5214.767.38Marginal NOPAT(40.80)20.0710.045.02NPVWhat 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 REFORMULATION7. 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 for each of the following:
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.REFERENCES MUST BE IN ALPHABETICAL ORDER. NAKED URLS ARE NOT ACCEPTABLEAPA conventions for citing and referencing:https://owl.purdue.edu/owl/research_and_citation/apa_style/apa_formatting_and_style_guide/general_format.html//owl.purdue.
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