Critical Financial Problems

Q1. What are the basic problems for Medfield Pharmaceuticals with their Drugs
projection in recent times?

Medfield Pharmaceuticals has four basic molecules of drugs. The organization’s leading
molecule Fleximat - accountable for 64% of its total revenues had only two years remaining
on its patent. Lodamadal, painkiller drug accounted for 12% of the company’s total revenue
had five years remaining on its patent. Orsamorph another more intense painkiller
responsible for 24% of total revenues had fourteen years remaining on its patent. Reximet,
used for acute migraine pain and arthritis and joint pain is on the last trial phase and yet to
hit the market.
The pharma market had changed drastically in recent times. The industry is now
focussing on mergers and acquisitions, restructuring, and other strategies for Cost-Cutting,
internal R&D, looking at M&A and survival. With the economic slowdown, approaching
heath-care-reform law, and many drugs losing patents, pharma companies need to govern
what steps need to take to boost their bottom line. Many large Pharma companies are
accumulating their products by buying or licensing molecules from other companies or
acquiring smaller units.

Q2. How generic drugs are taking up the US market for blockbuster drugs once
the patent is obsolete?

US Patent policy allows drug manufactures 20-year protection from the date of the original
patent, plus 14 years from the date of FDA(Food and Drug Administration) approval. Once
the patent is expired, the molecule will become a generic one, and any pharma company in
the market can legally produce it, which significantly changes the pharmaceutical patent
landscape. The main objective behind this decision was for the availability of generic drugs
to more common people — generic drugs on an average of 50 to 75% cheaper than the
branded drugs. Blockbuster drugs sale can drop down to 80% or more the first year after a
generic competitor come in the market. In 2009 the generics’ market share was 74%,
compared with 49% in 2000.
Q3. What are the steps taken by Johnson to revive the blockbuster molecule
Fleximat?

Johnson focused her attention on Fleximat, which is the core drug of the company, became
the biggest source of ambiguity. Beside from Fleximat’s loosing out the patent and losing
sales to the expected generic substitutes, she had taken below steps to counter those:

 A transformed marketing effort would be aggressive tactics against competitors.

 Engaging in traditional tactics would allow the firm to control the assistances of
patents through hostile trial.
 Manufacturing the generic version of Fleximat in-house would allow Medfield to be
in partnership with large generic drugs and would lead to the broadest use of
blockbuster drugs. It would be the easiest way to generate positive cash flows
continuously.
 Restructure Fleximat would be the strategy of reinventing a drug to improve and
reduce the effect of generics.

Q4. Why would reformulation of Fleximat be risky being beneficial to the

organization?

In recent past following the same reformulation of a drug, five pharma companies
filed a case, and it dismissed by the federal district court. The court also made clear
antitrust laws do not assess the quality of a particular drug. New products can’t
affect the market share if customers preferred them.

Q5. Why is the decision is difficult for Jonshon to sell or not to sell Fleximat?

While starting the company, Jonshon has a primary mission: to find and develop
medicines that would make lives better. It was evident that Medfield was given an
offer with great opportunity. On the other hand, Reximet is in the late stage of the
trial, which can be a potential blockbuster drug in future in that case selling of the
company would be a bad decision.