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Medfield Case Analysis

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Chun-Ching Hsu

on 24 September 2014

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Transcript of Medfield Case Analysis

Medfield Case Analysis
Agenda
Introduction
Reformulation
Financial Projection
Recommendation
Problems
Medfield Pharmaceuticals
1(Fleximat) + 3 drug products
Fleximat is responsible for 64% of its revenue
Fleximat’s patent would expire in two years
$750 million offer to purchase Medfield

Reformulation
The simplest and most obvious approach to solve the challenge---Reformulation.
Idea of the reformulation: reconfiguring the medication so it was different enough for FDA approval and a new patent

Strategy: change the shape of the pills but keep the pharmacology of the medication unchanged.

Financial effect:

Initial cost $35 million
$25 million annually in 5 years from 2011
Sales drop 50% right after the patent expiration.
Sustainable growth for 8 years at 2% rate.

Financial Projection
Challenges
Lowering New drug approval rate
Increasing Cost to bring new drug to market
Generics taking the market share
Weak new drug development
Tony Hsu, Tony Lin, Sampson Wang, Kevin Wu
Professor Su Chan
Advanced Corporate Finance 231.790.81

Current Value
Value with Fleximat Reformulated
Value with all drugs reformulated
Reformulate?
No!!!
Take the offer?
Yes
$750 Million - $439 Million = $311 Million
No
Take on the Challenges
Recommendation
Negotiate a deal with the buyer
Respect the company’s culture
Keep company’s research team & structure
Decision to be made
Questions?
Introduction
Development costs were rising
Patents were running out
No new breakthroughs
Industry trends of M&A
Extend the patent or not?
$750 million-undervalue or overvalue?
Sell the company or not?
Full transcript