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Medium Revenue Strategy

Lost Patent

#Pharmaceutical #Healthcare
ProHub Comment

This case tests the candidate's ability to recognize that a well-established, efficient company facing patent expiration requires a revenue-maximization strategy, not cost-cutting. The candidate must shift focus from operational efficiency to strategic growth initiatives and demonstrate structured thinking about market dynamics, sales forces, and competitive positioning within a compressed timeframe.

Estimated Time 15 minutes
Difficulty Medium
Source Chicago Booth
50 / 100
Your team has been working with a major drug company on their future strategy. Their patent on a blockbuster drug, Zewal, will run out in less than a year. It currently generates half of their revenues, while 10 other drugs generate the other half of revenues. Their next blockbuster drug is still more than 5 years away from being ready and mergers are not possible. How can we help the company?

Clarifying Information

  1. The company is efficient and well-run. In fact, they have been cutting costs for the last few years and they are competitive with industry standards.
  2. Salesforce mainly sells to doctors.
  3. 20% of all doctors make up 80% of prescriptions.
  4. They consistently keep in touch with major HMOs.
  5. Dedicated salesforce of 150 people. On average a sales person is responsible for 100 doctors.
  6. The industry standard is one per 50 doctors.
  7. The rival company has the advantage of a bigger salesforce which can reach out to 35% of all doctors in the U.S.
  8. Our client’s reach is about 10%.
  9. The sales person’s compensation structure is dependent on the contribution margin of the drugs they sell. Each sales person has a portfolio of drugs with varying margins.
  10. The contribution margin for Zewal is the lowest. So far this strategy has worked as there is more pull for the drug than push required from the sales people.
  11. There is presently no single drug that has a similar chemical composition as Zewal, but doctors have been trying out a combination of drug regimen from a rival company.
  12. When the patent expires, our client will get about 6 months before generic drug companies come up in the market.