Beruflich Dokumente
Kultur Dokumente
- 2009
Case Notes Prepared by: Dr. Mernoush Banton
Case Author: Mernoush Banton
A. Case Abstract
B. Vision Statement
“To make a difference in the lives of people globally through our innovative
medicines, vaccines, biologic therapies, consumer health and animal products. We
aspire to be the best healthcare company in the world and are dedicated to providing
leading innovations and solutions for tomorrow.”
“We have made it our mission to provide innovative, distinctive products and
services that save and improve lives and satisfy customer needs, to be recognized as
a great place to work, and to provide investors with a superior rate of return.”
To provide people worldwide (1, 3) with superior drugs (2) by developing innovations
and solutions using the latest technology (4) to satisfy customer needs, and to
provide employees (9) with meaningful work and advancement opportunities, and
investors with a superior rate of return (5). We are committed to the highest
standards of ethics and integrity (6). We devote extensive efforts to increase access
to medicines through far-reaching programs help deliver help to people who need
help (7). Through investments worldwide (3), we preserve and improve human life
(8).
1. Customer
2. Products or services
3. Markets
4. Technology
5. Concern for survival, profitability, growth
6. Philosophy
7. Self-concept
8. Concern for public image
9. Concern for employees
Opportunities
Opportunities
1. The industry is marked by rapid advances and is 0.08 4 0.32
heavily based on research and development
2. The United States leads the world with the 0.07 3 0.21
highest market share and is the home of five of
the ten largest drug manufacturers
3. Japan is placed third with companies such as 0.04 3 0.12
Sankyo Co., Takeda Chemical Industries, and
Yamanouchi Pharmaceutical
4. The industry is highly concentrated: the 50 0.06 4 0.24
largest companies control more than 80 percent
of the market
5. The pharmaceutical industry accounts for 27.3 0.07 3 0.21
percent of the healthcare sector
6. The industry has been growing at over 10 0.08 2 0.16
percent annually and many large drug companies
supplement their own efforts by buying or
licensing products from other companies
7. Increasing elderly population offers a good 0.07 4 0.28
opportunity for drug companies
Threats
1. Strong competition with approximately 1,500 0.05 4 0.2
companies in the U.S.
2. The pharmaceutical industry is capital intensive 0.07 2 0.14
with exorbitant research and development costs
3. Drug discovery and development is a highly 0.08 3 0.24
sophisticated process that can take several years
Positioning Map
Price (High)
Pfizer
Merck
Bayer
Price (Low)
Strengths
Weaknesses
1. The problem with Vioxx created negative publicity for the company
2. Merck’s revenue dropped by approximately US$347 million from 2007 to 2008
3. Merck carries more than US$1.4 billion in goodwill on its balance sheet and
close to US$4 billion long-term debt
4. Very nominal expenditure in R&D which could impact the company long term
5. Hardly any increase in product sales from 2007 to 2008
6. Multiple products have been linked to negative health effects
7. Product quality (recalls)
Net Profit
Avg P/E Price/ Sales Price/ Book
Margin (%)
12/08 10.20 2.73 3.42 32.7
Strengths
1. Continuous acquisition of companies has 0.07 4 0.28
made the company stronger
Weaknesses
1. The problem with Vioxx created negative 0.07 2 0.14
publicity for the company
F. SWOT Strategies
Strengths Weaknesses
1. Continuous acquisition 1. The problem with Vioxx
of companies has created negative
made the company publicity for the
stronger company
2. Strong distribution 2. Merck’s revenue
channel for all its dropped by
FS
Conservative 7
Aggressive
CS IS
-7 -6 -5 -4 -3 -2 -1 1 2 3 4 5 6 7
-1
-2
-3
-4
-5
-6
Defensive -7 Competitive
ES
Financial Stability (FS) Average 3.8 Environmental Stability (ES) Average -2.6
Strong
Weak
Competitive
Competitive
Position
Position
Quadrant IV
Quadrant III Slow Market Growth
1. Market development
2. Market penetration
3. Product development
4. Forward integration
5. Backward integration
6. Horizontal integration
7. Related diversification
High
3.0 to
3.99
IV IV VI
VII VIII IX
Low
1.0 to
1.99
Form joint
ventures
with
companies
who are not
in direct
competition
with drug
companies
but within
health-
Use the related
excess cash businesses
by acquiring for
biotechnology developing /
or other introducing
health- non-
related competing
businesses products
Key Factors Weight AS TAS AS TAS
Opportunities
1. The industry is marked by rapid advances 0.08 3 0.24 4 0.32
and is heavily based on research and
development
2. The United States leads the world with the 0.07 3 0.21 4 0.28
highest market share and is the home of
five of the ten largest drug manufacturers
3. Japan is placed third with companies such 0.04 --- --- --- ---
as Sankyo Co., Takeda Chemical Industries,
and Yamanouchi Pharmaceutical
4. The industry is highly concentrated: the 50 0.06 4 0.24 2 0.12
largest companies control more than 80
percent of the market
5. The pharmaceutical industry accounts for 0.07 --- --- --- ---
27.3 percent of the healthcare sector
6. The industry has been growing at over 10 0.08 --- --- --- ---
percent annually and many large drug
companies supplement their own efforts by
buying or licensing products from other
companies
7. Increasing elderly population offers a good 0.07 --- --- --- ---
opportunity for drug companies
Threats
1. Strong competition with approximately 0.05 4 0.20 1 0.05
1,500 companies in the U.S.
2. The pharmaceutical industry is capital 0.07 1 0.07 3 0.21
intensive with exorbitant research and
development costs
K. Recommendations
Form joint venture with smaller companies or companies that are in health-related
sector but are not in direct competition with Merck by making and introducing
health-related products such as vitamins, over the counter consumer products or
small medical devices.
L. EPS/EBIT Analysis
Merck will pay Dynavax Technologies Corp. US$4 million to cover costs of the
Heplisav program. This was based on partnership and the payment was the result of
negotiation since December 2008. Merck backed out of the deal after the FDA put a
hold on their joint venture testing program even though they lifted the hold later on.
After collaborating on a new cancer drug, pharmaceutical giant Merck and GTx are
parting ways, leaving the smaller player to fund clinical trials on its own. GTx will
reacquire rights to cancer drug Ostarine and its selective androgen receptor
modulator (SARM) program after dissolving its collaboration with Merck. Cutting ties
with the larger drug company will bring GTx closer to becoming a self-sustaining and
profitable company, says CEO Mitchell Steiner as the drug trials have faced
significant delays during Merck's recent merger with Schering-Plough. (Forbes, March
15, 2010)