The highlight of the Case: The Future of BioPasteur
BioPasteur is at a crossroads. The company’s founders are split on a decision that is critical to its future. A new drug (DIASTOP) was developed to cure type I and Type II Diabetes. After FDA approval, Prof. Paul Rivers believes the drug is dangerous to patients between 50-70 years of age. About 80% of the revenue was estimated to come from customers between 45-70 years old category. Since the three founders are friends and do not like conflict, they hired PSL and Co. to act as an external arbiter to make recommendation on whether to release DIASTOP to the market now or take it to the laboratory for further development.
Below was the first draft of my report as a senior consultant of PSL and Co. to Biopasteur management.
The Report
“February 23, 2010
The Managing Director,
The BioPasteur Venture, New England
Attention: Jeff Thompson
Dear Sir,
Subject: The Risk of Introducing DIASTOP to the Market at the current state
The Biopasteur venture is a well-known enterprise in the medical community. Credit to the introduction of LOBLOPRIN, a blood pressure drug that was not generally accepted at the beginning, but later proven to be very effective and profitable to the company. The company’s decision to invest in a drug that could treat both type 1 and type 2 diabetes, has not gone unnoticed by Doctors in New England. However, the recent skepticism expressed by Professor Paul Rivers during the Annual Global Pharmaceutical conference calls for concern. Professor Paul challenged the effectiveness of DIASTOP to treat diabetes in patients between the age of 50 and 70. BioPasteur is faced with decision to either introduce DIASTOP now or return it to the laboratory for further development.
Notwithstanding the FDA approval of DIASTOP, Biopasteur objective was to develop a drug with the safety of the patients as a top priority. The result of the clinical trials have not provided enough confidence that the drug is safe to be released to the market until further testing is done to confirm the drug is safe in patients of all ages. It was reported that 4.5% of the 1000 sample size that underwent the trial developed heart-related complications, and about 0.3% suffered severe consequences and were hospitalized. This result appears not to be perfectly in alignment with the objective of the company for developing DIASTOP, though it was proven to be more effective than other drugs in its category.
Professor Paul Rivers’ theory: More Clinical Trials
To verify or refute Prof. Paul Rivers’ claim that DIASTOP is injurious to patients between 50 and 70 years. We recommend that management requests for approval from FDA to carry out a further trial on patients between this age bracket:
- The last test request by FDA was made from 30-year-old individuals with modest cases of diabetes. Exhibit 2 shows that complications resulting from this age bracket (30-50), were at the lowest point. This could indicate that the chance of increased complications is possible within the 50-70 age bracket. Also, exhibit 1, shows that complication was low when 5mg or 15mg was taken. This needs to be proven further during the next trial.
- 80% annual revenue of DIASTOP (about $56 Million) is expected from patients between the age of 45-70. If this important customer target does not accept DIASTOP, a potentially lost margin on the drug could be looming.
Subject DIASTOP to further Development
If the result of the test shows an increased rate of severe complications with hospitalization cases, the management is advised to consider subjecting DIASTOP to further development. The gain or savings to be accrued from the early introduction to the market is inconsequential to the damage; a recall DIASTOP by FDA would create. The negative brand’s reputation, loss revenue on LOBLOPRIN, and the moral implication of management decision when it is being reported on Global pharmaceutical publications are all important factors to be considered. If the drug is sent for further development, the $48 million investment to improve the core technology of BioPasteur can be covered within the first 12 months of its successful entrance to the market, and that changes could help the renewal process of its patents right. We believe management would not like to donate a BioPasteur brand that is caught up in moral scandal to MIT.
FDA Recall of LIPOSCI Drug
The Conclusion
The report by Professor Rivers is an opportunity for Biopasteur management to reassess the effectiveness of DIASTOP. BioPasteur should widen the clinical trial to the population between 50-70 age which constitutes 80% of its potential customer target. The outsourced production vendor (GFT) should be contacted to put the production on hold until the final trial is conducted. The $15million commitment by BioPasteur based on the signed contract to produce the drug could be absorbed as a loss. GFT could refuse to continue with the project and the management should be prepared to absorb the cost already advanced.
Joshua Adeyemi (EMBA27)
Senior Consultant (PSL and Co.)
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