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Product Overview

Susan Johnson, founder and CEO of Medfield Pharmaceuticals, is faced with conflicting recommendations for extending the patent life of the company's flagship product, Fleximat, scheduled to go off patent in two years. With only three other products in Medfield's lineup of medications, one of which has only just received U.S. Food and Drug Administration approval, strategic management of the company's product pipeline is of paramount importance. But a recent $750 million offer to purchase the company has entirely shifted her focus. With this offer, Johnson has the opportunity to exit the business on a high note. Before making her recommendation, Johnson has to determine the value of the company, with a careful review of its existing and potential future products. But this is more than simply a financial decision, since Johnson?and Medfield employees in general?believe that the company is engaged in critically important work. This case is meant for undergraduate, MBA, executive education, and executive MBA audiences. It is taught as part of a core course, "Financial Management and Policies," at the Darden Graduate School of Business Administration.

Learning Objectives

• Determine the value of a project given facts related to cash flows. • Determine the value of a set of existing assets of a company and explore the relationship between the value of projects and the value of the company as a going concern. • Articulate the purpose of the company and explore the relationship between company mission and value creation. • Identify the stakeholders of a company and analyze the implications of the firm’s choices to those stakeholders. Confront the ethical aspects of the firm’s resource allocation decisions.