Berlex

The Betaseron Decision

Case Study

Executive Summary:

Berlex Labratories has developed a drug, Betaseron, as a treatment of Multiple Sclerosis. The FDA has approved the drug ahead of schedule, leaving the supply far behind the demand. Berlex must find a way to handle the supply, distribution, and price.

Financial Analysis:

Berlex has a medication that works and people need it. There is a market of approximately 100,000 people in America. With an expected price of $10,000, this is a drug worth $1 billion per year.

However, Berlex will not see this revenue for a few years. Since the FDA approved the drug two years ahead of schedule, the supply does not meet the demand. Berlex’s supplier, Chiron Corporation, estimates to have enough of the drug to supply to 12,000-20,000 patients in 1993. This will yield $120,000,000 to 200,000,000 in revenues.

They will increase production in following years. They should be able to provide 40,000 patients by 1994, providing $400,000,000 in revenues. They do not expect to meet demand until 1996.

SWOT Analysis:

Strengths:

Berlex has developed the only MS treatment drug in the past 25 years. Their strength is no competition for the life of their patent. They have a strong market of 1/3 of MS patients.

Weaknesses:

The hastened approval of the drug has shown to be a problem. They have a short supply of the drug to sell and must find a way to produce as much as they can in as little time possible.

Opportunities:

Berlex will be making a lot of money in this drug. Over the next few years, the supply will increase, and revenues will along with it. Opportunities lie in the ability to increase supply as soon as possible.

Threats:

There is a 20 year patent on the drug. They have the market guaranteed in this time frame, and they need to make the most of it. Time is their threat. It is only a matter of time before another company is able to copy the drug and start producing it themselves....