You are recently hired as Senior Vice President and Chief Operating Officer (COO) for a company in the biotechnology field focused on vaccines for immune therapies for cancer patients to help boost their immune systems while they go through radiation and chemotherapy treatments. You report directly to the President of the company. You will be assisting in the launch of a new drug for the company.
The role you will take is to oversee the following duties and create an action plan on how you would handle the following fact patterns individually and collectively as a whole. You have the potential to get a $1 million bonus in March 2023, if you can solve the above problems before February 1st, 2023. Please address the following:
1. Overseeing General Counsel Management Decision:
a. General Counsel is the attorney for the company and you can utilize the attorney as needed to address legal related issues that impact the company business situation and your decisions you may want to implement. The General Counsel is salaried and makes $175,000 per year and this comes to 1500 hours of his time as an employee or $116.66 per hour. He also gets a 401k, bonus and health care which equals another cost of 30 percent of his base salary or a total for these additional benefits of $52,500. So he makes a total of $227,500 or cost the company as an expense for his employment $227,500. He is weak on the employment law and has created some issues that need your action plan.
b. You also have been approached by another lawyer outside of the company who has expertise in handling employment law and litigation if you need some additional resources. Her hourly rate is $500 per hour for her services.
Who would you choose and why for the following situation:
Your General Counsel has a current dispute with a third party vendor that demands payment for an alleged claim that they shared the legal rights with your company on the last drug launched. Your company made a profit on that last drug launch in the amount of $200 million dollars. This company was a collection of scientists hired as consultants to work on that vaccine from France and they got paid, but they also claim they were to be paid 20% of the 200 million profit from one year of that vaccine in the amount of $40million dollars. You are trying to settle this matter in a negotiation before any other legal options have to be implemented, which may include having to litigate the case in France which is not a favorable option for your company. Who would you choose to handle this situation and what would be your plan be to settle it.
2. How would you raise new capital for operations, which includes making new payroll, new scientists, new computers, and lab equipment?
3. How would you raise new capital for renovations and expansion of the company’s manufacturing plant that produces your compounds that are used in your vaccines?
4. What would your action plan be if you were tasked to hire 4 new key scientists to oversee property development that would like to create a new 2025 vaccine, which includes going through a new drug launch with the Food and Drug Administration for approvals through phase 1 and phase 2 (for purposes of the final assignment you do not need to know much about those phases focus on the agreements with your new employees and the intellectual property they may create)
5. You have been tasked to make a hard decision and let 3 key US-based scientists go that each make $300,000 a year and they have worked on the last vaccine launched in 2022. This vaccine has made the company $200 million dollars. The reason you need to let them go is because the President wanted to outsource their work for the 2025 vaccine launch because your new budget is $500,000 dollars now. You can also offer equity to the 3 key scientists up to .005% of future profits of the 2025 vaccine, which is estimated at $500 million dollars of profit. This equates to $2.5 million dollars each. How would you approach this conversation with the 3 key scientists?
6. Oh no! Some of the action plans that you have proposed have not worked and the claim from #1 was never settled and not enough capital was raised for operations and research. The President has informed you that the company will face the prospects of having to file bankruptcy. It is your job to review all of the details of the situation at hand and provide a new action plan that can save this company from bankruptcy. There is no direct one answer, so please use everything you learned from every chapter as well as the information provided from the previous action plans to form your opinion.
If bankruptcy happens the creditors will be a private equity firm that provided the original finance in equity of $50 million for the 2022 vaccine. In addition to that, UBS (a bank), gave your company a $50 million loan which also valued the manufacturing plant in its current condition at $25 million only and is holding the fixtures and equipment as collateral. This means that you owe UBS $25 million dollars.
The patent/intellectual property of the 2022 vaccine is valued at $70 million dollars. However, since the claim was not settled in #1, it will only be valued at $40 million dollars because of $30 million dollars in litigation claims.
In total you have $55 million dollars in debt, this means you have surpassed the original $50 million dollar loan you got from UBS. UBS also is the main shareholder of this company, holds all of the directors seats. If you don’t fix this situation, the shareholder will lose all its original money other than what it was paid in a dividend in 2022 from the profits of the 2022 vaccine losing the opportunity of new value and new profits of a second vaccine in 2025.
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