Morgan Life Case Study

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yale case 08-021 february 15, 2008 Morgan Life Sciences Ben Flaumenhaft 1 Constance E. Bagley2 (The following case is a fictional account, based on actual fact patterns from court cases) Morgan Life Sciences Inc. was a biotechnology firm headquartered in Waltham, Massachusetts. Initially, it focused on generic and over-the-counter medications, which it manufactured and distributed to drugstores and supermarket chains. Morgan completed a successful initial public offering in 1994, but by the late 1990s, the generics market had become increasingly competitive. Morgan steadily lost ground as its larger, low-cost competitors pushed prices relentlessly downward. The Morgan board promoted Wendy Shaw CEO in 1999. Recognizing that Morgan needed a major change of course, Shaw cut capital expenditures to the bone. Over the next five years the company built a decent stockpile of cash, even as its market share shrank. Meanwhile, she persuaded Morgan’s board that the company should invest in biotechnology. Shaw, who held a doctorate in biochemistry, was charismatic and engaging. She quickly assembled a sophisticated, well-connected Scientific Advisory Board. In 2005, the Board made its first big move when it recommended hiring Andrei Petrozzi. Andrei Petrozzi The Italian-born Petrozzi was a Professor of Biochemistry at the University of Massachusetts. In 2002, Petrozzi had developed a new kind of monoclonal antibody and shown that it was effective at fighting cancer in rats. The antibody, which Morgan called mexotinab (MXB), was a possible effective treatment for Maxwell’s Leukemia. (This case describes several drugs and diseases. Although based loosely on real science, they are fictional. Exhibit 1 summarizes these drugs and diseases.) Petrozzi, a prominent academic scientist, was new to the private sector and excited about the transition to applied research. After

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