Auxilium Pharmaceutical Management - Assignment Example

? It has been determined that Auxilium Pharmaceutical needs to implement a new strategy approach to turn the company around. During the last three years the firm has obtained negative losses of approximately $50 million per year (Annual Report: Auxilium, 2010). Auxilium Pharmaceutical has been ineffective at marketing their products and at lowering the operating costs of the company to cover break even sales. The revenues of the company exceeded $200 million in 2010. The company should be making a profit at those sales levels. In the week four paper I identified several strategies that Auxilium Pharmaceutical could pursue. The purpose of this paper is to prepare an implementation plan for the company. A complete financial breakdown of the budget to implement the plan by segment is illustrated in Appendix A. The company must build up the image of the company and reinforce its brand value across the domestic United States marketplace. The company needs the doctors to recognize the firm’s brands as one of the best alternatives to treat Dupuytren’s contracture and hypogonadism. The company must hire a temporary workforce of pharmaceutical sales representatives for a period of six months. Each state will be allocated 100 pharmaceutical sales representatives. The goal of the program is for the pharmaceutical sales representatives to visit the offices of every doctor in the United States and to give them several samples of both drugs. As of 2008 there were 661,400 doctors in the United States (Bls, 2011). The purpose of the initiative is to create brand awareness of the firm’s products and to provide a personalized customer service to the doctors that prescribe the drugs. The cost to implement the plan is illustrated below: total employees 5000 Total hours elapse (6m) 1039 Total man hours 5,195,000 Labor cost per hour $15 Project cost $77,925,000 After the completion of the six months the company will not have to pay anymore the pharmaceutical sales representatives because their contracts will end and the company will no longer need their services. Due to the high implementation costs of the plan the company could divide the visiting doctor project in two years. The project after six months or lower and $38 million in spending would become inactive. The following fiscal year the company would fund the additional $38 million to complete the project. The company will also target the end user of the medicine, the patient. The company must increase its marketing budget a lot in 2012. The firm’s marketing budget must be at least twice of its 2010 spending. An effective branding strategy requires a high capital investment. The firm should create a new advertising campaign to be launched on Christmas day. The commercial will be launched simultaneously on the written press, television, radio, and the internet. The written press commercial will be a reanimation of the commercial in cartoon format. The radio commercial will provide the same audio as the television commercial. The television and internet commercial are identical. The total elapse time of the commercial will be 15 seconds. The advertising campaign will be run on television and radio for 30 days. The written press will have the commercial on for a period of 30 days with an offering of the commercial once a week. The internet campaigns will be ran for 90 days. The reason the internet campaign will be run longer is due to the lower cost of internet commercials. The total budget for the project is $2,000,000 million. The organization will use additional campaigns in order to raise the brand value of the firm. One of the technological tools that will be used to target specific customer profiles is the use of cellular technology advertisement. One of the advantages of cellular advertisement is that the entire population of targeted customers receives the message into their phones simultaneously. Due to the graphic and online capabilities of smartphones the company could design very appealing commercials. The commercial length should not exceed 15 seconds. The company should target a 10 second commercial for the cellular phone advertising campaign. The advertisement will be send to the users once a week for a period of four weeks. In order to reduce cost the commercial will be developed in-house. The final product of sending out video commercial cellular advertisement will be performed by consulting firm. The estimated cost of the project is $20,000 - $50,000. The company will limit the messages to an audience of 10,000 users. A fourth strategy that the company will use is to build 1000 large bulleting boards to be placed in cities with high population in the United States. The posters will be colorful and they will advertise both the Testim and Xiaflex products (Auxilium, 2011). The poster will be dual posters that advertise both products. One side of the poster will market Testim, while the other side will advertise Xiaflex. The size of the posters will be six feet long by three feet wide. The approximate cost of each poster including governmental permits is $2,000. The total cost of the bulletin board projects is $2,000,000. The fifth initiative the company must immediately implement is a full redesigning of its corporate website. The job should be performed by an outside contractor. Prior to choosing the contractors the accounting department must obtain at least five different quotations from reputable companies. The firm must emphasize that the web expert utilize optimization techniques to increase the website’s traffic based on an improved selection of popular words. The higher the traffic of the corporate website the greater brand value the company starts to build. The corporate website can also be used to improve the relationships with customers and other stakeholder groups. The policy of the firm should be to answer customer questions or inquiries within a 24 hour period. The approximate cost of the web designer will be between $10,000 and $15,000. The executive management team reviewed the strategic plan and the recommended to implement both strategic alliances and acquisitions. The company must begin a networking process to identify pharmaceutical companies that do not compete directly with the company. The company must find at least five companies. The firm will then negotiate a marketing strategic alliance with these companies. The purpose of the alliance is to share marketing resources and to perform combined ads for all participants in the alliance. The reason the companies needs to implement a diversification strategy is to add products to its product offering. In order to implement the plan the company needs to hire an intermediary. A consulting company will be hired to evaluate candidates for the marketing strategic alliance and to negotiate a deal with them. Once the five partners for the marketing alliance are identified an executive meeting must occur between the five CEOs of the pharmaceutical companies. The consultant firm will serve the role of a mediator during the meeting. The marketing contract alliance will be signed 30 days after the meeting with the CEOs. The consultant will be paid $250,000 in two phases. The first $100,000 once the five companies are identified and the remaining balance of $150,000 will be paid once the final contract is signed. Some of the benefits and initiatives of the strategic alliance include mutual commercials, transfer of marketing knowledge, and sharing of human and physical resources. Once the contract is signed the company must selected a team of two members to participate in a join task force. Each company will have two members in the task force to compose a ten member group. The optimal size of a group is between 8 to 10 members (Moore, 2006). The group will have meetings at a physical location twice a month and they will have one hour virtual meetings three times per week. The strategic alliance should have its first advertising material ready three months after the contract is signed by all the participants. The corporation needs to raise capital in order to implement its acquisition strategy to achieve diversification. The objective is to purchase the license or the full manufacturing operation of a small pharmaceutical company with a market capitalization of approximately $250 million. To finance the project the company will use a combined strategy. The first $100 million will be raised through the sale of ten year corporate bonds. Corporate bonds are debt issues used by corporations to raise money which require a recurrent coupon payment every six to twelve months and full payment of the principal upon maturity of the bond (Finance-glossary, 2011). The remaining $150 million are going to be raise through the sale of common stocks. The company has to issue a secondary offering of stocks. The estimate time to raise all the money is 30 days. The executive management team of the company will search for a good acquisition targets in the industry. Due to the budget limitations the company should seek a generic drug that has high volume of sales with a good gross margin. The target company should follow a diversification strategy, thus the new drug product must help treat different diseases than Xiaflex and Testim. Auxilium Pharmaceutical has to evaluate its internal operations in order to streamline them to reduce costs. Three years of net losses should be enough proof that cost savings are necessary. In terms of revenues the different strategies that the firm will implement in the short term should help build brand value and increase the total sales of the company. Brand awareness for the Xiaflex will be accomplished once the pharmaceutical representatives visit all the offices of the doctors in the United States. Due to the limited size of the market for the Xiaflex drug and to a certain extend to the Testim drug the company has identify multiple international targets for expansion. The partnership the company signed with Pfizer on March 2010 for the development and commercialization of Xiapex (European version of Xiaflex) was a great initiative by the executive management team (Annual Report: Auxilium Pharmeceutical, 2010). Pfizer received approval from the European Commission and the drug will be available in the market in the fourth quarter of 2011. Pfizer has the vision of fully advertising the new drug across the world. If the partnership with Pfizer works well the firm should seek a permanent arrangement with the company by creating a joint venture. A joint venture can be defined as contractual agreement joining two or more parties for the purpose of executing a particular business undertaking (Investorwords, 2011). The company also has to gain the input of the patients in order to show the world how satisfied its users are with the effectiveness of Testim and Xiaflex. My recommendation to address the issue is to perform primary research. Primary research can be defined as any type or research that a research goes out and collect themselves thought methods such as surveys, interviews, observation, focus groups, and ethnographic (Purdue, 2011). The primary research techniques that the company should use are surveys and focus groups. The surveys will be an online questionnaire. An economic incentive of $100 will be given to the first 500 patients of Xiaflex that fill out the survey. The same financial incentive will be given to the first 500 patients of Testim that fill out the survey. The total implementation cost of the online questionnaire product is $100,000. One of the benefits of this initiative is that the company will receive instant feedback once all the surveys are filled out. The second primary research initiative is to formulate focus groups. Two focus groups will be formed one for each drug. The size of the focus groups will be 30 people. A population of 30 was chosen because a sample size of at least 30 is needed to perform statistical analysis of the results (Mann, 1995). Appendix A: Implementation Plan Costs Quarter 1 Quarter 2 Quarter 3 Quarter 4 Pharmaceutical Sales Rep. $19 million $19 million $19 million $19 million Commercial multiple channels $2 million Cellular Ad $35,000 Bulletin Boards $2 million Website redesign $125,000 Consultant $250,000 Acquisition Generic Drug $250 million Primary Research $100,000 Total $273.51 million $19 million $19 million $19 million References Annual Report: Auxilium Pharmaceutical (2010). Retrieved August 31, 2011 from http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9OTE0NTB8Q2hpbGRJRD0tMXxUeXBlPTM=&t=1 Auxilium.com (2011). Our Products. Retrieved October 31, 2011 from http://www.auxilium.com/OurProducts/Default.aspx Bls.gov (2011). Physicians and Surgeons. Bureau of Labor Statistics. Retrieved October 26, 2011 from http://www.bls.gov/oco/ocos074.htm Investorwords.com (2011). Joint Venture. Retrieved October 31, 2011 from http://www.investorwords.com/2671/joint_venture.html Finance-glossary.com (2011). Corporate bond. Retrieved October 31, 2011 from http://www.finance-glossary.com/define/corporate-bond/315 Mann, P. (1995). Statistics for Business and Economics. New York: John Wiley & Sons. Purdue.edu (2011). What is Primary Research and How do I Get Started? Retrieved October 31, 2011 from http://owl.english.purdue.edu/owl/resource/559/1/ Moore, K. (2006). Edward Hall: The perfect group size = 8 to 12. Retrieved October 31, 2011 from http://37signals.com/svn/archives2/edward_hall_the_perfect_group_size_812.php Read More