Emily’s Dilemma: An examination of tactics used to protect and surrender market share

K. Doreen MacAulay, Robert Marley, Mark J. Mellon and Rebecca Shortridge

Journal of Accounting Education, 2023, vol. 62, issue C

Abstract: This case involves evaluating the ethicality of a pharmaceutical company’s catch and kill strategy. As opposed to taking the perspective of an experienced executive at a large, successful company, this case is presented from the viewpoint of an inexperienced CEO at a small, cash-strapped research firm that has two promising drugs in early stages of development. However, the firm possesses neither the resources nor the experience necessary to bring the experimental drugs to market. This case introduces you to the timeline and steps associated with the Food and Drug Administration’s drug approval process. Additionally, the case asks you to review US GAAP and IFRS applicable to research and development costs, to analyze the appropriate accounting for intangible assets, and to perform discounted cash flow analysis under varying assumptions. It thereby introduces students to a variety of accounting and valuation issues that abound in the pharmaceutical industry.

Keywords: Capital budgeting under uncertainty; Catch and kill strategy; Defensive asset; Discounted cash flows; Ethics; FDA drug approval process; Intangible assets; Research and development costs; Risk-adjusted net present value analysis (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:joaced:v:62:y:2023:i:c:s0748575123000015

DOI: 10.1016/j.jaccedu.2023.100829

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