Case 2 Amgen Inc.’s Epogen Case Executive Summary
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MMI1050 – Case 2 Amgen Inc.’s Epogen Case Executive SummaryJane Dong, Al-Qaim Mitha, Andrew Schellenbach, Shannon ZhengIssues Amgen Inc. has started a patent war with Genetics Institute over the production of EPO. Neither company was able to produce EPO without infringing the other’s rights. The dispute has brought considerable economical loss to both companies. The stock price and publicity of both companies came under severe pressure. The delay of EPO commercialization also raises ethical concerns on delaying potential treatments of patients with chronic kidney disease.AnalysisThere are four strategic approaches Amgen Inc. can pursue moving forward: 1) Accept Genetics Institute(GI)’s royalty-free license offer 2) Continue the patent war with GI; 3) Give up EPO production; 4) Offer a cross license agreement to GI.Amgen could accept the royalty free license with GI with a fixed upfront payment from GI. Although by choosing this strategy Amgen would gain upfront cash that can be used to pay off debts and develop future products, GI is the ultimate winner in the long run.
Amgen could continue its patent war with GI. However, this approach will continue to drain the company’s resources and could lead to the delay of other Amgen drug commercialisations. If Amgen gives up EPO production, significant loss of R&D and legal fees associated with the drugs development will not be quickly recovered. Epogen was responsible for 26% of the company’s $10billion product sales. Losing this market is detrimental to the company as it would need money to pay for the development of future products in addition to paying for the initial R&D and legal expenses. Lastly, Amgen could offer a cross-license agreement as GI initially offered. This agreement may be difficult to make given the history between the two companies, but it bring high profits for both companies.Recommendation We recommend Amgen to re-offer GI a cross license agreement. The two companies could reach common terms on manufacturing, distributing, and marketing of EPO that best utilize the core competencies of each company. Such an agreement would be mutually beneficial to both companies in terms of long term growth as it allows Amgen and GI to end the patent war and find their ways back to financial stability.