Case Detail

Case Summary

AstraZeneca, Prilosec, and Nexium: Strategic Challenges in the Launch of a Second-Generation Drug

Case Number: 5-404-752, Year Published: 2006, Revision Date: April 01, 2005

HBS Number: KEL334

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Authors: James Gerard ConleyRobert C. Wolcott; Eric Wong

Key Concepts

Intellectual Property, Regulation, Patents, Innovation, Trademarks

Abstract

Tom McKillop, CEO of AstraZeneca, faced the classic quandary of large pharmaceutical firms. Within the year, the firm’s patent for Prilosec (active ingredient omeprazole) was expiring. Prilosec was a US$6.2 billion/year blockbuster that revolutionized the treatment of chronic gastro-esophageal reflux disorders (GERD). Severe cost-based competition from generic drug manufacturers was, however, inevitable. Patent expirations were nothing new for the US$15.8 billion in revenues drug firm. AstraZeneca had Nexium, an improvement on the original Prilosec molecule, in the pipeline. Ideally, it would like to move brand-loyal Prilosec customers to Nexium. Additionally, the company had the opportunity to introduce its own version of generic omeprazole, hence becoming the first mover in the generic segment, and/or introduce an over-the-counter (OTC) version of omeprazole. Tactically, AstraZeneca would like to use regulatory incentives and intellectual property rights to strengthen its competitive position. How could the company use its entire portfolio of intellectual properties—including patents and trademarks—to actively manage the priced-based competition and achieve a revenue growth strategy in the GERD market? Use with Case Supplement #5-404-753 (KEL335).

Number of Pages: 20

Extended Case Information

Teaching Areas: Management, Strategy

Geographic: Global

Industry: Pharmaceuticals

Organization Name: AstraZeneca

Organization Size: Large

Decision Maker Position: CEO

Decision Maker Gender: Male

Year of Case: 2001