Merck case solutions and business thics

1. Questions for Merck Case
1. What are the stakes for Vegalos as a CEO and Merck as a company
in deciding whether to invest in Dr. Campbell’s ideas?
Stakes for Vegalos as a CEO:
 As a CEO Vegalos is responsible to show results to all the stakeholders of
Merck and is also responsible to protect the reputation of Merck.
 On the contrary of taking the decision not to fund would hurt the
company’s fundamentals of providing cure to people with illness.
 By approving the project, he will take a risk of huge financial loss.
Stakes for Merck as a business:
 Merck would be hit badly on the reputation side if the drug shows side
effects on humans which has chances of being happening.
 Merck would face loss of sales from the existing sales of successful
animal drug ivermectin.
 Merck’s investment in the project might just be a loss producing no
returns at all.
2. How does Merck pick from many ways to “do good” and many
drugs to invest in?
 There was never a single method by which projects are approved and
money was distributed.
 After finding the potential in a particular project only then Merck would
start looking at it critically.
 Every year Merck’s research division has a large review meeting at which
all research programs were examined. Projects were coordinated and
consolidated. Established programs were reviewed and new possibilities
were considered. This is how new investments for considered to move
forward to the next stage.

2. 3. How much of its research budget should Merck invest in drugs that
will likely produce a substandard return on its investment?
 It takes 12 years and 200 million to bring a new drug to the market.
 In 1978 161.35 million is invested in Research. This is with a 11.35%
growth rate from previous year.
 Net income is 300 million.
 Over years’ investment would be on an average 16.66 million dollars per
year which is 10.32% of existing research and development expenses.
 With a net income of 300 million the company can take the risk of
investing 10-11% of its research expenses to a substandard return on
investment project.
4. What should Merck tell the shareholder who might complain about
the decision to invest in research in river blindness?
“We try never to forget that medicine is for the people”, It is not the profits,
profits will follow and if we have remembered that they have never failed to
appear. The better we have remembered it the larger we have been” - This is the
company’s corporate philosophy. And this is a strong reinforcement to the
decision of investing in the project.
 The other problem would be on reputation of the business which is in
case if the drug shows side effects on the humans and this one is ir-
repairable and as a ceo certain preventive measures can be taken to
deviate the loss from reputation to financial.