Page 13 - CIMA SCS Workbook November 2018 - Day 1 Suggested Solutions

SUGGESTED SOLUTIONS

Bribery
The competitive nature and regulation within the pre-seen and brief industry research shows that
companies have been found guilty of such actions. It could be happening at Novak, or a drug
developed by Novak may not be successful or gain approval because competitors seek to get an
unfair advantage.

Litigations
Given the regulation, the sensitive nature of the industry and the importance of patents, all these
factors could lead to litigation either by Novak or against Novak.

Supply chain quality/safety
As the products that Novak make are consumed and designed to have an impact on the health of
their users any issues with either API or excipient ingredients could lead to adverse reactions and
litigations (as above), so the quality of supply is critical to Novak.

IT/Cyber security
Intellectual property is mentioned as being very important within the industry. Protecting it from
malicious actions by “hactivists” or underhand competitors is therefore vital.

Pricing
Getting the pricing strategy right for a drug is vital, so that it receives approval from the PRA but
also to make sure the margin is sufficient to cover the R&D costs for that drug and the various
other drugs that don’t make it through the R&D phase.

Patents run out before they have generated sufficient return
There is a risk that it takes too long to get a compound into an acceptable format, through all the
regulatory approval and on the market before patent runs out and competitors can enter the
market.

Interest rate risk
Novak has a significant amount of debt and needs to continually reinvest, therefore maintaining
appropriate gearing and interest cover levels will always be something the company must be
aware of.

Foreign exchange risk
As a global company with factories in 10 different countries around the world they will be likely to
face all three types of currency risk.

Health & Safety
Both the factories and the major research centres will involve the use of hazardous substances,
the health and safety of their workers will be of utmost importance.

Animal rights groups
Testing on animals and humans is common within the industry and so it is likely that Novak will
face some sort of protest from activists.

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