Question

You are a manager who works for Hecht LLP, a local accounting firm. Your client is Triox Co. Triox is a major manufacturer of pharmaceutical products. A significant part of the company's operations involves research and development. Your firm has accepted the engagement to prepare a special report regarding the operations of Triox. (more will be discussed on this in unit five). Any findings in the report will be used to dictate the interest rate for future financing.

You have found that the company is near completion of a drug that is expected to save consumers significant money and compete effectively with the lead brands.

Upon review of the unaudited financial statements, you see a note states the government has provided funding for research contingent on the successful launch of the drug mentioned above. This loan will be forgiven upon successful launch of the product. The loan was not recorded on the books as the CFO of Triox felt that the new drug was near its final stages and would be launched within the timeframes specified in the contract with the government. Upon further enquiry, you also found there have been delays for a number of reasons of the new drug and it is unlikely the drug will be launched in time to meet the terms of the contract with the government.

Required:

1. Explain any concerns that you have given the recent information regarding the launch of the new drug
2. Discuss 5 procedures that you would perform to alleviate these concerns.

Answer 1

1.concerns that recent information regarding the launch of the new drug

• Reduced staffing and travel at pharma companies will shrink resources for managing, communicating and promoting launches. With home-working now the norm, global launch teams are more geographically dispersed than ever, to say nothing of the culture shock experienced in predominantly office-based businesses.
• Pharma companies’ ability to fund new drug launches is affected by the global economic downturn and accompanying share-price erosion
• Regulatory agencies, as well as pricing and reimbursement authorities, face depleted staffing due to coronavirus. This could potentially delay drug assessments and launch programmes.
• Regulators are also scaling back facility inspections, which could slow drug approvals and launches.
• Social distancing, travel restrictions and refocused priorities at medical-centres complicate clinical-trial recruitment and implementation. The longer-term impact could be delayed launches.                        
• Once new drugs actually launch, they may encounter disruption in the pharmaceutical supply chain (e.g., drug shortages due to pharmacies, health systems or patients stockpiling medicines)   
• Launches are competing for media space and awareness currently saturated with coronavirus concerns.
• Reduced hospital visits could impede access to specialty medicines, while healthcare providers may be more inclined to prescribe treatments that can be taken at home.
• 2) Government grants must be accounted in financials. And once the conditions met then only the benefit should be carry forward.
• The terms and conditions and guide lines of government should follow.