You are the risk manager of Glenmark Generics, a manufacturer of generic pharmaceuticals. Your firm has a generic substitute of a patented drug that is introducing to the US market. However, the patent for the drug is still several months away from expiring, and is held by Sanofi-Aventis. Under a special provision of US law, Glenmark can contest the patent's remaining months and begin selling the generic before its patent expires. If Glenmark contests the patent, begins selling the generic drug, but then Glenmark does not win the court case contesting the patent, Glenmark will face litigation from Sanofi-Aventis for damages. Sanofi-Aventis has filed an injunction to stop Glenmark from selling the generic drug while the litigation is on-going. The court, however, has denied the injunction. Launching a generic drug before the outcome of a patent suit is resolved is a common strategy in the generic drug industry. The industry calls this strategy a "launch-at-risk". In the recent past there have been just over 300 cases of a launch-at-risk. In 21% of these cases the patent holder settled with the generic drug manufacturer, but Sanofi-Aventis settled only in 7% of the cases against it. For the cases that did not settle and went to litigation the courts ruled in favor of the generic manufacturer in 48% of the cases. The cost of such litigation is on average $4 million, plus any damages to Sanofi-Aventis if the court rules against Glenmark. Under the applicable law, courts determine damages on the basis of lost sales to the patent holder. Based on what you anticipate, and on prior cases, you think that damages will be around $20 million, give or take a few million. An insurance policy to cover damages (but not litigation costs) Glenmark may have to pay to Sanofi-Aventis costs $9.6 million. Under the applicable law, once Glenmark launches the generic drug, Glenmark will have a 12- month exclusivity, after which other generic manufacturers can introduce their own versions of the generic drug. During the exclusivity period Glenmark projects a price of about $2.10 per capsule with a profit margin for a capsule of about 90%. Because the price of generic drugs is substantially lower, during the exclusivity period Glenmark will have about 60% of the total market for the drug. You cannot estimate Glenmark's share market after the exclusivity period because other generic versions of the drug will be available. The annual market for Sanofi-Aventis is $60 million. Sanofi-Aventis sells each capsule for $3. For the prior year, Glenmark has total revenue of $523 million and net income of $69 million.

What do you recommend Glenmark do? Explain/justify your recommendation.

Part 2 During the semester we have examined several real-life situations involving the management (or mismanagement) of risk. We also discussed the quality of risk leadership associated with these real-life situations. How would you explain "risk management" and "risk leadership" to a person without the benefit of your knowledge? If you rely on sources other than your notes, please cite these sources.