Scm421merckcasereport 2
SCM 421: Merck & Company: Product KL-798
Kristin Olson, Michael Lombardi, Kristen Prazenica, Anthony Sung The Opportunity: Merck, a global, research-driven pharmaceutical company, has core values invested in cutting edge science programs. Recently the organization was accosted by Kappa Labs with a proposal to purchase the product KL-798. This drug is associated with obesity and weight-loss which is becoming a valuable investment to the pharmaceutical industry. The initial decision Merck must make is whether to purchase the drug rights of the KL-798 product. It will initially cost $30 million up front and an additional $5 million to complete phase one. Disregarding Mr. Merck’s philosophy, the program suggests to not invest in drug rights due to an overall loss of $260,000. Phase One: The KL-798 product has been under testing phases for six months. Based on Kappa Labs’ project team research there is a 60% chance of Phase One successful completion. If Merck were to buy the product rights, the cost incurred to complete this would be $5 million. The software states there is a 40% chance of Phase One failing resulting in a loss of $35 million. If the first round proves successful then Merck faces the decision of progressing to Phase Two. Phase Two: If Merck decides to advance into Phase Two there presents a multitude of opportunities. The first decision involves treating just obesity at 10% likelihood. A 10% chance also exists of the drug treating only high cholesterol. There also is a possibility of the drug effectively addressing both conditions at 30%. The chance of the drug not treating any of the maladies is 50%. The cost of completing Phase Two is $40 million. For each condition that is addressed, the decision remains whether to seek out FDA approval. The program suggests if Phase Two is successful, the company has two feasible options, to produce a drug for just obesity or attain a drug that combats both obesity and
Kristin Olson, Michael Lombardi, Kristen Prazenica, Anthony Sung The Opportunity: Merck, a global, research-driven pharmaceutical company, has core values invested in cutting edge science programs. Recently the organization was accosted by Kappa Labs with a proposal to purchase the product KL-798. This drug is associated with obesity and weight-loss which is becoming a valuable investment to the pharmaceutical industry. The initial decision Merck must make is whether to purchase the drug rights of the KL-798 product. It will initially cost $30 million up front and an additional $5 million to complete phase one. Disregarding Mr. Merck’s philosophy, the program suggests to not invest in drug rights due to an overall loss of $260,000. Phase One: The KL-798 product has been under testing phases for six months. Based on Kappa Labs’ project team research there is a 60% chance of Phase One successful completion. If Merck were to buy the product rights, the cost incurred to complete this would be $5 million. The software states there is a 40% chance of Phase One failing resulting in a loss of $35 million. If the first round proves successful then Merck faces the decision of progressing to Phase Two. Phase Two: If Merck decides to advance into Phase Two there presents a multitude of opportunities. The first decision involves treating just obesity at 10% likelihood. A 10% chance also exists of the drug treating only high cholesterol. There also is a possibility of the drug effectively addressing both conditions at 30%. The chance of the drug not treating any of the maladies is 50%. The cost of completing Phase Two is $40 million. For each condition that is addressed, the decision remains whether to seek out FDA approval. The program suggests if Phase Two is successful, the company has two feasible options, to produce a drug for just obesity or attain a drug that combats both obesity and