Use the table below to answer the following questions. Sydephekt Pharmaceuticals

Question

Use the table below to answer the following questions.

Sydephekt Pharmaceuticals has decided to go ahead and start clinical trials on a potential new drug. The total R&D costs are estimated to reach around $875,000,000, with clinical trials mounting to $145,000,000. The current market size is estimated to be around 3,000,000 and is expected to grow at 4 percent every year. The market share they hope to capture in the first year is 7 percent, and is projected to grow by 25 percent each year for the next four years. A monthly prescription is anticipated to generate revenue of $420 while incurring variable costs of $150. A discount rate of 8 percent is assumed.

Calculate the projected sales for the first year.

D. 378,000,000

Use the scenario and table in Question 6:

Calculate the annual revenue for the fourth year.

Calculate the projected profit for the third year.

D. $2,373,996,000

Use the scenario and table in Question 6:

Calculate the market size for the second year.

Data Market Size 3,000,000 Unit (Monthly Rx) Revenue ($) 420 Unit (Monthly Rx) Cost ($) 150 Discount Rate (per cent) 8 Project Costs R&D ($) 875,000,000 Clinical Trials ($) 145,000,000

Explanation / Answer

1)

They expect to capture 7% MS in the first year.

Hence Sales = 7% * 3000000

= 210,000

Option A

2) Market is expected to grow by 4% every year.

Hence, Market size for the 4th year would be = 3000000* 1.04 *1.04 * 1.04

= 3374592

The market share gain is also expected to grow be 25% every year.

Hence the MS gain in the 4th year would be = 7 * 1.25 *1.25 * 1.25

= 13.67%

Thus the sales in the 4th year = 3374592 * 13.67%

= 461306.72

Revenue = (461306.72/12) * 420

= 16145745

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