Require assistance

1
Merck & Company : Case Study
Evaluating the Drug Licensing Opportunity using Precision Tree
Prepared by: Mr Students Name
Date: May 29, 2013
2

Nova Southeastern University
H. Wayne Huizenga School
of Business & Entrepreneurship
Assignment for Course: QNT5040
Submitted to: Dr. Phillip S. Rokicki
Submitted by: Cindy Ruppel
N000999999

3301 College Ave
Davie, FL33314
954-555-5555
954-555-0000
Date of Submission: May 29, 2013
Title of Assignment: Evaluating the Drug Licensing Opportunity at Merck & Company
using Precision Tree

CERTIFICATION OF AUTHORSHIP: I certify that I am the author of this paper and that any assistance I
eceived in its preparation is fully acknowledged and disclosed in the paper. I have also cited any
sources from which I used data, ideas or words, either quoted directly or paraphrased. I also certify
that this paper was prepared by me specifically for this course.
Student's Signature: _______ _______________________
*****************************************************************
Instructor's Grade on Assignment:
Instructor's Comments:
3

Management Report for Drug Licensing Opportunity at Merck & Company
Executive Summary
Based on precision tree analysis the licensing opportunity has a net positive payoff of 13.98 million.
The yield from this project can be maximised, if the drug qualifies under both categories however
the probability of that is only 5 % in phase II. It would actually not be profitable to pursue the drug
for phase 3 trials if it qualifies for weight loss only in phase II as the company may be able to reduce
the loss but it would not fetch any profit. The decision should be augmented with strong market
study for verifying the revenue potential and probabilities. The acceptance decision is having very
low margin and so sensitivity analysis should be conducted before final decision.
4

Case Background
The case is about evaluating an opportunity for a pharmaceutical company. Merck & Company is
a world class pharmaceutical company which specialises in new drug introduction and R&D.
Merck has many patented drugs in its name and is known for many researches and
developments upon medical supplies for human and animals.
The case deals with a business opportunity for Merck & company wherein another company
named Lab pharmaceuticals offers Merck to License its newly invented drug Davanrik. The
usiness sense to this proposal lies in the fact that Lab Pharmaceuticals neither have the
competency to clear the lengthy FDA approval process nor the cash to fund the project.
The opportunity has many associated risk ranging from complete failure to partial failure the
Net present Values of all scenarios have been worked out by Merck together with the
probabilities of success and failure. The case is all about analysing the various scenarios and
a
iving at decision based on decision tree theory. The tool used for developing the decision tree
is the ‘Precision tree’ software by Palisade Corporation.
Merck –Back Ground
Merck actually originated from Germany wherein it was founded in the year 1668 ("Our
History", n.d., p. 01-13). In 1887 German chemist Theodore Weicker came to U.S to set up a
anch of Merck. Later in 1891 George Merck, (grandson of the German company’s founder)
formed a partnership with Weicker. Up to 1903 the company imported drugs and chemicals
from Germany but after that the first plant was set up in Rahway, New Jersey, to make alkaloids.
In 1933Merck setup its first Research lab and later in 1944 the scientists at Merck develop the
first steroid “Cortisone”. In 1953 Merck merged with another drug maker Sharp & Dhome to
utilise its strong sales force.
From 1976 onwards Merck has put special attention towards research and Development and in
1980’s it has been successful in
inging 10 new drugs including the famous drug Vostoc. By
year 1995 Merck was successful in
inging another eight new drugs including Pepcid AC
(heartburn) and Cozar (hypertension).
Merck and Company is headquartered in Whitehouse station, N.J. and trades on the New York
Stock Exchange It generated a sales volume of $27.4 billion with an operating profit of $2.4
illion for the year ending December 2009 (Ruback, 2003, p. 01-06)
5

Merck& company specialises in R&D, manufacturing and marketing of pharmaceutical products. The
three main segments of its operations include the pharmaceutical, animal...