Team a Week Five Reflection.Docx

Team A Week Five Reflection

Devin Alexander, Alyssa Eller, Talissha Johnson, Anthony Jones,

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September 7, 2015

Tami Bolder

Team A Week Five Reflection

Talissha

The pharmaceutical sector changes its environment every time a new product is created, this can cost billions of dollars.  According to the video, to successfully bring a new drug to the market, there are four steps. 1) The drug starts in the lab. 2) Human trail on healthy patients.  3) Applied to the disease population and placed against competitors. 4) Drug is approved by the FDA. There is a contingency step to monitor the drug for 8 to 10 years. Through patents, drugs can remain in existence.

Devin

Pfizer’s capital base is built up of debt and equity, their primary structure is built of equity. They have over $40 billion in outstanding debt and over 8 billion shares traded every day which allows them to have a confined capital base that they can invest in businesses that are NPV positive. Pfizer’s R&D is invested by prioritizing the existing product in the rank order of their value using certain financial metrics, which allows them to fund all of the business that will be a good return for the shareholders.

Joseph

In Pfizer the cost of capital can be a challenge. A lot of risk is taken is being in research and development. When looking at cost of capital, you are looking the rate or return that your capital is making you. When capital is tied up into research and development there will be a certain amount of capital that will have no return. For this when a new drug does hit the market, it is commonly outrageously priced. The capital return from all the other research that never made it to market has to be absorbed by the one that did. Pfizer has done an excellent job is having a large amount of victories. But for a company that doesn’t, they may be capital starved.