Case Study: Metabical: Pricing, Packaging and Demand Forecasting for a New Weight Loss Drug

y

Pricing makesMetabical apremium qualityproduct in linewith product effectivenessStrategic fit

y

Does not fit wellwith CSPscorporatestrategy

y

While Metabicalwill be able togain a large userbase initially theoption does not fit the strategic goalof 70% marginsover the longterm

y

Being a moreeffective product in the market place, Metabicalloses the edgewithout anyreason.

y

Fits well withcompany strategy

y

Althoughrevenues arelower in the short term, Metabicalwill be able toproject itself as apremium product over the longterm

y

Given the highstarting price,the product maynot attainrequired market share

y

Product may not be able tocompeteeffectively giventhe intensecompetition inthe market.FinancialAttractiveness

N

ot attractive.

y

ROI is negative (-25%)

y

Target market size is too lowcompared toother twomethods , hencegenerates loweroverall revenuesover 5 years NPV of $709.5million

y

Attractive Recommended

y

ROI is close to75%, whichsurpasses theexpectedminimum ROI of 5% by a largemargin

y

Pricing issensible, in linewith market expectations

y

NPV of approx.$1.5 billion

A

ttractive  not recommended

y

Although ROI is126%, pricing isunrealistic

y

Pricing a newproduct at $150a per week couldbe a non-starterin a highlycompetitivemarketplace.

Noteworthyrisks

y

Product will endup competingagainst productsthat are not even

y

Product may not be acceptedreadily given thehigher than

y

Very high entryprice point

y

Revenueexpectations

in the samesegment

y

Brand messagecould beconfusing

y

Revenues not attractive

y

Assumption isthat the thismarket portion isnot highlysegmentedaverage pricepoint of the drug

y

Revenueexpectation couldbe exaggerateddue to point estimate value of market size.

y

Assumption isthat the thismarket portion isnot highlysegmentedmore unrealisticcompared toother pricingstrategies

y

ROI althoughattractive maybe...