Merck Case

Group 1

Merck & Company: Evaluating a Drug Licensing Opportunity

1. Because Merck had a number of patents on popular drugs, generic substitutes were not available on the market. This allowed them to generate around $5.7 billion in sales across the globe. Along with this, Merck was constantly in the process of developing new drug in order to generate new sales and “refresh the company’s portfolio” of drugs. Through internal research, Merck always kept itself ahead of the competition in therapeutics.

Davanrik

Davanrik

2.

phase 1 (2 yrs comp):

Cost: $30 million, including $5 million to LAB for drug licensing

Cost: $30 million, including $5 million to LAB for drug licensing

FAILURE: 40%

FAILURE: 40%

SUCCESS: 60%

SUCCESS: 60%

phase 2 (2 yrs comp):

Cost: $40 million, including $2.5 million to LAB

Cost: $40 million, including $2.5 million to LAB

BOTH: 5%

BOTH: 5%

FAILURE: 70%

FAILURE: 70%

DEPRESSION: 10%

DEPRESSION: 10%

WEIGHT LOSS: 15%

WEIGHT LOSS: 15%

FAILURE: 15% (5%)

FAILURE: 15% (5%)

SUCCESS: 85% (28.33%)

SUCCESS: 85% (28.33%)

Cost: $150 million, including $10 million to LAB

Cost: $150 million, including $10 million to LAB

Cost: $200 million, including $20 million to LAB

Cost: $200 million, including $20 million to LAB

FAILURE: 30% (10%)

FAILURE: 30% (10%)

SUCCESS: 70% (23.33%)

SUCCESS: 70% (23.33%)

FAILURE: 25% (8.33%)

FAILURE: 25% (8.33%)

SUCCESS: 75% (25%)

SUCCESS: 75% (25%)

phase 3 (3 yrs comp):

F: 10%

F: 10%

B: 70%

B: 70%

WL: 5%

WL: 5%

D: 15%

D: 15%

Cost: $500 million, including $40 million to LAB

Cost: $500 million, including $40 million to LAB

potential profits:

Depression Only: $250 million to launch, PV of $1.2 billion

Weight Loss: $100 million to launch, PV of $345 million

Both: $400 million to launch, PV of $2.25 billion

3. After an analysis of the costs to take on Davanrik (as shown below), the venture would provide profitable returns for all cases. This has...