Case Study Of Orencia

We will review the financial activity of launching Orencia as a pharmacological treatment in the reduction of symptoms associated with Scleroderma. The financial activity regarding the launch expenditures are listed on table 1. A yearly activity sheet is provided to assess the stability of the product to our board of directors. An income statement, market share, and profitability ratio are listed on table 1. The ratio will examine the product positioning in the market, based on population and pricing. Pharmaceuticals account for 15 percent of health care spending, but the cost of orphan drugs and other biologics are rising 20 percent to 25 percent a year(Managedcarearticle). The Orphan Drug Act of 1983, documents the ability to obtain
ROI: is the rate of return on the investment on the idea/item which will generate a profit, making it attractive to investors. The average ROI for an orphan drug is 54%( https://www2.deloitte.com). The cost of Ornecia per patient, per year is $110,000; which is on average of most orphan drug prices.
In a market of less than 200,000 patients, the drug Orencia, will continue to provide a stable outcome in revenue once the break even period is passed. Years 1 and 2 showed a loss due to such high costs of Research and development at (18% of sales), sales expense (15% of sales), and the fluctuating marketing expenses. Marketing expenses, ranging from 150% in yr. 1, 80% in yr. 2, 30% in yr. 3 ; there is a need to capture a strong market share in the years. The launch saw a 15%, market share, yr. 1 and a 25%, market share, yr. 2 . Due to orphan drug processing, with the FDA, beginning in phase III trials, this can provide more of a stable return on investment. Creating a strong foundation of your product will ensure product payment as it is noted “ more that 1 of 4 orphan drugs
Orencia will obtain a market share during launch period beginning with 15% and progressing at 5%-10% increase in yearly intervals. The ending population is 152,000 which will yield approximately $2.8 billion at the end of the 7 year period. The cost of Ornecia per patient, per year is adjusted based on the market population. With greater than 10,000 patients, the pricing as fixed at $110,000 due to the population being treated ( lifescicapital.com/a). Orencia has sophisticated knowledge of the market, strong R&D, and of course, Bristol Myers Squibb, brand name loyalty. Pricing was decided at the higher end of the greater than 10,000 population pricing to continue Bristol Myers leverage in the pharmaceutical industry.
With an market share of 15%, seen in the first year, showing a patient population at 50,000, pricing of Orencia was set showed a -36% in ROI, equaling -932,250,000, its first year out to launch. The competitors of Scleroderma treatments are temporary and the route is a daily pill, where the injectable and IV route, is a weekly remedy to the symptoms, driving up the projected patient population. Due to its convenience in delivery and dose administration, these are some attractive qualities, which will project a rise in market