Schering Plough: Replacing Claritin
Introduction
Schering Plough is a large pharmaceutical company who is about to lose the patent to its largest revenue generating drug, Claratin. The loss of exclusive rights to this product could decrease Schering Plough's revenue by over 90%.
Schering Plough in hindsight of what will become of their financial position with the expiration of this patent has decided that it must develop a new product which uses Loratadine, the main component of Claratin. The two drugs the company wishes to investigate are Newprox, an asthmatic drug; and Minprox, a nasal congestion spray. Based upon data provided from its financial and marketing department Schering Plough has compiled data for the two products that could replace Claratin as its new "flagship product". The data used for the decision analysis in this report can be found in Appendix A.
Schering Plough must decide which product to invest in and produce. The up front costs are large in drug production due to the strict regulations imposed by the FDA; a decision therefore, must be made with due diligence.
Key Assumption
The assumptions made in this report are the following:
both drugs pass FDA approval
costs incurred prior to FDA approval are not recoverable
uncertainty exists for only the sales figures
sales figures could be either less or more than the projected figures (see Appendix A); therefore a triangular probability distribution is used for simulation
minimum value and maximum value for triangular distribution are 25% above and below the most likely sales value projected by the company (see Schering Plough-Decision Analysis.xls)
each year is treated as independent; there is no correlation between year 1 and 2 and so forth
Decision Analysis
"Decision analysis is a deductive reasoning process that allows a decision maker to choose from a well-defined set of options on the basis of the model-based analysis of all the probable outcomes."
Schering Plough is a large pharmaceutical company who is about to lose the patent to its largest revenue generating drug, Claratin. The loss of exclusive rights to this product could decrease Schering Plough's revenue by over 90%.
Schering Plough in hindsight of what will become of their financial position with the expiration of this patent has decided that it must develop a new product which uses Loratadine, the main component of Claratin. The two drugs the company wishes to investigate are Newprox, an asthmatic drug; and Minprox, a nasal congestion spray. Based upon data provided from its financial and marketing department Schering Plough has compiled data for the two products that could replace Claratin as its new "flagship product". The data used for the decision analysis in this report can be found in Appendix A.
Schering Plough must decide which product to invest in and produce. The up front costs are large in drug production due to the strict regulations imposed by the FDA; a decision therefore, must be made with due diligence.
Key Assumption
The assumptions made in this report are the following:
both drugs pass FDA approval
costs incurred prior to FDA approval are not recoverable
uncertainty exists for only the sales figures
sales figures could be either less or more than the projected figures (see Appendix A); therefore a triangular probability distribution is used for simulation
minimum value and maximum value for triangular distribution are 25% above and below the most likely sales value projected by the company (see Schering Plough-Decision Analysis.xls)
each year is treated as independent; there is no correlation between year 1 and 2 and so forth
Decision Analysis
"Decision analysis is a deductive reasoning process that allows a decision maker to choose from a well-defined set of options on the basis of the model-based analysis of all the probable outcomes."