CK Merck & Company: Evaluating a Drug Licensing Opportunity Rich Kender, Vice President of Financial Evaluation & Analysis at Merck, was working with his team to decide whether his company should license Davanrik, a new drug with the potential to treat both depression and obesity. The small pharmaceutical concern that developed the drug, LAB Pharmaceuticals, lacked the resources to complete the lengthy approval process, manufacture the compound, and market the drug. LAB had approached Merck with
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Executive Summary The following analysis of Merck and Company was to thoroughly examine a drug licensing opportunity with LAB Pharmaceuticals, a small pharmaceutical firm. This firm has offered to allow Merck and Company rights to further development of the drug called Davanrik. The analysis includes calculations of probability and decision trees using the Microsoft program Excel. It is assumed that given probabilities are correct, however sensitivity analyses were conducted to show the overall effect
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9-201-023 REV: MARCH 25, 2003 RICHARD S. RUBACK Merck & Company: Evaluating a Drug Licensing Opportunity Rich Kender, Vice President of Financial Evaluation & Analysis at Merck, was working with his team to decide whether his company should license Davanrik, a new drug with the potential to treat both depression and obesity. The small pharmaceutical concern that developed the drug, LAB Pharmaceuticals, lacked the resources to complete the lengthy approval process, manufacture the compound
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decision to license off Davanrik to Merck. This analysis is about how Merck has been able to generate substantial returns given the costly and lengthy time to develop drugs and the potential outcome for Davanrik should LAB licenses off to Merck, Also, the analysis will determine if Merck should license the drug and for how much, and to determine how much LAB would receive given a 5% royalty fee on any cash flow. Lastly, the paper will analyze the change in launching Davanrik for weight loss if the
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Problem Definition Should Rich Kender recommend licensing Davanrik, making Merck & Company responsible for its manufacture and its marketing? In order to provide Rich Kender with a good and thorough analysis and recommendation on the Davanrik licensing project, we need to answer the following guidance questions: I. How has Merck been able to achieve substantial returns to capital given the large costs and lengthy time to develop drugs? II. How much should they pay? III. What is
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generated $5.7 billion in worldwide sales would be expired. In order to anticipate the loss of sales, it is recommended to update the product portfolio by investing in the development of patented new products. LAB proposed 17 years exclusivity on Davanrik, a substance which has probability to be efficacious for depression or weight loss or both indications. Up to now LAB has completed preclinical testing and entering clinical testing. The clinical testing will take about 7 years which is divided into
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perspective of Merck. In this regard, the NPV of the licensing arrangement to Merck drop to $ 7.0973 million (shown in Figure 2). According to the draft of contract regarding to the licensing arrangement between Merck and LAB, the would-be royalty on the eventual sales of Davanrik seems to a must-be terms in the contract, contrary to a contingency provision. So to speak, assuming other things are constant and the royalty fee rate fixes at 5%, the bid to license Davanrik, at the standing point of Merck, should
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Problem Definition Should Rich Kender recommend licensing Davanrik, making Merck & Company responsible for its manufacture and its marketing? In order to provide Rich Kender with a good and thorough analysis and recommendation on the Davanrik licensing project, we need to answer the following guidance questions: I. How has Merck been able to achieve substantial returns to capital given the large costs and lengthy time to develop drugs? II. How much should they pay? III. What is the expected
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Merck Case Study Questions Instructions: We will discuss the Merck case in class on Thursday, February 20, 2014. In preparing for our class discussion, please focus on the following questions. 1. How has Merck been able to achieve substantial returns to capital given the large costs and lengthy time to develop drugs? - New product process: Merck is real fast in marketing drugs, as it develops cross-functional teams and starts marketing early in the development process only - through
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Case report Merck&Co: Evaluating a drug licensing opportunity Background The case is set in the year 2000. Merck&Co. is a global, research-driven pharmaceutical company that discovers, develops, manufactures and markets a broad range of human as well as animal health products. It operates directly or through established joint ventures and provides pharmaceutical management services (PBM). During the last 5 years the company has launched 15 new successful products; the most popular drugs
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