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Option-I: Pilot Manufacturing (Phase I & II) + Commercial Manufacturing (Phase III)
Economics of Strategy Nucleon Inc. Abhimanyu Kakkar 21/248
Anjali Mahajan 21/257
Shyam Dahiwal 21/266
Gauri Patil 21/269
Shagun Parmar 21/293
Advantages-
1. Enables the firm to develop the nucleus of future large scale in-house manufacturing
capability
2. Scaling would be easier
3. Helps to build competitive advantage as ownership of the product and technology is
retained
Disadvantages-
1. Financial Risk for Phase I and II, though can be hedged based upon the multiple uses the
drug can be employed to.
2. Process Uncertainty as process might not be universal for the upcoming project usages
3. Additional recruitment costs for handling different functions
Advantages-
1. The firm would not have to invest the $20 million in a commercial plant. Financial risk is
lessened.
Disadvantages-
1. Financial Risk for Phase I and II, though can be hedged based upon the multiple uses the
drug can be employed to.
2. Process Uncertainty as process might not be universal for the upcoming project usages
3. Lesser Revenues from Royalty payments
Economics of Strategy Nucleon Inc. Abhimanyu Kakkar 21/248
Anjali Mahajan 21/257
Shyam Dahiwal 21/266
Gauri Patil 21/269
Shagun Parmar 21/293
Option-III: Contract Manufacturing (Phase I & II) + Commercial Manufacturing (Phase III)
Advantages-
1. No major capital investments for Phase 1 and 2 trials would be required which reduces the
financial risk. However, commercial manufacturing would become costly.
2. Companies supplying contract manufacturing services had facilities and personnel in place
3. Helps to build competitive advantage as ownership of the product and technology is
retained
Disadvantages-
1. Risk of confidential information disclosure
2. It is risky to commit large quantities material which might not be required if product
specification changed or product was pulled from clinic.
3. Technology transfer and scale up would still take 9 months
4. Financial risk for setting up a commercial plant
5. Additional recruitment costs for handling different functions
Economics of Strategy Nucleon Inc. Abhimanyu Kakkar 21/248
Anjali Mahajan 21/257
Shyam Dahiwal 21/266
Gauri Patil 21/269
Shagun Parmar 21/293
Advantages-
1. No major capital investments would be required which reduces the financial risk.
2. Companies supplying contract manufacturing services had facilities and personnel in place
Disadvantages-
1. Risk of confidential information disclosure
2. It was risky to commit large quantities material which might not be required if product
specification changed or product was pulled from clinic.
3. Technology transfer and scale up would still take 9 months
Option-V: Licensing
Advantages-
1. Would generate immediate cash
2. Reduces financial risk as would not have to invest in setting up plant
Economics of Strategy Nucleon Inc. Abhimanyu Kakkar 21/248
Anjali Mahajan 21/257
Shyam Dahiwal 21/266
Gauri Patil 21/269
Shagun Parmar 21/293
Disadvantages-
1. Risk of confidential information disclosure
2. Lesser revenues from Royalty payments
Licensing
Royalty 5% WACC 30%