Vision Research - ClearView Project

Author
Crystal Ball Team

Summary

The Vision Research spreadsheet models a business situation filled with uncertainty. Vision Research has completed prelimina
code-named ClearView, that corrects nearsightedness. This revolutionary new product could be completely developed and tes
if the FDA approves the product. Although the drug works well for some patients, the overall success rate is marginal, and Visi
whether the FDA will approve the product. Because the ClearView project is a multimillion-dollar risk, Vision Research has de
decide whether to scrap the project or to proceed to develop and market this potentially profitable new drug.

Note: This example is presented as the second tutorial in the "Getting Started with Crystal Ball" chapter in the Crystal Ball Use
far more detail than this description.

Keywords: tutorial, pharmaceutical, research, new product, drug, development

Discussion

Unlike most of the Crystal Ball example models, this simple spreadsheet requires you to define some of the distributions and f
five sources of uncertainty: Testing Costs, Marketing Costs, Patients Cured (out a sample of 100), Growth Rate of Nearsightedn
far, Vision Research has spent $10,000,000 developing ClearView.

By speaking with your coworkers and subject matter experts, you have determined the following information about each of th

Testing Costs: Any value between $3,000,000 and $5,000,000 has an equal chance of being the actual cost of testing.

Marketing Costs: Vision Research expects to spend between $12,000,000 and $18,000,000, most likely $16,000,000.

Patients Cured: Preliminary testing shows a cure rate of 25% for 100 trials

Growth Rate of Nearsightedness: There is a 75% probability that the market will increase by 0-5%, but there is also a 25% cha
will be released on the market soon. This product would decrease ClearView’s potential market by 5% to 15%.

Market Penetration: Eventual share of the total market for the product will be normally distributed around a mean value of 8
2%.

You can use this information (and the suggested distribution hints in the model) to help you when you use Crystal Ball to defin
these variables.
Using Crystal Ball

Crystal Ball enhances your Excel model by letting you create probability distributions that describe the uncertainty surroundin
model, you will define five probability distributions, referred to in Crystal Ball as "assumptions." The details for defining these
the discussion above.

Select Define Assumption from the Define menu or click on the Define Assumption button on the Crystal Ball toolbar to begin
variable in the model is accompanied by a suggested assumption type that you can pick from the Distribution Gallery. Once yo
Ball colors the assumption cell green.

This model also includes two formulas that you will need to define as Crystal Ball forecasts so that you can analyze their values
simulation, Crystal Ball saves the values in the forecast cells and displays them in a forecast chart, which is a histogram of the s
example, you want to analyze the Gross Profit and Net Profit. To define a forecast with Crystal Ball, highlight the cell and eithe
Define menu or click on the Define Forecast button on the Crystal Ball toolbar. Once you have given the forecast a unique nam
will color the forecast cell light blue.

When you run a simulation, Crystal Ball generates a random number for each assumption (based on how the assumption has
new value in the cell. Excel then recalculates the model. You can test this by selecting Single Step from the Run menu or clickin
the Crystal Ball toolbar.

After you run a simulation, you will see the two forecast charts. What is the certainty that you will break even on this project?
will reach your expected Net Profit of $9.2 MM? You can use the Percentile and Statistics views to view the forecast data in ev
company scrap the ClearView project or proceed to develop and market this revolutionary new drug?

To view which of the assumptions had the greatest impact on a particular forecast, use the sensitivity chart. Which variable m
the same for each forecast? Could you change the distribution parameters of the key drivers to improve the forecast results?

Copyright Information
Copyright © 2004, 2017, Oracle and/or its affiliates. All rights reserved.

Oracle is a registered trademark of Oracle Corporation and/or its affiliates. Other names
may be trademarks of their respective owners.
 415574853.xlsx

0 Vision Research - ClearView Project

(in millions)
Costs
Development Cost of ClearView to Date $10.0
Testing Costs $4.0 Uniform
Marketing Costs $16.0 Triangular
Total Costs $30.0

(sample of 100 patients)

Drug Test
Patients Cured 100 Binomial
FDA Approved if 20 or More Patients Cured 1

(in millions)
Market Study
Persons in U.S. with Nearsightedness Today 40.0
Growth Rate of Nearsightedness 2.00% Custom
Persons with Nearsightedness After One Year 40.8

Gross Profit on Dosages Sold

Market Penetration 8.00% Normal
Profit Per Customer in Dollars $12.00
Gross Profit if Approved (MM) $39.2
Gross and Net Profit
Net Profit (MM) $9.2 Forecasts

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Learn about model

Gross and Net Profit

Forecasts

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