The pharmaceutical company Neuronome is in late clinical phase of a new cancer treatment. However, their competitor
Question:
The pharmaceutical company Neuronome is in late clinical phase of a new cancer treatment. However, their competitor Immunoneuron is also in the late clinical phase of a pharmaceutical for the same treatment. They have to make a decision about increasing the speed of the project to beat the competitor. They have the following scenarios to take into consideration:
1) They continue as they have done, and the project will not need an increase in budget.
2) They undertake a minor investment of €1,000,000 to be able to finalize the project three months in advance.
3) They undertake a major investment of €5,000,000 to be able to finalize the project six months in advance. If they beat their competitor and release the treatment first, their yearly profit will be €400,000 month when alone in market, but €300,000 a month if they have a competitor. However, if they release their treatment after their competitor does, then the profit will only be €200,000 a month. The probability of releasing the treatment more than six months before the competitor is 0.3 in scenario 1, 0.5 in scenario 2, and 0.8 in scenario 3. The probability of releasing it around the same time is 0.5 in scenario 1, 0.4 in scenario 2, and 0.2 in scenario 3. Finally, the probability of releasing it more than six months after the competitor is 0.2 in scenario 1, 0.1 in scenario 2, and 0 in scenario 3. They want to make a payback for three years. What decisions should be made?
Step by Step Answer:
Operations Management Sustainability And Supply Chain Management
ISBN: 9780135173626
13th Edition
Authors: Jay Heizer, Barry Render, Chuck Munson