Optimization of the launch of new products

Our client requested a strategic financial model in order to assess the needed funds to launch a portfolio of new products.

Background

The products can be used for a wide range of disease areas and in different regions, hence several product market combinations exits. The products are not ready to market but need further R&D and there after regulatory approval should be obtained. Production capacity is available but limited. If the first products are successful production capacity should be build. The time span to increase the production capacity is two years. Furhtermore the company makes uses of third party techniques for which she has royalty agreements in place.

Our approach

Together with industry experts we mapped all characteristics of the product for each market:

  • the market characteristics, like market volume, launch date and volume, market share development,
  • the proposed pricing strategies,
  • the expected competitor behavior,
  • the existing royalty agreements,
  • the product complexity for further R&D planning and production planning and
  • the expected regulatory expenses.

Furthermore, the model also contained constraints like for instance product A2 cannot be launched if product A1 is not launched, restrictions on production capacity, restrictions on available R&D capacity and for instance restrictions on cash burn.

With this input our simulation model could assess the optimal path for various different strategies, like:

  • Maximizing volume (which leads to lower COGS / Unit)
  • Focusing only on certain disease areas
  • Optimizing the expected cash flows and value creation

The simulation model could vary certain input data in order to assess the sensitivity of these parameters.

In total over 3.200 different scenarios were automatically rendered to assess the optimal launch strategy for the portfolio. With this ultimate scenario the company could make decisions for its funding, assess which technologies should be used (and should be bought instead of keeping the royalty agreement in place), it could assess the production planning including the new built production capacity.

The model can produce detailed reports on which the company could built its information memorandum.