Pfizer is a biopharmaceutical company that faces financial challenges to provide medicine to the world built from compounds derived in their laboratory.
The high costs to discover, develop, and the manufacture healthcare products and medical solutions lye within the phases of development and regulation that govern the industry. 12 years and 1.2 billion dollars are metrics that are found within this competitive industry and require financial applications that yield a productivity index. The return on investment and productivity index helps guide the company with what compound is developed in what order. It is the use of these metrics within the capital asset pricing model that guides the company to develop the right products at the right time and keep the cost of development low.
In Week 5, Learning Team A was assigned to watch a concept review video about cost of capital. Mainly its effect on one specific company, Pfizer. The team was to discuss some of the corporate finance challenges faced by Pfizer and write a summary of the discussion. The following is the team’s summary and notes from the video.
One of the corporate finance challenges faced by Pfizer is the high costs to discover, develop, and the manufacture of healthcare products and medical solutions that matter the most to people. According to “Phases of Development” (2002 – 2013), “It typically takes 12 years from the moment of discovery in the lab for a potential new therapy to gain approval for use and reach patients. Clinical development is the most time intensive and expensive part of this research and development continuum accounting for approximately 45 to 75 percent of the $1.2 billion average cost of bringing a new therapy to market. “(para. 2).
Pfizer also competes in an industry that is highly regulated and limited intellectual property rights. According to "Appendix A 2013 Financial Report" (n.d), "The biopharmaceutical industry is highly competitive and highly regulated; as a...