Merck Decision Tree Case

NCC5010 Statistics group Assignment 1 Team 8: drumhead 1: See portray 1 straits 2: See innovation 1 for the folding sustain of the manoeuver. The pass judgment yield take account of potence cash f first-class honours degree is $13.98M, therefore, Merck should permit the medicine. Question 3: assumptive the probability of victory in Phase 1 is P1. The pass judgment homecoming of the licensing the medicine is 43.3*P1+(-30)*(1-P1). Merck withdraw from behind license the medicate as long as the expect payoff is striking than the alternative option of non licensing the dose, i.e. 43.3*P1+(-30)*(1-P1)>0 P1>0.41 Therefore, as long as the probability of success in stagecoach 1 is between 0.41 and 1, the decision to license the dose remains the same. Question 4: When the launching follow is $225M, Merck volition still choose license the drug. The new decision tree is updated and shown in express 2. The expect present value of potentiality cash flow is $10.76 if the drug is licensed. However, in this sideslip Merck would block off the figure 3 sphere if the drug passed class 2 for weight loss only. This is because low this scenario Merck would lose more capital to continue point 3 than not to continue manikin 3. Question 5: gybe to the tree in Exhibit 1, the expected payoff without the mark off of whether it exit pass phase 1 is 13.98.

If Merck knows the drug forget fail phase 1, it provideing never incur the 30M damage in phase 1. Therefore, the expected payoff with the information is 43.3*0.6+0*0.4=25.98. Therefore, Merck is unforced to pay up to 25.98-13.98=$12M to know in broadcast of attack whether the drug will pass phase 1 or not. Question 6: If Merck can guarantee the success the phase 1, the payoff will be $43.3M. Without the guarantee, the expected payoff is $13.98M. Therefore, it is willing to pay up to (43.3-13.98)=$29.32M to guarantee the success of phase 1. Question 7: jibe to the decision tree in Exhibit 1, there ar four cases that have supportive payoffs in the end. The first case is passing phase 2 and phase 3 for depression, and...If you requisite to get a wide-cut essay, suppose it on our website: Orderessay

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