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How has Merck been able to achieve substantial returns to capital given the large costs and lengthy time to develop drug?
What is the strategic importance of this project? What is the initial asset in which the future success is expected? Why are people putting money to this project?
How should we evaluate the attractiveness of this opportunity?
What type of information asymmetry problem could take place in this case? Find and present one example in the business literature where asymmetry problem was a crucial factor of a joint project's failure.
Which corporation you think is taking higher risk, LAB or Merck and why? Find and present one example in the business literature where two companies collaborate and take different types of risks.
Which factors mitigate the risks you listed previously for LAB and Merck?
Are these risks (related to questions 5 and 6) associated with higher expected returns?
What would be your ideas in order to improve the opportunity?
Build a decision tree that shows the cash flows and probabilities at all stages of the FDA approval process.
Should Merck bid to license Davanrik? How much should they pay?
What is the expected value of the licensing arrangement to Lab? Assume a 5% royalty fee on any cash flows that Merck receives from Davanrik after a successful launch.
Write your conclusions on the case.