Metabical Analysis

      Metabical is a prescription drug produced by Cambridge Sciences Pharmaceuticals (CSP) for weight
loss, which was the first and only prescription drug to obtain FDA approval. The drug was developed to
help aid people in the overweight segment to lose 10 to 30 pounds. Barbara Printup is the marketing
director in charge of selecting a price for the new prescription drug. In a study CSP did with Metabical,
people with a body mass index (BMI) of 28 to 30 had an average weight loss of 26 pounds over a 12
week period. At the same time, people with a BMI of 25-28 had an average weight loss of 15 pounds.
This study found the new prescription drug to be useful and effective. Through research, Printup
decided to target female consumers in the 35 to 65 age range with a college education. Metabical was
also basing pricing and packaging compared to their main competitors in this particular market. CSP
wanted to base their new product comparably to Alli, but felt Metabical could be priced at a premium
due to the need of a prescription to get the drug, and the fact that they were the only FDA approved
weight loss drug on the market. Pricing was a main concern with this product and several scenarios were
run to try and project and forecast where the pricing would make the best return on investment (ROI).
The packaging was also something Printup had to consider when preparing this product. The main issue
is how to break up the 12 week supply, if at all, to get the best sales results.

      The packaging was the first concern we decided to take care of. We decided we should sell the
weight loss drug in three four-week packages. We decided upon this since there are many advantages to
this while minimizing disadvantages. First, we decided that the four week packaging was at the specific
point where the consumer did not have to spend too much money to buy it, yet got invested in the
product enough that they would come back to buy the second and third portions. This allows CSP to
keep the price of Metabical down for consumers with less income to be able to easily spend the money
for the product. CSP would also make the whole 12 week package available at once for the consumers
who can afford this. This is better than a one or two week at a time packaging because the shorter time
period packages would cause the consumer to feel less involved with the weight loss plan or forget to
get a new package so rapidly. If the packaging is in a longer term such as six weeks, it may have too high
of a price for the average consumer to afford and psychologically seem like too much of a commitment.
This is why we decided on the four week package. It seems to be the best option for spitting up the
packaging.

      Pricing for the product was also a concern for Printup and CSP for Metabical. The retail prices for
each four week package seems was set at $75, $125, and $150 for three different scenarios in this case.
We agreed with these prices for the four week packages to forecast the different scenarios. The $75 is
priced very low and at a level that just about all consumers would be able to reach. This price was based
using Alli as a benchmark, but priced higher due the fact that this drug was a prescription and could be
sold at a premium price compared to Alli. The second price is based on other drugs that CSP sold on the
market and kept them on the same level at $125. The third price option was based on the fact that
overweight individuals spent about $450 out of pocket on health care. This gave way to CSP setting
Metabical’s price to $150 per four week package, coming out to $450 for the full 12 week program.
However, in a study CSP conducted, they found this is a price higher than consumers would be willing to
pay for a weight loss program. As you can see, there are three pricing options that are well justified for
Metabical. These were ran in the three scenarios for figure out which combination of price and scenario
gave the best ROI.

      The three scenarios which Printup came up with to test Metabical’s price differed quite a bit. The
first scenario looked at the number of Americans with a BMI between 25 and 30. 35% of these people
would be actively trying to lose weight. Selling to this population would create 706,146 unit sales in the
first year. The second scenario consisted of the American with a BMI between 25 and 30, and 12% of
these people would be go to their doctor to request a prescription for diet pills. This population would
create 1,614,048 unit sales in year one. Scenario three was more specific, focusing on CSP’s ideal target
of overweight females age 35-65 with a college education. From this group it was projected that 30%
would buy Metabical in the first year. This came out to 2,218,800 unit sales in the first year. Each
scenario was adjusted by 10% for consumers who would buy Metabical is the first year, 5% growth in
each subsequent year, 60% of consumers who would come back to buy the second package, and 20%
who would come back to buy the third and final package. From these numbers, the projections were
made about revenues and how the ROI would turn out.

      When deciding on what options to take with regards to Metabical you have to run the numbers and
look at the potential ROI with each option to see if it matches the companies goals. The first thing we
did was put all of the numbers into excel to see where they came out. The first option for the market
segmentation generates 2,118,438 unit sales in five years. When you multiply that by the different gross
margins you come out with $175,124,208 using price option one, $410,482,144 using price option two,
and $528,197,208 using price option three. Next we looked at the second market segmentation which
came up with a total of 4,842,144 unit sales. When multiplied by the gross margins, we came up with
revenues of $400,283,904 for price one, $938,246,102 for price two, and $1,207,307,964 for price three.
We did the same again for scenario three and came up with gross margins of $366,841,000 for price
one, $859,858,960 for price two, and $1,106,441,600 for pricing option three. When looking at all these
numbers you need to take into consideration the required ROI of 513.5 million. That only leaves a few
options that fit this requirement. These are pricing option two ($125) with scenario two and scenario
three, and pricing option three ($150) in all three scenarios. When looking at viable options, you we had
to keep in mind that consumers stated the $150 price option is too high so we decided the $125 pricing
option would be the best. When looking at the different scenarios for price option two, forecast method
two showed us the best results with the highest gross margin. This came out to be $938,246,102 after
the five year period and certainly reached the ROI goal set for the company. After looking through all
this information, we feel this would be the best course of action to take while producing and selling the
drug Metabical.