Metabical: Pricing, Packaging, and Demand Forecasting for a New Weight-Loss Drug

Monterrey, Team 2 Analysis

___ Part 1. Company Analysis ____________________________________________________________

CSP’s 5 C’s of marketing

• Company
o 25 billion sales in 2007
o Focused on developing, manufacturing and marketing products that treated metabolic
disorders, gastro diseases and immune deficiencies
• Consumer
o Market size of 3.74 billion
o Targeting obese individuals looking to shed 10 to 30 pounds
o Customers
▪ 70% of respondents not satisfied with weight
▪ 35% were actively trying to lose weight
▪ 15% were comfortable using drugs to reach their weight loss goals
• (12% said they would immediately make the appointment to get a
prescription)
• 4.3 million women fell into this target population, educated women
between 35-65 YO Metabical estimated they would capture 10% of
individuals in first year, then 5 then 30% by the fifth year
• Context
o In April 2008, after 10 years of testing and 400 RD costs, Metabical was about to receive
coveted FDA approval
o Obesity epidemic
o 65% of 230 million adults in the US were overweight
o BMIs between 25 and 30 are our target “obese”
o Overweight individuals lost an average of 26 pounds compared with others with a
placebo
o Overheads were reaching 1.2 million and they wanted to recoup 400 million in RD spent
o
• Competition
o Prescription drugs and over the counter remedies
o Appetite suppressants and fat absorbing blockers
o Potential side effects on all of them, tachychardia etc
o Orlistat blocked the body absorption of fat (Side effects liver damage, etc) Prescribed by
obese and severely obese
o No prescription drug for overweight segment
o Ali, a reduced strength version of Orlistat
o Ephedra but banned already (25 million on allegations that the weight loss was a fraud)
 • Channels
o Pharmacies, chain market stores, supermarkets, convenience stores, among others.
o Prescription-based selling.

CSP’s 4 P’s

• Price
o Closest was a 50-pill box for 120 dollars with refills of 120 pills for 70 bucks
o A 4-week supply would retail for 75 bucks (first model)
o Second model based on comparison, like 125 for a 4 week supply
o Third option was 150 for a 4-week supply because overweight spend 450 more out of
pocket a year for that stuff
• Package
o This is a 12-week pill, skipping a day reduces de effect substantially
▪ Optimal package would be days of the week blister style package similar to birth
control
▪ However, the pricing tag might be too high for a 12 week package
• Product
o Metabical offer moderately overweight adults a medically proven, effective method to
reach a desirable weight and improve their health
o First prescription drug approved specifically for overweight individuals looking to lose 10
to 30 pounds
▪ Suppressant and fat blocker blocking calories
• Side effects were gastro discomfort for eating too many calories
• Promotion
o Barabara Printup senior director marketing for CSP (20-year experience)
o Marketing budget was 23 million

___ Part 2. Case Problems _______________________________________________________________

Optimal package size for the drug

The optimal package would be a days-of-the-week, “blister”-style package due to its effectiveness on
making sure the client took the daily treatment without missing a day. This was extremely important
given that the effectiveness of an inconsistent use of the product would be significantly reduced. This
would result in a negative perception of the product. Additionally, the package would have to include
the complete 12-week supply to minimize the number of clients that did not finish the treatment due to
forgetting to refill or being too busy to do so.
Pricing Recommendation

In this analysis, we considered 3 initial pricing options:

Option 1. (@$75.00 USD) - Using competitor Ali as benchmark and price Metabical as premium.

Option 2. (@125.00 USD) – Making a comparison between other CSP drug margins.

Option 3. (@150.00 USD) – Focusing on the value of a successful program to a customer.

Initial demand forecasts Methods for the product in the first five years

The demand forecast elaborated takes into consideration 3 specific methods for analyzing how potential
customers would respond to Metabical:

• Method 1.
o Target: Americans with BMI between 25-30 (71,060,000)
o Considerations:
▪ 35% actively trying to lose weight
▪ 15% who are comfortable using diet pills
▪ 10% who might purchase Metabocil in Year 1 adding 5% each subsequent year
▪ (+) 60% buy a second package
▪ (+) 20% of these buy a third package
• Method 2.
o Target: Americans with BMI between 25-30 (71,060,000)
o Considerations
▪ 12% say they will go to a doctor to request prescription
▪ 10% who might purchase Metabocil in Year 1 adding 5% each subsequent year
▪ (+) 60% buy a second package
▪ (+) 20% of these buy a third package
• Method 3.
o Target: Overweight females between 35-65 years old, college educated
▪ Considerations
• 30% who might purchase Metabocil in Year 1 adding 5% each
subsequent year
• plus 60% buy a second package
• plus 20% of these buy a third package

ROI analysis

Using the 3 pricing options and the 3 demand forecast methods mentioned above, the ROI for each
scenario considering the first 5 years of analysis was calculated. Table 1 shows a direct comparison
between the different pricing options.
 Table 1. Pricing options analysis table

The following table demonstrates the operating and investment costs to be considered in the analysis.
Table 2. Operating cost and investments

As a last step, a table comparing the different demand forecast methods through the different price
options was created, accounting for 9 different options. Results show that 4 out of the 9 possible
courses of action have an acceptable ROI. These 4 options will then be considered as viable. From these
options, the analysis then looks to identify the most conservative option. This indicates that the 2nd
method, together with the 2nd price option of $125.00 USD represents the best option given that:

a) It has an accumulated ROI of 83%, making it a viable option and,

b) It has the lowest volume projections among the rest of the viable options.

Table 3. Method 2/Option 2 analysis.

___ Part 3. Exhibits _____________________________________________________________________
Exhibit 1. Option 1 analysis through the different method options.
Exhibit 2. Option 2 analysis through the different method options.
Exhibit 3. Option 3 analysis through the different method options.