What is the economic value of Angiomax to the three key segments: low-,

high-, and very high-risk patients?

Angiomax is the lead product of the Medicines Company, that received FDA approval for the
treatment of “high-risk” patients undergoing a balloon angioplasty, and competes against a
commodity drug, called Heparin. According to the theory, TEV = Cost of the Next-Best
Alternative + Value of Performance Differential.

We assume, the cost of the next best alternative is $8 (4 doses*$2). At the same time,
Angiomax helps hospitals to avoid any complications’ costs, which have been calculated for
$8,000 per person. Based on the Phase III Results of drug’s development process, the table
below represents the percentage of patients who perform complications per segment and
shows that Angiomax seems to have a more positive effect on their post operational
behaviour, especially on the very high-risk patients:

Table A: % of Total Complications per medicine

% of affected
Segment Heparin Angiomax Difference
patients

High-Risk 40% 16.5% 9.5% -7%

Very High-Risk 10% 21.4% 7.8% -13.6%

Low Risk 50% -3.5%*

* For the remaining 50% of angioplasty patients—the “low-risk” patients—Meanwell estimated that the
relative benefits of Angiomax over Heparin were about half as great as that for the High-Risk patients.

Based on the above numbers, we can estimate the economic value to each segment as
follows:

High-Risk Patients: $8,000*7%+$8 = $568

Very High-Risk Patients: $8,000*13.6%+$8 = $1,096

Low-Risk Patients: $8,000*3.5%+$8 = $288

What price would you charge? Please explain.

In contrast to Heparin treatment, which needs 4 doses per patient, the average Angiomax
dose is: 70%*1+30%*2.5%=1.45. The following table demonstrates the maximum price a
hospital is ready to accept per segment:

1
 Segment Cost Saving Cost Price

High Risk $560+4*$2 1.45*P $568/1.45=$391.72

Very High Risk $1,088+4*$2 1.45*P $1096/1.45=$755.86

Low Risk $280+4*$2 1.45*P $188/1.45=$198.62

To identify the minimum price the company must charge for being profitable we use the
Break-even Price = (Total fixed costs/units) + VC.

Thus, the direct variable cost is $40 per dose, after the contact with UCB and the total
annual fixed costs of the company are $9.4M per year ($54,605,882annual costs/10years +
$3M projected marketing costs).

The maximum quantity of doses Angiomax can sell is 700,000 patients*1.45

doses=1,015,000. The company has decided to concentrate on the 700 centres responsible
for 92% of all angioplasties and we believe it will target initially only the 22%* of doctors
who are already unsatisfied with Heparin, scaling it 1-5. Thus, without taking under
consideration the power of a patient to select a drug, a more realistic number would be
700,000*1.45*92%*22%=205,436 doses/year. Of course, if we include more unsatisfied
doctors (e.g. those who give it a “6”) will raise that number. However, solving the initial
equation as the worst case scenario, we have:

BEP = (9,400,000/205,436 doses/year)+ $40 = $305.80

Considering the price window for Angiomax lies between $305.80 and $755.86 and the
typical price to cost of goods in the industry is 1 to 10, we suggest a starting price of
$391.72, which can get higher after a period, if it is proven that the drug performs better
than any competitor.