Millions of Dollars

Cummulative
Sequence of Events Probability Expenses Cummulative
Probablility Expenses

Success 0.6 30
Phase 1
Failure 0.4 30

Depression Only 0.1 0.060 40 70

Weight Loss only Success 0.15 0.09 40 70
Phase 2
Both 0.05 0.03 40 70
Failure Failure 0.7 0.42 40 70

Depression Only Success 0.85 0.051 450 520

Failure 0.15 0.009 200 270
Success 0.75 0.0675 250 320
Phase 3 Weight Loss only Failure 0.25 0.0225 150 220
0.15 0.0045 750 820
Success 0.05 0.0015 600 670
Both
0.7 0.021 900 970
Failure 0.1 0.003 500 570
Failure Cost from Phase I and Phase II

Net Present Value of taking up the project

Phase*Probabilit
y of earlier
phase
Millions of Dollars
Net
Commercial Pay Off NPV(Expected EMV
Values Values)
Value

13.98

43.3

1200 680 34.68

537.5
0 -270 -2.43
345 25 1.6875
-36.25
0 -220 -4.95
1200 380 1.71
345 -325 -0.4875
879.75
2250 1280 26.88
0 -570 -1.71

-41.4

13.98
 Expected Value of Milestone Payments to LAB (Million of Dollars)

Milestone
Probability Expected Milestone Payment
Payment(Millions)
Initial 5 100% 5
Phase I Success 2.5 60% 1.5
Phase II 20 60% x 10% 1.2
Depression
Phase II Weight 10 60% x 15% 0.9
Loss
Phase II Dual 40 60% x 5% 1.2
Indication
Total 9.8
 Expected Value of Royalty Payments to LAB

Gross CF Royalty Probability Expected Royalty

Depression – 1263.16 5% 5.10% 3.221

Independent Claim
Weight Loss – 363.16 5% 6.75% 1.23
Independent Claim
Depression – Dual 1263.16 5% 0.45% 0.28
Claim
Weight Loss – Dual 363.16 5% 0.15% 0.03
Claim
Dual Claim 2368.42 5% 2.10% 2.49
Total 14.55 7.25