Novogen Limited – my nominated firm is a research and drug development company so identifying three products was difficult. I have made a few assumptions around what selling price Novogen would calculate for their drugs considering they are in clinical trial stages only and don’t sell any product at this stage of the trials. Only fixed costs were listed in the financial reports so the figures for variable costs have been estimated. Also, the number of patients involved in the trials was difficult to find so this number is an assumption as well. The total other income in 2017 was $9,407,434 so dividing that by 50 patients in trials for product 1, 47 patients in trials for product 2 and 32 patients involved in trial 3, then we can assume that each patient has sales of $72,926. Using the figure of research and development expenses for 2017 (this could be fixed or variable costs, so I am using this as a variable cost) was $10,656,315. If we divide that by the 129 patients, then that equates to $82,607 of variable expenses per patient per trial.
Product No.1:
Cantrixil (TRXE-002-1). This drug is in phase 1 clinical trials and is used to treat patients with ovarian cancer.
Assuming there are 50 patients at $72,926 worth of sales in this trial the contribution margin per patient will be:
Contribution Margin (CM) = Sales – Variable costs
CM = $3,646,300 (50 x $72,926) – $4,130,350 (50 x $82,607)
CM = ($484,050)
This figure is in line with the loss made by Novogen Limited in 2017.
Product No.2:
GDC-0084. This drug is in phase 2 trials and is used to treat patients with Glioblastoma Multiforme – a form of brain cancer.
Assuming there are 47 patients involved in this trial the contribution margin per patient is:
Contribution Margin (CM) = Sales – Variable costs
CM = $3,427,522 (47 x $72,926) – $3,882,529 (47 x $82,607)
CM = ($455,007)
Product No.3:
Trilexium (TRXE-009-01). This is a drug that is no longer trialled by Novogen Limited. It was intended for the treatment of multiple cancers.
Assuming there are 32 patients involved in this trial the contribution margin per patient is:
Contribution Margin (CM) = Sales – Variable costs
CM = $2,333,632 (32 x $72,926) – $2,643,424 (32 x $82,607)
CM = ($309,792)
All three products have a contribution margin which is a negative figure. This trend is in line with Novogen making a loss in 2017.
Constraints that may inhibit Novogen from carrying out clinical trials could be lack of willing participants, lack of qualified medical staff to administer the drugs and possibly lack of funding to continue with trials and further develop these life saving drugs.
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