| Due to frequent changes of pharmaceutical policies since 2017,profits of pharmaceutical companies have declined and their financing capability has weakened.This has resulted in a slow-down of pharmaceutical R&D and hitting a bottleneck in development.In order to mitigate the risks of relocation and achieve economies of scale,the parent company of Company Y has decided to move the current operations of Company Y to a new pharmaceutical park.The former site of Company Y will then have to be re-purposed.Having analysed the geographical advantages and disadvantages and the resources available at the former site,Company Y identifies three options:(1)selling the former site directly,(2)production and sale of its own pharmaceutical products,and(3)parallel operation of its own products with undertaking contract manufacturing outsourcing(CMO)services.This thesis aims to fully consider financial benefits,risks,and non-financial influencing factors in assessing the feasibility of the three alternative solutions.It will also conduct comparative analysis on the risks and returns of these solutions,ultimately to select the one with the highest economic benefit and lowest risk.Firstly,this thesis adopts the literature research method to determine suitable evaluation methods for the above alternative solutions as independent projects,as well as assessment methods for decision-making between mutually exclusive solutions.Then,based on the investment objectives and plans of the three mutually exclusive projects,this thesis estimates the required investment,financing amounts,and costs for each project,forecasts the financial base indicators for each project,and calculates relatively accurate future cash flows and related financial evaluation indicators such as net present value,internal rate of return,and dynamic and static payback periods to assess the feasibility of each individual solution.Risk factors for each project are investigated using questionnaire surveys and uncertainty analysis methods,such as dynamic break-even point and sensitivity analysis.Finally,this thesis uses the equal annual annuity method to conduct comparative analysis of the financial benefits of the three alternative solutions,taking financial risks and non-financial economic benefits and risk factors into account.The results show that when making decisions on these three independent projects individually,they all meet Y Company’s decision-making criteria and are worth investing.However,in the decision-making of mutually exclusive projects,if considering financial benefits and risks only,selling the former site outperforms the other two solutions,while the parallel operation of producing and selling proprietary products with CMO has higher risks than the others.Whereas,if considering non-financial economic benefits and risks,selling the former site would cause a loss of talent,which would in turn result in huge hidden economic losses for the timely implementation and operation of the new production base.Therefore,selling the former site is no longer the optimal solution.Instead,the parallel operation of producing and selling proprietary products with CMO becomes the optimal solution.This thesis may contribute to the empirical literature of pharmaceutical mutual exclusion projects by presenting the decision case of Company Y.It may also provide insights into the economic benefits and operational risks of the two production capacity optimization strategies of product mix and parallel operation,and serve as a reference for other pharmaceutical enterprises to optimize their production capacity.In addition,this article explores the characteristics between different schemes by comparing various financial benefit indicators and financial risk indicators.It selects the evaluation indicators that are most suitable for the project decision-making of Company Y,provides a way to screen financial evaluation indicators,and has universal guiding significance for industrial enterprises to study the problem of old site decision-making. |
PDF Full Text Request