Medical knowledge is useful for guiding the trajectory of business development, depending on the trends in the healthcare industry. One viable option is to pursue the opening of a specialized pharmacological venture. It is considered realistic in this case due to previous experience in pharmacodynamics and clinical trials. Even in the absence of new drug development, the manufacture of generic drugs can produce profits. The financial analysis of the proposed plan assesses its feasibility and profitability.
Potential Healthcare Business Interest
Pharmacological company investment is generally expected to pay off no later than two years, assuming that the product successfully entered Phase 4 of the clinical trials. According to Gapenski (2013), the direction of any business is based on the competently formulated strategies. The primary business idea of the initiative is to eventually create a large trading network specializing in the sale of medical products and drugs. The vision of the company is to compete with production by outsourcing. The goal of the organization is to maintain a stable income, and the objectives reflect a natural desire to gain recognition among consumers. It is planned to establish relationships among individual firms to consolidate and integrate into a single network. The reason for launching such a venture is the lack of medications, and/or the improvement of currently established side effect profiles, competing with production costs. That could be achieved by ‘outsourcing’ parts of the supply chain management of either a new medication or a generic drug manufacturing. After assessing scenario analysis and the sensitivity analysis, and determining a positive NPV and IRR, a plan is considered to be financially feasible.
Financial planning, as in this case, guides the future of the desired business (Gapenski, 2013). The company will focus the advertisement campaign on a specific target audience (e.g., patients with a certain disease) to promote specific drugs and other high-quality products. A distinctive value proposition of the company is that the enterprise will be oriented to modern production using new technologies.
Measures to Evaluate the Financial Health of the Business
To be profitable, it is essential to assess the business’ current performance and competently make forecasts. Thus, the degree of potential buyers’ interest, the availability of partner contracts, as well as the prominence in the market help narrow the focus of probable business success. Essentially, the demand for certain drugs and products and their prevalence in healthcare guide vision for the company’s future. Some of that information can be attained by conducting patient surveys and meta-analysis of current trends. As Gapenski (2013) remarks, one of the factors emphasizing the success of the organization is the revenue cycle that needs to be monitored. Another criterion for the success of the business is the number of satisfied consumers (Gapenski, 2013). If buyers are satisfied with the high-quality products by this firm, could further promote the business through feedback reviews.
A financial plan, as in any enterprise, will include the forecasts of sales and revenues based on the current state of the business. As a possible plan, the following algorithm can be used:
- The risk assessment will initially be conducted using the case scenario analysis. To supplement those results, testing of individual variables will be done by sensitivity analysis. NPV and IRR will subsequently be calculated, and a positive result would adopt the proposed plan.
- By the end of the year, it is planned to increase sales by 10-25% via the promotion of goods through social networks and advertising. Variance analysis will subsequently be used to identify any discrepancies between the projected and actual outcomes.
- It is planned that the invested capital will be recovered in 1 ½ – 2 years. Cash Flow Statements will regularly be conducted and monitored.
- A break-even analysis will be carried out regularly for monitoring.
- The corporate cost of capital will be used to persuade investors. Additionally, the rate of interest and the DCF (discounted cash flow) will be evaluated when considering other funding options.
- The opportunity cost principle will also be conducted to ensure the efficient allocation of resources.
- The development of a separate brand will include contracts with other promising companies for business expansion.
The financial analysis of an organization is useful when drawing certain conclusions about the appropriate allocation of resources and the profitability of the proposed plan. In this plan, the success of a new drug depends on a competently conducted advertising campaign, consumer demand, and a well-thought-out business strategy. Specific measures will be implemented to cover all the critical points.
Gapenski, L. C. (2013). Fundamentals of healthcare finance (2nd ed.). Arlington, VA: Health Administration.