Annals of Business, Finance and Management

Danger of management in the advancement of new items in the drug business


Ewa Kleczyk

One of the greatest challenges facing the pharmaceutical industry is the process of selecting which
new products to develop. In this study, the product development and investment decision problem was
examined. A hypothetical case of new product investment in either Product A and/or Product B by a
hypothetical company called Healthcare Company was investigated. As employed in previous empirical
studies, the NPV framework was utilized to examine the strategies for new product development.
Additionally, the stochastic dominance methodology was employed to help with further examination of
the dominant strategy. Three investment scenarios were investigated in this article: 100% of investment
devoted to only one of the products and an equal investment in each of the drugs. The results
suggested that the healthcare company should only invest in one of the pharmaceutical drugs. All of
the methods utilized in this study yielded consistent outcomes.


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