Novak Pharma: Industry Analysis

The CIMA November 2018 SCS exam is based a pharmaceutical company “Novak Pharmaceuticals” – as the exam is approaching it’s a good time to take a look at some industry analysis that you can use on exam day.

Novak Pharmaceutical’s: Industry Analysis

VIVA Financial Tuition have produced an insight to the pharmaceutical industry for SCS students to get to grips with – below is a look at some of the financials in the industry as well R&D within the industry.

Revenue’s Vs Profits

The pharmaceutical industry is one of the largest industries in the world in terms of revenues generated and those revenues have grown considerably in the last 15 to 20 years.

In 2001, annual world revenues for the pharmaceutical industry stood at US$ 390 billion.

Today, they have already surpassed US$ 1 trillion per year.

To put it in perspective, that accounts for around 1% of the entire world GDP! The sheer size of the industry in absolute terms often leads to a popular perception that this is also one of the most profitable industries in the world today.

However, although profits can be large in any given year, if we look at the rate of return on investment in the pharmaceutical industry, it is not as profitable as popular opinion suggests.

According to Pharmaceutical Research and Manufacturers of America, the average return on equity for key industries from 2014 – 2016 shows that the pharmaceutical industry’s profits stand at 16.2%, significantly lower than Computer Sciences (31.6%), Beverages (27.4%), Aerospace/Defense (23.0%), and Trucking (19.1%).

So despite health revenue growth figures in recent years, and large profits in absolute terms, relative to investment, it is not the most profitable industry in the world by any means.

SCSIndustry.png

Clinical Trial Phases

The research and development phase in this industry is long, painstaking, and has an extremely high failure rate. In the full analysis we investigate the reasons why this is the case.

Here, we offer a quick overview of the structure of the testing period for new drugs, and look at the fail rates that correspond to each.

There are 4 main stages or phases of testing that new drugs go through.

First, there are pre-clinical trials. These are usually a battery of sophisticated laboratory tests, in which pharmacists and technicians perform provisional tests on the efficacy of a chemical compound by using biological cultures, disease samples, and in some cases (though less and less frequently), animal testing.

Once promising indications of efficacy have been established at this pre-clinical stage, the drug passes on to testing on human subjects. This is usually called “Phase 1” testing. In Phase 1, voluntary human subjects are administered the drug.

These subjects are typically healthy and are not suffering from the relevant disease or ailment. The primary aim of this phase is to determine whether or not there are any strong adverse side-effects, and appropriate dose thresholds.

If there are no clear problems at this stage, the drug proceeds to Phase 2 trials. Phase 2 usually involves a larger sample of people, and in this case, the drug is tested on people who actually suffer from the relevant disease. The main objective of Phase 2 testing is to ascertain and confirm the efficacy on real human patients, while again ensuring no adverse side effects in those actually suffering from the disease.

If there appear no obvious problems here, the drug is submitted for the final Phase 3 trial. This is a much larger trial, typically taking in hundreds or even thousands of patients where possible, over longer periods, in order to establish long-term usability and efficacy.

One of the main aims of Phase 3 testing is to compare the long-run efficacy and safety of the new drug with already-available medications that are on the market. Once Phase 3 testing is successfully completed, the drug is submitted for approval with the relevant regulatory authority (e.g. the FDA in the United States, or the PTA in the pre-seen case of Novak).

Success Rates

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It’s interesting to note the success rates in percentage terms from one phase to the next. As you can see in the chart above, the main hurdle is at Phase 2.

This is perhaps not surprising, as this is typically the first time that the drug is tested on real patients who actually suffer from the disease.

Even if in Phase 1 no adverse side effects are discovered, there is no guarantee that patients with the disease will not react differently due to their ailment.

Moreover, there is no guarantee that the provisional efficacy established in pre-clinical trials on isolated biological samples (or animals) will carry over into real, full human subjects.

Therefore, Phase 2 is critical from the point of view of determining whether or not the drug is really viable in the real world.

Once all the clinical trials have been completed in accordance with criteria established by the regulatory authority, then there is an 85% chance that the drug will be approved.

However, when we sum the probabilities and we look at the overall chances that any given drug will make it from pre-clinical trials to approval, the percentage plummets to just over 9%!

Put another way, there is a 91% chance that any given drug will not be saleable at the end of an approximately 10-year cycle of testing! Not surprisingly, research and development in this industry is very expensive indeed…

The full industry analysis on the November 2018 CIMA strategic case study from VIVA Financial Tuition can be found at www.vivatuition.com

*The above industry analysis article was taken from the VIVA Financial Tuition website with permission 19/10/2018

CIMA Nov 18 Case Studies: Top 10 Issues

 

CIMA November 2018 Case Studies

The November 2018 CIMA case studies will begin in around four weeks with the OCS scenario of GymFit. With the November case study session finishing just over two weeks later with the SCS scenario of Novak Pharmaceuticals.

Students taking the exams next month should be well in their exam preparation and have made extensive motes and analysis on the pre-seen materials.

Now you should be drawing your focus on the most likely issues that will come up on exam day.

The benefits of understanding the so called “Top 10 Issues”

  • Gives you a focus for your final weeks of study.
  • Provides an insight to the syllabus that could appear in your exam variant.
  • Boosts confidence ahead of the exam.
  • A useful tool for brainstorming about the case study scenario.
  • Can generate discussion between yourself and other students – do they have a different opinion on the issues?

If you are struggling to digest all of the pre-seen materials and draw your own conclusions from the materials you have, then use the videos below as a way to get the ball rolling and start thinking about the main issues with your respective case study as use it as a source of focus for the next couple of weeks.

Final Weeks of CIMA Case Study Preparation

Not only should you be digging into the top 10 issues and most likely examinable topics, but you should be practicing your exam technique and have a strategy on how you answer your questions.

Exam Answer Planning

I would recommend that you plan your answers before jumping straight into answering the question in your case study exam.

When passing my OCS and MCS exams first time – I used to spend 8-10 minutes reading the question and planning my answer on the exam script with brief bullet points and my structure of the answer and what I wanted to cover.

Here is a summary on how I approached answering case study questions.

  • Identify the questions requirements.
  • Make headings and sub headings on your answer script.
  • Add relevant points relating to pre-seen and new materials.
  • Finish your answer by drawing conclusions and give reasons why you have come to your conclusion.
  • Don’t forget ethics!! (where relevant – don’t include it for the sake of it)

Here are the Top 10 Issue videos for the November exams.

CIMA OCS Nov 18: Top 10 Issues

You can find the full set of videos on GymFit here.

CIMA MCS Nov 18: Top 10 Issues

You can find the full set of videos on Grapple here.

CIMA SCS Nov 18: Top 10 Issues

You can find the full set of videos on Novak Pharmaceuticals here.

CIMA SCS Nov 18: Novak Pharmaceuticals

SCS Nov Dates

SCS November Important Dates

The relevant CIMA SCS milestones for the November 2018 exams are listed above. As you can see (at the time of writing this blog post) there are still a few weeks until the pre-seen materials are released for the exam, so it’s a great time to start planning how you will pass the SCS first time and become CGMA qualified!

However, if you are reading this after the pre-seen materials have been released, don’t fear! You still have enough time to get exam ready and I hope the advice and resources below will see you on your way.

SCS Tuition Videos

One way to get prepared for strategic case study scenario is to understand;

  • What does it take to pass the exam?
  • Exam planning and writing
  • How to score how marks on the pre-seen materials

As you should have the required level of technical knowledge from all of the E3/P3/F3 exams, now it’s a case of having the required technique and structure for laying out your answers.

I also believe there is a great benefit from learning from other students mistakes to make sure you don’t fall into the same trap. Below is an example of the Astranti SCS tuition video that goes through a students SCS exam answer on what was good and not so good!

Approaching the CIMA SCS Exam

I want to start this section with a look at what the examiner is looking for in terms on the competency displayed in the SCS against the other CIMA case study exams.

The SCS exam is a perfect split of 25% in each category, which, on comparison is very different to what CIMA expect from OCS students where the emphasis is on technical knowledge (i.e. syllabus content).

CIMA3

What does this all mean?

Well, it’s clear that the SCS exam requires a well rounded answer script that addresses the four areas that make up the CGMA competency framework.

The below diagram taken from CIMA website paints a clear, brief picture of each competency.

The general trend from the OCS, MCS to the SCS exam places less weighting on the technical knowledge with a stronger focus on the business, people and leadership skills that is required at strategic level.

CIMA2

With this in mind, when giving your answers in the SCS exam you should remember that your role as Senior Finance Manager has to;

  • Think long term and sets the strategy for the business.
  • Be able to demonstrate leadership skills (especially with change management)
  • Has the ability to influence people.

What’s more you’ll also need to remember the audience you will communicating to the exam.

Unlike the operational or management case studies, you will be giving your answers and recommendations to the CFO, the board of directors, the senior management team and other senior non financial staff.

Pre Seen Materials: Novak Pharmaceuticals

SCS Nov18

CIMA released the pre-seen materials for the November 2018 strategic case study on Friday 5th October and you can download them from the CIMA website here.

SCS Astranti Course

SCS ALL

The full SCS course from Astranti is really packed full of resources;

Complete pre-seen pack (pre-seen, strategic, industry analysis and top 10 issues)

  • 3 x Full tuition videos
  • 2 x Study texts
  • 2 x Live Masterclasses (the keys to passing and revision masterclass)
  • 3 x Full Mock Exams (based on Nov 18 scenario)
  • Detailed marking and feedback
  • Ethics Pack
  • Pass Guarantee