SVR Clinical Research, LLC Mrs. Seaver, a microbiologist and pharmacist, has developed a drug therapy to treat dysphagia (swallowing problems). She discovered that a combination of existing drugs should address problems with swallowing that have only marginal treatments available to date. Since the therapy is using currently approved drugs, safety of the treatment is expected. It should allow the drug to enter Phase 2 clinical trials very soon after the firm raises its first $3 million in seed capital. Startup investors recognize that they are investing in firms with no history and with significant risk. They evaluate investment opportunities using required returns in the range of 10x5 (That is, the investors want to have their investment return to be 10 times great than the initial investment at the end of 5 years.) Mrs. Seaver's team has developed a clinical trial plan using major research medical centers such as the Vanderbilt University Medical Center and the Cleveland Clinic. The clinical trials are expected to be completed in 3 years. With success in the trials, the therapy's marketing to ENT physicians will begin, and the initial prescriptions (scripts) coming in soon thereafter. If the clinical trials are successful, manufacturing, marketing, and distribution plans will be implemented with a new round of capital funding. Forecasts of expected sales, costs, and cash flows have been created. See below: Forecast The therapy will be used before meals (3 times per day), and one prescription (script) will be for a 30- day supply. It is expected that, on average, patients will fill the script 10 times per year. # of patients: Sales are based on the number of patients using the drug. No patients are expected during years 1 through 4 (This is primarily through the clinical trials and the review process). 1,500 patients are expected in year 5, 5,000 in year 6, 15,000 in year 7, 75,000 in year 8, 150,000 in year 9, and 300,000 patients in year 10. Thereafter, the growth in the number of patients using the drug is expected to stabilize. Based on reviews of other drugs and after consultation with Medicare and Insurance payers, the target price per prescription is $150. Cash flow: For this situation, we will estimate that Cash Flow (CF) for a year = Sales for that year * .20, then less 150,000 fixed costs. After year ten, Cash Flow is expected to grow at a constant rate of 3%