Genentech’s T-DM1Communications
Break-Even Analysis
March 7, 2009
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Topics
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•
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•
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Overview
Fixed Costs
Variable Costs
Assumptions
Break-Even Analysis
Q&A
2
Overview
In response to Genentech’s recent Request For
Proposal (RFP), Agency has analyzed and
developed a Financial Scope of Work Plan (SOW)
based upon the requirements listed in the RFP
T-DM1 is an investigational*compound designed to
treat breast cancer and Genentech is planning for
a Fast-Track** approval based on positive Phase II
interim data
*Status: Phase II (data available Q4-2009), Phase III trial currently recruiting
** Fast-Track approval is the term used by the FDA to signify drugs that are given a 6
months or less review period as opposed to the standard 1 year review period
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Fixed Costs
• Salaries/Income
• Employee Benefits
– 401K
– Medical*
– Vision
• Unemployment Costs**
• Lease/Rent/Maintenance
• Business Insurance
• Utilities
– Communications
– Electricity
– Water
• Subscriptions
*Medical Insurance benefits based on single PPO plan @ $1000 total costs per month
and the Agency paying $500/mo.
**Federal Unemployment taxes (FUTA) calculated based on 2009’s rate = 6.0%
4
Variable Costs
• Out-of-Pocket (OOP) costs
– Copying
– Printing
– Production Materials
– Shipping
– Travel (market research, convention attendance)
NOTE: (OOP) or Pass-thru-Expenses (PTE) are not factored into the
break-even analysis because the agency does not mark-up the
expenses and they are merely invoiced to the Client directly on a
monthly schedule
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Assumptions
• All of the fixed and variable costs have been estimated and do not represent actual
calculations
• The typical SOW is built with a negotiated hourly rate for all staff either as a blended
rate or defined by title.
– Blended rates range = $120-$175/hr.
– Title defined rates range;
• Account Assistant = $78/hr.
• Account Manager = $110/hr.
• Account Director = $188/hr.
• Director of Client Services = $282/hr.
• 1600 hours/year = the total number of hours allocated per employee to be staffed at
100% or 1 FTE= 1600 hours
• Lease/Rent/Maintenance was calculated with following assumption;
1 FTE has a footprint = 36 ft2 = (6’x6’)
Space = $35/ ft2
• Corporate Insurance = 5% of 1 FTE’s yearly salary
• Utilities = 2% of 1 FTE’s yearly salary
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Break-Even (calculations)
Detailed Scope of Work (SOW)
that includes the Fixed Costs;
1)Salaries
2)Staffing
3)Allotted Hours
4)Multiple projects
5)Project definitions
6)Project estimates (fee based)
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Break-Even (calculations)
Genentech T-DM1/S&H
Break-Even Analysis
Break-Even calculation =
Fixed Costs
=
(Rate – Variable Costs)
Break-Even (in units/hrs.) =
$1,112,906
$140hr – $0
7,949
units/hours
Fixed Costs
1
2
7
8
9
3
4
5
6
6
Salaries
$
Employee Benefits
– 401K $
– Medical $
– Vision $
Unemployment Costs
$
Lease/Rent/Maintenance
$
Business Insurance
$
Utilities
$
Subscriptions*
$
918,503
Total $
1,112,906
45,925
4,321
86
55,110
10,888
45,925
27,555
4,593
Total Profit margin = 57.5% margin
Typical profit margins = 15-20%
(as reported by CFO/Accounting)
Varible Costs
Total $
–
Revenue
Total Fee & OOP $
Unit/Hours
Rate ($/hr) $
1,935,640
13,826
140
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Break-Even Analysis (graphic)
Break-Even Chart
$3,000,000
Contract = 14,000 hrs.
Dollars ($)
$2,500,000
Total
Revenue
Line
Break-Even = 8,000 hrs.
$2,000,000
PROFIT
$1,500,000
$1,000,000
Total Costs
Line
Loss
$500,000
$1,000
5,000
10,000
13,826
15,000
20,000
Units/hours
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Questions and Answers
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