Benecol: Raisio's Global Nutriceutical

1265 words 6 pages
Benecol: Raisio’s Global Nutriceutical
Cheryl Hull
Florida Institute of Technology
September 23, 2012

Financial Management Policy
Professor Ana Machuca
September 23, 2012
Benecol: Raisio’s Global Nutriceutical Raisio, a Finnish grain and chemical company, is the proud owner of a product that has been deemed one of the ten most important nutritional innovations in the world (“Benecol®,” 2010). This product is a unique compound composed of plant stanol esters and has been scientifically proven to help lower cholesterol levels in humans. With the prevalence of high cholesterol in the world population and the incidence of mortality associated with a high cholesterol level, it is no wonder that Raisio had a deep desire to share
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If Raisio could not keep up with the demand for stanol ester, there would be no payment. As for being an insurance policy, introducing a new product into the market carries with it enormous financial risk, if Raisio only receives a milestone payment if the launch is successful, McNeil has alleviated some of their risk by sharing it with Raisio.
Financially, if McNeil was able to get beyond the FDA and other regulatory hurdles, Raisio stood to make considerable gains. This was welcome news as Benecol sales in Finland had gone fairly flat and had only accounted for 2% of the Raisio Group sales just two years after it had been introduced (Moffett & Howard, 1999). Under the agreement with McNeil, Raisio would receive returns in the short-term, on a continuing basis, and over the life of the agreement. In the short-term, Raisio would receive milestone payments for the use of their intellectual property. These payments would start in 1998 and go thru 2001. Their amounts would be (millions of Finnish marks, FIM) 110, 150, 100, and 50 respectively. These payments are an assured inflow of cash and incur no direct expense associated with them. On a continuing basis, Raisio holds the patent on stanol ester so they would be supplying all of the stanol ester to McNeil. The projected amount ranges from 1723 tons in 1999 to 6851 tons in 2005. This gives Raisio continued sales of the ester and because they are partnered