Hi,

Thanks for your question. I do not have the full case, so correct me if I'm missing something. I'll try to make it as simple as possible. It's basically a betting game. 

- Currently ~1 in 8 candidate drug goes to market (70%*40%*50%*90%=12.6% ie ~1/8) which means that on every drug candidate we make an “expected winning” or average winning of ~150M (1.2B divided by 8). If I take a portfolio of 8 drugs, I know that 1 will make it to the market and I will get 1.2B from that drug. So on average, one drug gives me 150M

- If the company invests an additional 150M, we need to have at least 150M in additional “expected winning” to breakeven. Since we already have an “expected winning” of 150M, we basically want to double that winning.

- To double the winning we either double the future profits from the drug candidate (which seems to be out of scope) or we double the likelihood of winning, ie we double the number of drugs that make it to the market

- Since we can only impact Phase 2 here, we have to double the likelihood on Phase 2 ie move from 40% to 80% which is 40pp more

I hope this helps, let me know if it's unclear. And let me know if you want to practice similar questions.

Best,

Mehdi