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Chicken Pox Vaccine: 1 Round Interview
Chicken Pox Vaccine: 1 Round Interview
Chicken Pox Vaccine: 1 Round Interview
vaccine
1st round interview
Prompt - Part 1
• Novartis, one of the leader pharma companies in the world, is deciding whether to
continue the development of a vaccine or not. Should Novartis do so?
• Vaccine is a one time pill and there is currently no similar or substitute product on the market
• The vaccine has to pass 3 phases to be approved by the FDA (U.S. Food and Drug Administration)
• The first and second phases have been completed with a total cost of 200M$
– Phase 1 and 2 combined take 3 years (therefore, candidate should recognize we have 3 years of
competitive protection)
• The third phase is estimated to cost 300M$ and would last 2 years before initiating production
• Vaccine cannot be patented but other companies would have to undergo same series of testing
– Up to date no other companies have started formal testing of vaccine
• We are only worried about US market in this case and it is estimated that it would take 3 years to
vaccinate the existing population 2
Suggested approach - Part 1
• Industry
– Market: Size, growth, margins, trends, etc.
– Barriers to entry: Economies of scale, capital requirements, learning curve, etc.
– Key success drivers: Brand, technology, patents, product differentiation, etc.
• Clients
– Segments (size, growth, trends, etc.)
• Competitors
– Possible entry from today to compete in 5 years since the product cannot be patented
– Could enter price war and take part of our market share, etc.
– That the vaccine is not approved by the FDA and all the investment is lost in vain
– Less predisposition of parents to vaccinate their children for their side effects
– Arrival in the future of another more effective vaccine or with lower production cost
– That technical immunity is achieved in the US with the distribution of this vaccine
and lose its commercial push in the future
– Etc.
4
Prompt - Part 2
% infected
100
75
25
0
0 2 4 6 8 10 12 14 16 18
Age
6
Guide - Provide only if requested
When asked about the price…
% parents
100
75
25
0
0 5 10 15 20 25 30 35 40
Price (US$)
7
Suggested approach - Part 2
There are multiple options to estimate the number, one possible approach would be the following:
Candidate should ask himself by now (in the event that he had not done so at the beginning while developing the
framework) how long it would take to vaccinate the uninfected population willing to pay the 30 US$ vaccine 8
Suggested approach - Part 2
Candidate should also keep in mind that there is a segment of potential additional buyers, who
would be the parents of newborn children:
Current customers - - 9 9 9 -
Newborn children - - 3 3 3 3
Total Market 0 0 12 12 12 3
9
Prompt - Part 3
10
• The third phase is estimated to cost 300M$ and would last 2 years before initiating production
– From the previous phases, it seems that the opportunity to be approved by the FDA is 40%
– 300M$ costs for phase 3 include everything else (plant set upcosts, etc.) and can be spread over
the 2 years of testing
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Suggested approach - Part 3
• Candidate could continue to develop the previous table with the new information as follows:
Current customers - - 9 9 9 -
Newborn children - - 3 3 3 3
12
Guide - Provide only if requested
When asked about DCFs…
• To give a superior answer, candidate should propose to calculate the discounted cash flows
(especially relevant if MBA or business background)
• Since it would take long to calculate it, interviewer should give this information as shown so
candidate could think about the recommendation
NPV (up until year 5) = -55 M$ Full NPV (with perpetuity) = +86 M$
13
Prompt - Part 4
14
• The only scenario where recommendation should be a clear "GO" would be without taking
into consideration none of the above circumstances, with a pay-back less than 2 years
15
Suggested approach - Part 4
• Considering the last deduction, assume competitors did enter in year 6, we would be sharing
only 3M vaccines per year. Even supposing they were able to capture a decent portion of the
market, they wouldn’t be able to cover the upfront testing costs for years, so most probably
this would be a natural monopoly for Novartis
• Therefore, without considering the market outside the US, competitors do not have much
incentive to follow us into this market making our position even better
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