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Children vaccine
Topic Difficulty Style
Market entry Advanced Candidate-led (usual style)
Market sizing
New product

Beyer, one of the biggest pharmaceutical companies in the world, just

invented a very reliable vaccine against Chickenpox, a disease that affects
children in the age from 2 to 16 years.

Beyer came to you wondering what their potential sales in Europe in the first
year would be if they launched this product next year. They are only
interested in the overall sales revenue as they already know that the
vaccine can be sold for a profit. This is more meant to show them how big the
volume they have to supply is and what the revenue would be.
Comments

This is an interesting example of substitute product produced by the client

(in many cases the client has to react to a substitute that competitors bring to
the market).

A good interviewee would achieve a good estimate of the potential market

and then make the appropriate considerations to realistically estimate sales
(defining what market share the new product will gain and under what
conditions).

Short Solution

The vaccine is mainly interesting for children in the age 2-11 years.
It will generate 1.778 billion in the first year and be sold to 26.67
million children.
This means there is the need for 53.34 million vaccinations in the
first year.
 Paragraphs highlighted in green indicate diagrams or tables that can be
shared in the Case exhibits section.

Paragraphs highlighted in blue can be verbally communicated to the

interviewee.

Paragraphs highlighted in orange indicate hints for you how to guide the
interviewee through the case.

The following structure would be a good approach:

I. Potential market

Here the interviewee should investigate the potential market size:

Information that can be shared on the interviewees inquiry:

The theoretical potential market is made up of all children

between 2 and 16 years in Europe.
In order to estimate the number of people in a certain age-span it is
common practice to consider the population distribution as
uniform (i.e. there are as many 8-year-old people as, for instance, 55-
year-old people).
With this assumption, the number of people in the age-span is
proportional to the number of years comprised in the age-span.
For example, in a population of 100 million people with a life
expectancy of 100 years, there will be 10 million people between 50
and 59 (age span of 10 years).
However, to make this case more challenging, the age distribution
is not considered uniform.
Europe can be divided in two segments: countries with a
decreasing population and countries with a growing population.
 Share Diagram 2 and 3 if the interviewee inquires information about
the age distribution.
Share Diagram 4 if the interviewee inquires information about the
population.
Share Table 1 with an overview of the probability of the disease
and the treatment costs for the different age spans if the
interviewee inquires information about Chickenpox.

In order to calculate x and y from Diagram 2 and 3 we can set up the

following simple equations:

4x + 4*(1.5x) = 300
10x = 300 -> x = 30 m

5y + 3*(1.66 y) = 200
10y = 200 -> y = 20 m

Now we can approximate the number of 2 16 year-old children in both the

growing and declining populations. The age span from 2 to 16 years is
exactly 15 years.

Calculation for countries with growing population:

Number of people per 10-years age span:

=1.5 * x

Number of children from 2 16 years (15 years age span):

Calculation for countries with declining population:

Number of people per 10-years age span:

=1.0 * y

Number of children from 2 16 years (15 years age span):

Main conclusions:

The total potential market size is about 100 million children.

II. Forecast for 1st year

Now that we know that 100 million children could theoretically be customers
of the new vaccine in Europe, we should determine:

Competitors with a similar product

Size of customers willing to buy vaccine

Information that can be shared on the interviewees inquiry:

There are no competitors to the newly invented vaccine.

For the analysis of the customers in Europe it will be assumed that
the willingness to pay is equal in whole Europe (although there
are differences in buying power in reality).
The vaccine needs to be administered in 3 doses, with six-month
intervals between them. If only 2 vaccines are administered, they do
not have any effect.
The market price will be in sum 100 for three doses (33 per
dose). Each dose is only paid when given to the child.

Share Table 2 if the interviewee inquires information about the treatment

costs.

Main conclusions

From Table 2, we can conclude that many parents will be likely to buy the
vaccine for their children from 2 - 6 years as they have to spend on
average 75 with the alternative treatment.

However, for children between from 7 11 years only some rich parents
would buy the vaccine, as the treatment has much lower expected costs
and the probability of disease is lower.

There is almost no likelihood that parents of children from 12 - 16 years

would buy the vaccine (as the incidence is just 5%).

So we could estimate the real market as:

This is an estimate, there are no right/wrong numbers: For simplicity we are

taking 50% and 30%, those numbers coincidentally equal the percentage
of children getting sick. However, any other reasonable number should be
fine.

50% of children between 2 and 6 (because parents are likely to want

to buy the vaccine)

30% of children between 7 and 11 (because only some rich parents

want to buy the vaccine)

0% of children between 12 and 16 (because most parents will take

their chances that the kids don't get sick anymore)

The total is then around 26.67 million children, which will pay 2.667 billion
in total for the vaccines.

However, (and this is a tricky detail in the case), in the first year only
two of the three doses are administered (since they are applied 3 times
every 6 months).
Therefore the market in the first year will actually be 2/3 of 2.667 billion,
that is, 1.778 billion.

The overall number of vaccinations needed is 53.34 million in the first year.
=26.67m * 2 vacc. administered = 53.34 million

III. Conclusion

Here the candidate should be able to succinctly summarize the findings made
in the two previous steps and make a sound conclusion.

One possibility would be as follows:

The first-year sales for the new vaccine are very promising and expected to
be around 1.778 billion.

To arrive at this number, we first estimated the theoretical potential

market of the vaccine in 100 million children. However, due to the lower
incidence for older children and to the high price of the vaccine, we figured
out that only the parents of about 26.67 million children would buy the
vaccine. Since only two of the three doses are administered in the first year,
the expected sales would be of about 1.778 billion.

However, it is very important to mention that, since the vaccine prevents

the disease for the entire life, only during the release children of different
ages will be treated with it.

After the first couple of years, older children will have already been
vaccinated. The consequence is then that only children at age 2 will be
likely to be vaccinated in the future (if parents want to vaccinate their
children, its logical that they do it the earliest possible).

Using the same logic as above, we suppose that 50% of the parents will buy
the vaccine for their 2-year-old children. There are every year around
6.67 million children that reach the age of 2 years.

Therefore, after some years, when the market stabilizes, there will be about
3.3 million vaccines bought per year, that is 333 million (50% * 3.3
million vaccinated children per year * 100).

= 0.5 * 6.67 m * 100 = 330 m

Here we assumed that the birth rate will remain the same.
The problem of only two doses administered in the first year does not
apply here, as the third dose will be administered the following year.
Therefore after the year of introduction of the vaccine it will always be
in some sense three vaccinations per year (2/3 of the new vaccinations
of the year and 1/3 from the previous year).
Until now, there are no other known vaccines for Chickenpox.
This is the average cost that a child has with Chickenpox treatment. If half of
the children get sick and (traditional) treatment costs amount to 150 then on
average there is a cost of 75 per child.