BCG: Pharmaceutical rare disease business growth

Healthcare Growth
Industry Business
(case name) problem type

Our client is a large pharmaceutical company with a strong business in "Rare Disease" (rare
diseases are conditions that affect fewer than 200,000 people in the US).

Historically, pharmaceutical companies have not invested significantly in Rare Disease because it
has not been cost effective to conduct research for such small populations
populations. Due to the fall off in the
number of pharmaceutical blockbusters and improved regulation to make R&D cheaper for Rare
Description of Disease, pharmaceutical companies have begun to invest more in Rare Disease R&D over the
the business last few years.

eserved.
problem
Our client has hired BCG because it would like to grow its Rare Disease business
business.

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1. How can the client double its Rare Disease business in 5 years?

Case questions
to solve

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BCG: Pharmaceutical rare disease business growth
How would you approach our client's question on growing its Rare Disease business?

Where would you like to start?

[When the candidate asks about the existing business, share Exhibit 1] Based on the data,
how large will the client's rare disease business be in 2016? [If necessary,] what is the
Questions for shortfall to its goal of doubling its business?
the candidate
What does the client need to do to double the Rare Disease revenues by 2016?
[If candidates discusses acquisitions] Who to acquire? How many assets will we need to buy?

Let's say the CEO walks in, could you summarize for me?

eserved.
ng Group, Inc. All rights re
Our client is an industry leader with a track record of success. Its existing business is $2.5B,
expected to grow at 5% per year

Rare disease market is $30B and is as profitable as "Big

Big Pharma
Pharma"

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Information While research is relatively expensive, the government provides tax credits for drugs
provided upon designated to treat rare diseases
request Additionally, prices tend to be higher to make up for the upfront research investment.
It's also growing faster than Big Pharma.

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There are many small bio-techs that are attractive targets and there are also other big
pharmaceutical companies that have rare disease divisions / assets
BCG: Pharmaceutical rare disease business growth
Internal growth will not be sufficient to achieve your goal of doubling your business. You will
need to acquire ~3 "peak revenue" assets to close the gap between your goal of $2.5B and the
$1.1B your portfolio will generate organically.

Recommendation

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Quantitative analysis and solutions

Growth from existing assets

Current baseline is $2.5B, growing at 5% for 5 years
$2.5B * 5% * 5 = $625M (assumes linear growth would not ask to calculate compounding growth)

Growth from pipeline

Research assets need 6 years to reach the market = $0M
Phase I = 5 assets * 20% attrition * $500M peak rev * 20% rev in 1st year = $100M
Phase II = 3 assets * 40% attrition * $500M peak rev * 40% rev in 2nd year = $240M
Phase III = 1 asset * 60% attrition * $500M peak rev * 60% rev in 3rd year = $180M
Total = $520M

eserved.
ng Group, Inc. All rights re
Shortfall
Sh tf ll
Target is to double the business = $2.5B
Internal growth is $625M + $520M = $1.145M, need ~$1.4B more
If each asset is $500M, then need to buy 3 peak revenue assets, or more if they are in R&D

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2016 Portfolio
$5B portfolio with: $3.1B (60%) from current baseline, $520M (10%) from pipeline, $1.4B from
acquisitions (30%)

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 Exhibit 1

BCG: Pharmaceutical rare disease business growth

Assets in research and development



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ng Group, Inc. All rights re
Revenue by years on market
 

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( 
 

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BCG Case Book Case 2.pptx