2014 Ygcc Life Sciences Casebook Preview
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YGCC Life Sciences Case Book 2014 © Yale Graduate Student Consulting Club
Preview Version
1
Table of Contents Case #
Title
Firm
Type
1
CS Med
Health Advances
Commercialization
2
Ear X
Health Advances
Commercialization
3
NeoFactor
Trinity Partners
Market Entry
4
LT Neuro
Trinity Partners
Market Entry
5
O’ Care
Trinity Partners
Acquisition
6
Ultimate Bandage
Trinity Partners
Market Entry
7
C Difficile Vaccine
ClearView
Pricing
8
IBD Products
ClearView
Market Size Estimation
9
Boreal
L.E.K.
Profitability
Yale Graduate Student Consulting Club© !
2
Estimation Practice Estimation Prompts To help with your preparation, below are a collection of prompts used from previous interviews or based on similar interview questions Before starting, you should take a look at various outside resources to guide your approach Some suggestions are: • • • •
Case Interview Secrets by Victor Cheng (Amazon) Guesstimation by Lawrence Weinstein (Amazon) Framework for McKinsey, BCG and Bain estimation cases (Youtube) Estimation podcasts (Firmsconsulting website)
Example Estimation Questions: How many HPLCs are sold annually? How many PCR machines are sold annually? What is the amount of floss used in America? How many new braces (teeth) are installed per year? How many new glasses are prescribed per year? How much contact solution is sold every year in America?
Yale Graduate Student Consulting Club© !
3
Case 4: LT Neuro (Multiple Sclerosis) What factors should be considered? Sample Issue Tree
Launch oral drug for treating MS?
Market
Size
Trends
Profitability
Share
Competition
Revenue
Volume
Treatment Frequency
Yale Graduate Student Consulting Club© !
Implementation Risk
Costs
Price
Fixed Costs
Clinical Trials
Capital
Operational
Variable Costs
Costs / unit
# treatment sold
4
Case 5: O’ Care (Orphan Drug) Type of Case
Firm
Acquisition
Trinity Partners
Prompt Our client wants to acquire O’Care (OC), a small biotech company. Most of OC’s products are in development in the preclinical phase, but OC does have a single revenue stream. This revenue is from sales of OC1, the only FDA approved orphan drug to treat Disease X. Disease X is an inherited disease that affects 1/20000 among children at the age of 9 and younger. Negotiations with OC have led to a price of $60M. The client hires you to access whether they should acquire OC or not.
Additional Information (provided on request) Client Goal (Interviewer should emphasize this) - The board will approve the deal only if the acquisition can breakeven in 5 years. OC Business Model: - OC develops orphan drugs in house, but OC1 is the sole revenue stream. Other preclinical drugs can be considered mainly R&D cost within the 5 years. - Contracts with a third party for OC1 manufacturing and distribution/sales/marketing. Client Business Model: - Develops several classes of pharmaceuticals in house, but wants to expand to orphan drugs. Manufactures all drugs in house. Same external distribution/sales/marketing channels as OC.
Yale Graduate Student Consulting Club© !
5
Case 5: O’ Care (Orphan Drug) Exhibit 1: Profitability Comparison
Exhibit 2: Price Sensitivity
100% 80%
45%
30%
70% 60% 50%
40%
65% 30%
40% 30%
25%
20% 10%
15% 5%
15%
15%
0% OC Client Finance Finance Structure Structure Yale Graduate Student Consulting Club© !
Net Profit Distribution Production R&D
Market Penetration
Percent of Revenue
90%
35% 30% 25% 20% 15% 10% 5% 0% 25
30
35
40
45
50
Price/patient/year (in 000 dollars)
6
Glossary of Terms Healthcare is a rapidly developing sector of the global economy. This glossary serves as a starting point with a collection of terms to make the cases more approachable. However, it must be noted that during an actual interview, be cautious with the terms you use unless you fully understand them. The YGCC are not experts in this field so the terms contained within this glossary are simplified definitions. We highly recommend further research on your part should you decide to engage in this industry.
Pharmaceuticals – the umbrella term for substances that have a biological effect to manage or treat a disease Small molecules – chemically derived pharmaceuticals that are generally much smaller and less complex than biologics Biopharmaceutical / Biologic – biologically derived pharmaceuticals. Biologics are generally more complex than small molecule pharmaceutics. Examples include recombinant insulin (diabetes), interferon (HCV), and antibodies (commonly used for specifically targeting cancer). Medical Devices – Devices used for a therapeutic use. The most easily recognizable are pacemakers (control cardiac rhythms) Clinical Trials Process – FDA based approval process that pharmaceuticals must pass through before being sold to the general. There are many more caveats to explore so visit the FDA website for detailed information 1) IND – Investigational New Drug. Before entering the clinical trial process, a company must file an application that contains chemical analysis of the pharmaceutical and usually safety tests in animal subjects 2) Phase I – Generally the first studies in humans to test safety 3) Phase II – Larger scale trial for safety in a target population and efficacy 4) Phase III – Larger scale trial to test safety and efficacy 5) NDA – New Drug Application. Once the clinical trial process is complete, the company files an NDA to ask the FDA for approval. If approved, the drug can enter the market Yale Graduate Student Consulting Club© !
7
Additional Life Sciences Cases McKinsey & Company Title
Source
Case #
Magna Health
McKinsey Website
NA
Suger Magnolia Hospital
Columbia 2006
5
Heartcorp
Columbia 2006
10
Meditest
Columbia 2006
15
Health Care in Canada
Columbia 2007
7
Vitamin Manufacturer Entry into China
Kellogg 2001
36
Old Pharma
London 2013
NA
Apollo Medical Labs
McCombs 2007
2
APC Nutrition
McCombs 2008
7
US Healthcare
Michigan 2005
5
Pharma Acquisition
Michigan 2008
12
Medical Device
Ross 2005
43
Diabetes Testing
Ross 2007
17
Drug Store Profitability
Ross 2007
18
Pharma Acquisition
Ross 2008
12
Universal Healthcare
Sloan 2011
52
Nutracorp
Wharton 2005
5
Mini Case 1
YGCC 2012
23
Yale Graduate Student Consulting Club© !
8
Preview Version
1
Table of Contents Case #
Title
Firm
Type
1
CS Med
Health Advances
Commercialization
2
Ear X
Health Advances
Commercialization
3
NeoFactor
Trinity Partners
Market Entry
4
LT Neuro
Trinity Partners
Market Entry
5
O’ Care
Trinity Partners
Acquisition
6
Ultimate Bandage
Trinity Partners
Market Entry
7
C Difficile Vaccine
ClearView
Pricing
8
IBD Products
ClearView
Market Size Estimation
9
Boreal
L.E.K.
Profitability
Yale Graduate Student Consulting Club© !
2
Estimation Practice Estimation Prompts To help with your preparation, below are a collection of prompts used from previous interviews or based on similar interview questions Before starting, you should take a look at various outside resources to guide your approach Some suggestions are: • • • •
Case Interview Secrets by Victor Cheng (Amazon) Guesstimation by Lawrence Weinstein (Amazon) Framework for McKinsey, BCG and Bain estimation cases (Youtube) Estimation podcasts (Firmsconsulting website)
Example Estimation Questions: How many HPLCs are sold annually? How many PCR machines are sold annually? What is the amount of floss used in America? How many new braces (teeth) are installed per year? How many new glasses are prescribed per year? How much contact solution is sold every year in America?
Yale Graduate Student Consulting Club© !
3
Case 4: LT Neuro (Multiple Sclerosis) What factors should be considered? Sample Issue Tree
Launch oral drug for treating MS?
Market
Size
Trends
Profitability
Share
Competition
Revenue
Volume
Treatment Frequency
Yale Graduate Student Consulting Club© !
Implementation Risk
Costs
Price
Fixed Costs
Clinical Trials
Capital
Operational
Variable Costs
Costs / unit
# treatment sold
4
Case 5: O’ Care (Orphan Drug) Type of Case
Firm
Acquisition
Trinity Partners
Prompt Our client wants to acquire O’Care (OC), a small biotech company. Most of OC’s products are in development in the preclinical phase, but OC does have a single revenue stream. This revenue is from sales of OC1, the only FDA approved orphan drug to treat Disease X. Disease X is an inherited disease that affects 1/20000 among children at the age of 9 and younger. Negotiations with OC have led to a price of $60M. The client hires you to access whether they should acquire OC or not.
Additional Information (provided on request) Client Goal (Interviewer should emphasize this) - The board will approve the deal only if the acquisition can breakeven in 5 years. OC Business Model: - OC develops orphan drugs in house, but OC1 is the sole revenue stream. Other preclinical drugs can be considered mainly R&D cost within the 5 years. - Contracts with a third party for OC1 manufacturing and distribution/sales/marketing. Client Business Model: - Develops several classes of pharmaceuticals in house, but wants to expand to orphan drugs. Manufactures all drugs in house. Same external distribution/sales/marketing channels as OC.
Yale Graduate Student Consulting Club© !
5
Case 5: O’ Care (Orphan Drug) Exhibit 1: Profitability Comparison
Exhibit 2: Price Sensitivity
100% 80%
45%
30%
70% 60% 50%
40%
65% 30%
40% 30%
25%
20% 10%
15% 5%
15%
15%
0% OC Client Finance Finance Structure Structure Yale Graduate Student Consulting Club© !
Net Profit Distribution Production R&D
Market Penetration
Percent of Revenue
90%
35% 30% 25% 20% 15% 10% 5% 0% 25
30
35
40
45
50
Price/patient/year (in 000 dollars)
6
Glossary of Terms Healthcare is a rapidly developing sector of the global economy. This glossary serves as a starting point with a collection of terms to make the cases more approachable. However, it must be noted that during an actual interview, be cautious with the terms you use unless you fully understand them. The YGCC are not experts in this field so the terms contained within this glossary are simplified definitions. We highly recommend further research on your part should you decide to engage in this industry.
Pharmaceuticals – the umbrella term for substances that have a biological effect to manage or treat a disease Small molecules – chemically derived pharmaceuticals that are generally much smaller and less complex than biologics Biopharmaceutical / Biologic – biologically derived pharmaceuticals. Biologics are generally more complex than small molecule pharmaceutics. Examples include recombinant insulin (diabetes), interferon (HCV), and antibodies (commonly used for specifically targeting cancer). Medical Devices – Devices used for a therapeutic use. The most easily recognizable are pacemakers (control cardiac rhythms) Clinical Trials Process – FDA based approval process that pharmaceuticals must pass through before being sold to the general. There are many more caveats to explore so visit the FDA website for detailed information 1) IND – Investigational New Drug. Before entering the clinical trial process, a company must file an application that contains chemical analysis of the pharmaceutical and usually safety tests in animal subjects 2) Phase I – Generally the first studies in humans to test safety 3) Phase II – Larger scale trial for safety in a target population and efficacy 4) Phase III – Larger scale trial to test safety and efficacy 5) NDA – New Drug Application. Once the clinical trial process is complete, the company files an NDA to ask the FDA for approval. If approved, the drug can enter the market Yale Graduate Student Consulting Club© !
7
Additional Life Sciences Cases McKinsey & Company Title
Source
Case #
Magna Health
McKinsey Website
NA
Suger Magnolia Hospital
Columbia 2006
5
Heartcorp
Columbia 2006
10
Meditest
Columbia 2006
15
Health Care in Canada
Columbia 2007
7
Vitamin Manufacturer Entry into China
Kellogg 2001
36
Old Pharma
London 2013
NA
Apollo Medical Labs
McCombs 2007
2
APC Nutrition
McCombs 2008
7
US Healthcare
Michigan 2005
5
Pharma Acquisition
Michigan 2008
12
Medical Device
Ross 2005
43
Diabetes Testing
Ross 2007
17
Drug Store Profitability
Ross 2007
18
Pharma Acquisition
Ross 2008
12
Universal Healthcare
Sloan 2011
52
Nutracorp
Wharton 2005
5
Mini Case 1
YGCC 2012
23
Yale Graduate Student Consulting Club© !
8
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