No recurring revenue?

Question

Just wanting to confirm - the TAM here is calculated to be 27m children between 2-16. If we assume that a vaccination lasts a lifetime, Bayer (client) would receive the initial revenue of 26m x 100€ for the first 3 doses of the vaccinations.
How does the future revenue for this vaccine look like? Would only future children reaching the age of 2 be vaccinated, because all the older children have already had theirs?

Answer 1

The answer to your question is literally answered in the case:

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, it’s 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.

Answer 2

Hello!

+1 Henning, and good catch.

Cheers,

Clara

Answer 3

Henning beat me to it :)

Always read the full case! That said, good thinking on your own...exactly the right way to think about these questions!

Answer 4

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