Children vaccine

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Information that can be shared on the interviewee’s 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 into two segments: countries with a decreasing population and countries with a growing population.

Here the interviewee should investigate the potential market size:

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.

Main conclusions:

The total potential market size is about 100 million children.

Information that can be shared on the interviewee’s 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 the whole of 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.

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

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 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:

The overall number of vaccinations needed is 53.34 million in the first year.

=26.67m * 2 vacc. administered = 53.34 million

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, it’s logical that they do it the earliest possible).

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.

Suggested answer:

I would try to obtain a government subsidy for the payment of the vaccines as it is clear that they will save a lot of money by not having to treat children that got the new vaccine and never will get ill.

A similar agreement could be conceived along with private health insurance. They could help patients buy the vaccine. In this case, the number of parents buying the vaccine would be much greater.

More questions to be added by you, interviewer!

At the end of the case, you will have the opportunity to suggest challenging questions about this case (to be asked for instance if the next interviewees solve the case very fast).