Emergent BioSolutions to Look for Ways to Grow

Case Type: growth; business competition, competitive response.
Consulting Firm: IMS Health Consulting Group first round full time job interview.
Industry Coverage: healthcare: pharmaceutical, biotech, life sciences.

Case Interview Question #01172: Your client Emergent BioSolutions (NYSE: EBS) is a multinational specialty biopharmaceutical company headquartered in Gaithersburg, Maryland. It develops vaccines and antibody therapeutics for rare diseases, infectious diseases, oncology and autoimmune disorders, and provides medical devices for biodefense purposes.

The year is 2016. The client Emergent BioSolutions owns a majority of the Koot disease market. Koot is a rare disease (any disease that affects a small percentage of the population) that affects the portion of the human brain that controls balance, making games such as four square, handball, and tether ball difficult. Currently, the company’s leading product, Koot-Ease, is experiencing tremendous growth in their core markets, and the company is looking to grow further. What should your client Emergent BioSolutions do?

Possible Answers:

1. Information Gathering

The candidates should ask for additional information regarding:

* Which core markets? How much of their revenue do the core markets make up? (75%)
* How much market share does the company own? (65%)
* How much of that share is Koot-Ease? (50%)
* Are there any other products the company manufactures? (Yes, but let’s focus on Koot-Ease only)

2. Detailed Analysis

Prompt #1: What should the client do to drive growth?

Possible Answer:

The candidates should come up with ideas for growth, such as:

* Expand into new markets directly, by partnering with or by buying other companies.
* Expand in current markets by acquiring a company (it’s very common in Pharma industry.)
* Invest further into R&D to develop an even better drug.
* Look into other diseases the company has the capacity to tackle.

Prompt #2: Guide the candidate towards current Koot-Ease market share by core market (show Exhibit 1)

Exhibit 1: Koot-Ease Share by Core Koot Market (Fiscal Year 2015)

** IU (International Unit): in pharmacology, International Unit is the quantity of a substance, such as a vitamin, hormone, or toxin, that produces a specified effect when tested according to an internationally accepted biological procedure.

Exhibit 1 shows Koot-Ease market share for its 5 core markets: USA, Germany, Argentina, China, India. Given this information which market should Emergent BioSolutions focus on?

Possible Answer:

There are 3 different types of market share given here. The candidate should attempt to calculate the company’s revenue for each market, and ask for information regarding how many patients and how many IU’s are in each market.

* For patient share, the candidate should inquire about market size. Does a small amount of patient share in a large market do the company any good?
* For IU share, this is the amount of product actually used in the country. The candidate should differentiate patient share versus IU share, and how having less patient share but more IU share means your patients are more compliant. This could mean brand loyalty.
* For revenue share, if the company has more patient share than revenue share, it could mean the company is not competitively priced, or is under-pricing. Questions around this are important.
* For this case, the client company is interested in obtaining more revenue share.

Conclusion: Given market share and revenue in India is small, with such a large population, the client company should focus there.

Prompt #3: The client Emergent BioSolutions has now assessed its core markets and believes it could further grow in India. However, a new revolutionary drug developed by another pharmaceutical company Bynes & Lohan Inc., called Skooter, has just passed Phase 3 trials. Skooter attacks the Koot virus through an innovative neuropathway and produces no antibodies nor side effects. The drug is administered 2/month (compared to Koot-Ease 2/week), and has no co-morbidities for older patients.

The year is 2016. The new drug Skooter is scheduled to go on sale in all markets in 2017. The client Emergent BioSolutions wants to forecast Skooter’s potential revenue to year 2020. What should it do?

Possible Answer:

The candidate should give ideas on the information needed to forecast potential revenue:

* What is Skooter’s forecasted market share from 2017-2020?
* How many patients are in the market from 2017-2020, and how many will Skooter win?
* How much Skooter will each patient use on an annual basis?
* What is the price of Skooter forecasted to be?

A strong candidate will also ask questions regarding:

* What is the likelihood of Skooter making it to market? Would we then assume a risk-adjusted forecast?
* How important is brand loyalty in the Koot market?
* Does Bynes & Lohan have experience in launching a Koot treatment?

Prompt #4: (Show Exhibit 2) We have obtained Skooter forecast data for Koot-Ease core markets from 2017-2020. What are Skooter’s potential revenues to year 2020?

Exhibit 2: Skooter Forecast for Koot-Ease core markets (2017-2020)

** IU (International Unit): in pharmacology, International Unit is the quantity of a substance, such as a vitamin, hormone, or toxin, that produces a specified effect when tested according to an internationally accepted biological procedure.

Possible Answer:

Prompt #5: Given what you now know about Koot-Ease’s current and Skooter’s forecasted market share, do you believe Emergent BioSolutions should begin looking for ways to expand, and how?

Possible Answer:

When comparing the two drugs in the core markets, the candidate should notice that the overall revenue of the Koot market is decreasing rapidly: by 2020, 40% of the Koot patient market will account for only ~$220M of revenue; Compared to 2015 Koot-Ease revenues which are in the billions).

Given these forecasts, the candidate should recommend that Emergent BioSolutions look for ways to mitigate the impending disruption known as Skooter.

Strong candidates will go further to recommend:

* Acquiring Bynes & Lohan Inc., or forming a partnership, given their experience in the Koot market.
* Developing a marketing plan that highlights the benefits of Koot-Ease treatment pathway, as compared Skooter’s unknown innovation.
* Look towards undeveloped markets where Koot disease may be more prevalent.

3. Performance Assessment

* Average Candidate will be able to calculate most quantitative aspects of the case, but be driven to the exhibits and overall recommendation

* Good Candidate will be able to calculate most quantitative aspects of the case, and will drive towards the exhibits given the information needed to solve the case

* Excellent Candidate will be able to calculate all quantitative aspects of the case, and will drive towards the exhibits and overall recommendation by asking insightful and second-level questions.