H&H must evaluate acquiring Sternofi for $2.3B based on projected revenues of a pancreatic cancer drug. The analysis requires calculating market share and pricing across competitors, then determining if the acquisition achieves H&H’s 8-year break-even target ($2.2B in cumulative net income versus $2.3B price).
Key Insights:
- Market sizing requires careful interpretation of relative market share relationships (Competitor A has 50% greater share than B; C has two-thirds less than A; Sternofi captures twice B’s share)
- Sternofi achieves market leadership by patient volume (30%) but highest revenue share (~50%) despite lower per-patient pricing, indicating pricing power is secondary to volume
- Break-even timeline is marginally tight (8.17 years vs. 8-year target), making synergies and risk mitigation critical decision factors
- Key risks include FDA approval uncertainty, patent protection duration, insurance reimbursement challenges, and competitive response—all affecting the $2.3B valuation assumption