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Hard Growth Strategy Merger & Acquisition Product Launch

Into the Unknown

#Healthcare
ProHub Comment

This is a challenging growth strategy case that tests the candidate's ability to recognize market saturation (90% patient eligibility for FHS), shift to portfolio diversification thinking, and apply expected value calculations under budget constraints. The case requires moving beyond the initial business analysis into M&A evaluation and risk mitigation planning.

Estimated Time 36 minutes
Difficulty Hard
Source Duke
20 / 100
Arendelia Pharmaceuticals is a fast growing, innovative pharmaceutical company that has developed best-in-class treatments for Frozen Heart Syndrome (FHS), a rare but devastating progressive disease that significantly shortens a patient’s lifespan without treatment. Arendelia had $6.2B in revenue in 2020 and grew revenues 55% from 2019 to 2020. Arendelia has hired your firm to understand whether or not its current growth is sustainable and what they should do to ensure long term growth.

Clarifying Information

  1. Client/Company information: US biopharmaceutical company founded in 1989 which focuses on delivering scientifically innovative treatments for diseases with high unmet need.
  2. FHS is typically diagnosed at a very young age and most eligible patients with healthcare coverage are treated with one of Arendelia’s products. There are an estimated 100k total patients with FHS worldwide (70% in the US, 30% International). As this is a rare disease, YoY growth rates are correlated with population growth at ~1% annually.
  3. Industry/Competition information: Arendelia has a monopoly on the FHS market as they are the only product that treats the underlying cause of FHS rather than the symptoms. Competition is likely in the future but not a current concern.
  4. Product information: Arendelia sells 4 products to treat FHS each at 300k/year in the US and 100k/year internationally.
  5. Value Chain/Revenue information: Products are room temperature stable pills making them easy to ship/store. Patients take 1 pill 2x daily for their entire lives.
Mock Interview
Interviewer

Arendelia Pharmaceuticals is a fast growing, innovative pharmaceutical company that has developed best-in-class treatments for Frozen Heart Syndrome (FHS), a rare but devastating progressive disease that significantly shortens a patient's lifespan without treatment. Arendelia had $6.2B in revenue in 2020 and grew revenues 55% from 2019 to 2020. Arendelia has hired your firm to understand whether or not its current growth is sustainable and what they should do to ensure long term growth.

You

Thanks. Before analyzing, I'd like to clarify a few key questions...

Interviewer

Good question. Let me provide some background information...

You

Based on this, I suggest analyzing from these dimensions...

AI Score
Structure Analysis Communication Business Sense Quantitative
Practicing...
Score coming soon
Practice this case with AI Mock Interview

Arendelia Pharmaceuticals faces slowing organic growth as its Frozen Heart Syndrome patient market approaches saturation at 90% eligibility. The case challenges candidates to determine current growth sustainability and recommend optimal allocation of a $15B investment budget across six new disease area products. The solution involves selecting Products A, C, and D based on expected value calculations while acknowledging execution risks.

Key Insights:

  1. Recognize market saturation: 90% patient eligibility signals plateau in FHS growth despite high historical revenue increases
  2. Apply expected value formula: EV = (Revenue - Costs) × Probability of Success + (Failure costs) × (1 - Probability), accounting for phase-likelihood correlation
  3. Understand budget constraints: All selected products must total ≤$15B with acquisition costs included in budget but excluded from EV calculations (sunk cost concept)
  4. Balance portfolio risk: Select Product D (higher phase/approval likelihood) over Product B (identical financials but earlier stage) and diversify across multiple products rather than concentration
  5. Risk mitigation: Address execution risks (FDA approval, acquisition integration, supply chain) and non-financial considerations (patient perception, internal resource capacity)