This is a comprehensive M&A case requiring candidates to diagnose why OncoCo's profits are declining (patent expiration leading to generic competition) and evaluate whether acquiring liquid morphine rights is strategically and financially sound. The case tests both quantitative analysis (margin calculations, market share requirements) and qualitative reasoning (business model fit, reputational risks, operational capability).
A private equity client owns a specialized pharma manufacturer called OncoCo which focuses on cancer treatments. OncoCo is not only profitable, but also experienced steady growth in the past years. Hence, the PE fund was surprised when the management board of OncoCo stated that they expect declining profits in the future. OncoCo’s management board has also suggested, to cushion the decline with the acquisition of an additional asset. In particular, OncoCo’s board received the opportunity to purchase the commercial rights of liquid morphine.
The PE fund has asked us to figure out why a decline is expected and whether they should move forward with the acquisition.