2. Verritos Company - Extract from annual report
Verritos overview
Verritos key figures
Split of
Verritos sales
Profit before
tax in region
US
25%
0%
When an in-vivo test is prescribed by a physician, a laboratory will
quickly execute the test on the patient's blood sample. In doing so, it
will require up to 15 different allergens per test.
Japan
50%
20%
Verritos is a clear worldwide leader on the supply of those allergens.
It has been present in all key regions for more than 15 years, but sells
allergen for in-vitro tests only.
Europe
20%
24%
Rest of the
World
5%
24%
Verritos produces and sells allergens. Allergens are used when invitro tests are conducted to identify and assess allergic risks in a given
patient.
General physicians are the main prescribers of allergy tests. They
have two main options to assess the allergy: in-vitro and in-vivo tests.
Verritos operates on a regulated market. For example, prices of
allergens are set by local healthcare authorities. Currently prices per
allergen are set at $5.5 each in all key countries.
Verritos has plants in all key countries. Production, which is very
automated, is very similar in all countries.
Doc 1
3. Comparison of in-vitro and in-vivo tests
In-vitro tests
Testing principle
In-vivo tests
•
•
•
•
Key advantages
•
•
•
Key actors
•
•
•
Based on blood sample
Allergens added to blood sample to
track number and type of antibodies
formed
Severity of allergy determined by
quantitative test result
More allergens available
Lower discomfort and risk to the
patient - suitable for infants, children
and elderly and for individuals with
skin sensitivity
Quantitative results, which can be
saved for later use/comparisons
General physicians are key
prescribers
Test are performed in laboratories
Test results are analyzed by general
practitioners who then prescribe adhoc medicine
•
Skin testing by application of allergen
extract on patient skin
Size of skin reaction indicates degree of
sensitivity to allergen - although
difficult to replicate/record
•
•
Immediate response
Note that the main disadvantages are
discomfort and potential side-effects,
that are especially pronounced in
childre and elderly people
•
General practitioners are key initial
prescribers
Tests are conducted by allergists
( physicians specialists in allergy
treatment)
Allergists analyze results and prescribe
ad-hoc medicine
•
•
Doc 2
4. Question 1
(You have access to documents 1 to 2)
We has just been contacted by a private equity fund to study and acquisition opportunity. The targeted
company is Verritos. Verritos is a French company and a leader in the supply of allergens to laboratories. You
have gathered some information from Verritos's website.
Of the 2 statements below, which is most likely true given the information provided?
1- Use of in-vitro tests is particularly well suited for elderly people, infant and children
2- Verritos performs allergen tests as soon as a physician prescribes an in-vitro test
A.Only statement 1 is true
B.Only statement 2 is true
C.Both statements are correct
D.Both statements are incorrect
5. Question 2
(You have access to documents 1 to 2)
What is the profit before taxes of Verritos?
A.14%
B.16%
C.17.5%
D.None of the above / We lack sufficient information at this stage
6. Question 3
(You have access to documents 1 to 2)
Of the 2 statements below, which is most likely true given the information provided?
1- Japan represents less than half if Verritos profits
2- Volumes of allergens sold in Europe by Verritos are 40% of volumes sold in Japan
A.Only statement 1 is true
B.Only statement 2 is true
C.Both statements are correct
D.Both statements are incorrect
7. Question 4
(You have access to documents 1 to 2)
To prioritize your analyses, which topic would you consider most promising at this stage?
A.Benchmark costs in all plants to better understand profitability gaps
B.Focus on the US market
C.Focus on the Japan market
D.Benchmark US & Japan markets
E.We still lack sufficient information; it is to early to focus efforts
8. Question 5
(You have access to documents 1 to 2)
A note from the fund manager provides some additional data (Note: you will likely need that information for
the rest of the project)
1- EU market size is 40% of that of Japan
2- US population is 300M ; twice that of Japan
3- Verritos market share is 80% worldwide
4- Verritos has very similar market share in all countries
Given the information you already have in Doc 1 and 2, which one(s) of the above mentioned additional data
points are required to compare the sizes of US and Japan markets?
A.2 and 3
B.1 and 3
C.2 and 4
D.4 only
9. Question 6
(You have access to documents 1 to 2)
Given the information you have gathered at this stage, which of the following statements is true?
A.There is an opportunity to double Verritos sales in the US
B.US market size is half that of Japan
C.Verritos is making $70K of operating profit
D.Japan market size is half that of the US
10. Question 7
(You have access to documents 1 to 2)
You want to assess market sizes of in-vitro allergens in the US and Japan. Which additional information would
allow you to size those markets?
A.Verritos sales in Japan
B.Population size in US and Japan and share of allergic population in both countries
C.In-vivo market size in Japan
D.Number of patents on which in-vitro tests have been conducted worldwide last year
11. Question 8
(You have access to documents 1 to 2)
In your opinion, what are the 3 parameters necessary to calculate the number of in-vitro tests conducted in the
US?
A.Demographic growth
B.Share of allergic population in total population
C.Size and growth of allergic population
D.Share of in-vitro tests vs. in-vivo tests
E.Number of in-vitro tests conducted for each visit to general physicians
F.Frequency of visits of allergic population to general physicians
G.Increase of allergic substances (plant pollens, house dusts, insects, food, etc.)
H. Average number of allergens used in each test
12. Market key information
US
Population (M)
Share of allergic population
Share of allergic population by age
0 to 15 years old
15 to 25 years old
25 to 50 years old
50 years old and over
When visited by an allergic patient, general
physicians :
Prescribes medicines without any tests
Prescribes an in-vivo test
Prescribes an in-vitro test
Visit to general physicians of allergic population
# of general physicians in country (k)
Average number of allergens used for an in-vitro
test
Market share
Japan
EU
300
20%
150
40%
400
25%
35%
20%
18%
17%
45%
38%
30%
28%
n/a.
n/a.
n/a.
n/a.
65%
30%
5%
Every 2
years
200
15
65%
5%
30%
Every 2
years
100
5
n/a.
n/a.
n/a.
Every 2
years
300
10
80%
80%
80%
Sum of 3
regions
45%
30%
25%
25%
80%
Doc 3
13. Question 9
(You have access to documents 1 to 3)
During the due diligence (i.e. first data gathering on target company), the following information was gathered.
According to this table, what is the allergic population in those 3 key areas?
A.850M
B.220M
C.110M
D.110K
14. Question 10
(You have access to documents 1 to 3)
According to all the information you have gathered so far, what are Verritos dollar sales in the US and Japan?
A.~22.5M and ~45M respectively
B.~100M and ~200M respectively
C.~125M and ~250M respectively
D.~200M and ~400M respectively
15. Question 11
(You have access to documents 1 to 3)
At this stage, which of the following statements is most likely to be true?
A.There is a good opportunity for Verritos to grow its market share in the US vs. other allergen suppliers
B.In vitro testing is a common practice in the US
C.In the US, there is an opportunity to increase share of in-vitro tests versus in-vivo tests
D.None of the above
16. Question 12
(You have access to documents 1 to 3)
Which of the following statements is not true?
A.The number of visits to general physicians by allergic patients is ~30M in the US
B.Japanese are more likely to be allergic than Americans
C.The number of tests conducted in Japan with Verritos allergens is 6 times as high as in the US
D.The revenues generated for Verritos by an additional allergic patient in Japan are 3 times as high as in the US
17. Question 13
(You have access to documents 1 to 3)
With the Japanese benchmark in mind, which of the following measures would best help to quickly grow
Verritos sales in the US?
A.Initiate a price increase
B.Convince physicians to conduct more tests
C.Increase patients' visits to general physicians through a large promotional campaign (eg. TV spots)
D.Increase number of allergens used in a test
E.Convince physicians that in-vitro testing has advantages vs in-vivo testing
18. Transcript of discussion with Verritos Japan VP
Sales
"Past few years have been terrific for our sales in Japan. In our discussion with general physicians we spotted
the lack of awareness they had on in-vitro tests. This lack of awareness was explaining the small share of invitro tests versus in-vivo tests. By drastically increasing the number of commercial representatives to those
physicians, we inverted the positions
In three years we observed the following evolutions in the behavior of general physicians
Before
3 years later
No test
65%
60%
In-vitro
5%
30%
In-vivo
30%
5%
I guess this commercial effort benefitted our competitors as far as our market share on allergens remained
constant at roughly 80%”
Doc 4
19. Question 14
(You have access to documents 1 to 4)
If you assume Verritos's success in Japan could be replicated in the US market, what would be the average
annual growth of Verritos sales over the next 3 years in the US? - Assume all other parameters unchanged
A.~10%
B.~20%
C.~80%
D.~200%
E.~600%
20. Question 15
(You have access to documents 1 to 4)
You expect flat sales in other Verritos markets (Japan, EU, and ROW). What overall growth can you expect for
Verritos worldwide? - Assume all other parameters unchanged
A.25% per year
B.125% over the 3 year period
C.~130% over the 3 year period
D.150% over the 3 year period
E.600% over the 3 year period
