05 Dec Is the successful development and delivery of a vaccine for Covid-19 virus risky or an uncertainty?
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Assignment
Government support for the development of Covid-19 vaccines took two different forms. Some firms accepted grants (a.k.a, direct monetary support) for vaccine development and testing. As a condition of the grant, the government has options to purchase a first and specific number of vaccine doses. Other firms chose not to accept grants. Instead they negotiated advanced-purchase agreement to support pre-approval manufacturing of vaccines. The purchase agreement stipulates that payment will be made upon delivery of the pre-specified number of doses.
You are advising the CEO at the point in time when he/she must make to decision to undertake the research and development of a covid-19 vaccine. You know the CEOs job is to consider what is best for shareholders. The bottom line is all about profitability.
• 1. Is the successful development and delivery of a vaccine for Covid-19 virus risky or an uncertainty?
• 2. In the case of direct support agreements, who bears the cost of failure?
• 3. In the case of advanced purchase agreements, who bears the cost of a failure?
• 4. Pfizer was the first firm to have its vaccine authorized for use in the U.S. It did not accept a grant to support development and testing, but the Pfizer did negotiate an advance-purchase agreement for $1.95 billion to support the manufacturing of 100 million doses. Looking back, what hidden information is revealed by Pfizer’s deal?
