Case 2 (50 marks) Please read the following two articles and answer ALL questions.

Global Adult Vaccine Industry Trends and Opportunities, 2022-20271 (Businesswire, 18 Feb 2022)

...Recently, the increasing prevalence of diseases and novel vaccine technologies has been significant drivers for the global adult vaccines market. In addition, increased research in vaccine technologies and increasing government support also support the growth of the global adult vaccines market...

How COVID-19 has Benefited the Adult Vaccine Market

Pandemic COVID-19 had mixed impact on vaccines industry. Some of the vaccines vaccination rates have declined. On the contrary few vaccines vaccination rates have jumped such as flu vaccines. The launches of COVID-19 vaccines have made a huge impact on the overall growth of vaccines industry. The vaccines industry has registered a growth of Billion of USD in the year 2021. According to this report Global Adult Vaccine Industry is projected to grow with a CAGR of 6% from 2021-2027.

Adult Vaccine Market size was US$ 18.8 billion in 2021

The global adult vaccines disease segment includes Influenza, Cervical Cancer (HPV), Zoster (Shingles), MMR (Measles, Mumps, and Rubella Vaccine), Pneumococcal, Meningococcal, Hepatitis, TdaP, Travel and Miscellaneous, Varicella. Pneumonia is a disorder that drives lung contamination in one or both the lungs induced by viruses, bacteria organisms, or fungi; bacterial pneumonia is the most familiar in adults...

1 Source: https://www.businesswire.com/news/home/20220218005216/en/Global-Adult-Vaccine- Industry-Trends-and-O ppo rtu nit ies-2022 -2 027- --ResearchA ndMa rkets.com

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Pfizer and BioNTech Provide Update on Rolling Submission for Emergency Use Authorization of Their COVID-19 Vaccine in Children 6 Months Through 4 Years of Age2 (Pfizer, 11 Feb 2022)

Pfizer Inc. (NYSE: PFE) and BioNTech SE (Nasdaq: BNTX) today announced plans to extend their rolling submission to the U.S. Food and Drug Administration (FDA) seeking to amend the Emergency Use Authorization of the Pfizer-BioNTech COVID-19 Vaccine to include children 6 months through 4 years of age, which had been requested by FDA. The trial in children 6 months through 4 years of age is ongoing and data on the first two 3 g doses in this age group are being shared with the FDA on an ongoing basis...

About the Phase 1/2/3 Trial in Children

The Phase 1/2/3 trial initially enrolled 4,500 children ages 6 months to under 12 years of age in the United States, Finland, Poland, and Spain from more than 90 clinical trial sites. Additional children have been enrolled in all age groups following study amendments and the trial currently includes approximately 8,300 children. It was designed to evaluate the safety, tolerability, and immunogenicity of the Pfizer-BioNTech vaccine on a two- dose schedule (approximately 21 days apart) in three age groups: ages 5 to under 12 years; ages 2 to under 5 years; and ages 6 months to under 2 years...The Pfizer-BioNTech COVID-19 Vaccine, which is based on BioNTechs proprietary mRNA technology, was developed by both BioNTech and Pfizer.

Question 1 (30 marks)

Suppose Pfizer and BioNTech have the following two mutually exclusive development plan for new laboratories and research centers, Project A and Project B. The financial teams have prepared estimates of the initial investment, evaluation of the two possibilities produces the following cash flows and internal rates of return (IRR), they are shown in the table below. The financial managers believe that the two plans carry similar risks and the acceptance of either of them will not change the groups overall risk. With the tight timeline, the group only accepts projects that can be paid back up to 2.5 years. Suppose the companies requires a return of 12% on the development plans.

Year	Project A (US$ in thousand)	Project B (US$ in thousand)
0	(75,000)	(38,000)
1	32,400	17,800
2	30,200	14,200
3	36,600	19,800
IRR	15,06%	16.92%

1. (i) Which project will you recommend by applying the internal rates of return (IRR) criterion? Why? (2 marks)

2. (ii) Apply the Net Present Value (NPV) method to determine which project should be adopted. Explain. (5 marks)

3. (iii) Apply the payback criterion to determine which project should be adopted? Explain. (3 marks)

4. (iv) Apply the Profitability Index (PI) criterion to determine which project should be adopted. Explain. (3 marks)

5. (v) Based on your answers in parts (i) through (iv), which project will you finally recommend? Explain. (7 marks)

6. (vi) Suppose Pfizer has several positive net present value projects that would like to pursue and thus decided to issue additional shares of common stock. As a result of this stock issue, the firm's stock price declined. Explain why this occurred when the proceeds of the issue are being used to fund positive net present value projects. (10 marks)