Biotechnology Valuation An Introductory Guide

Acknowledgements

1 Introduction

Biotechnology Background

2 Traditional Valuation Methods

The Value of a Company

Accounts – Providing the Data for Valuation Analysis

The Income Statement

Balance Sheet

Cash Flow Statement

Income Statement Multiples

Balance Sheet Multiples

Summary

Discounted Cash Flow Analysis

Net Present Value

Constructing the DCF

Projecting the Cash Flow Stream

Choosing a Discount Rate

Other Thoughts

3 The Drug Development Process

The Drug Development Process

Drug Discovery and Research

Pre-Clinical Development

Clinical Trials

What Investors Should Look For When Analysing Clinical Trials

Conclusion

The Regulatory Process

Regulation in the US

Regulation in Europe

The Label

Timelines for Approval

Post Approval

Investment Lessons

Case Study #1

4 Biotechnology Company Valuation

Data Collation

NPV of the Pipeline

Calculations

Sensitivity Analyses

DCF of Whole Company

EBIT DCF of Products

Comparables Valuation

NPVs are Additive

Using all the Tools Available to Reach a Valuation Conclusion

Market Models

Conclusion

Appendix 1

Example 1

Example 2

Example 3

Appendix 2

Biosimilar Update

5 Decision Trees and Real Options

Decision Trees

Discount Rate

Deriving Scenarios

Conclusion

Decision Tree Example

Real Options

Valuing Options

Estimation of the Input Variables

Conclusions

6 Biotechnology Investing

Types of Healthcare Investment

Biotechnology Sector Evolution

Biotechnology Investment Cycles

Biotechnology Business Models

Focus on People

Cash

Product Pipeline

Commercial Risks

Newsflow

Lessons from Biotech Investing

7 Early-stage Valuation

Private Valuation

Discounted Cash Flow Method

Comparable Valuation

Venture Capital Method

Discount Rates

Conclusion

Glossary

References

Index