Biotechnology Valuation : An Introductory Guide

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  • Edition: 1st
  • Format: Hardcover
  • Copyright: 2008-12-31
  • Publisher: Wiley
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Written by experienced financial analyst, Karl Keegan, Biotechnology Valuation: An Introductory Guide is a hands-on guide to the valuation of biotechnology companies both from a private and public market perspective for industry professionals, investors and students.

Author Biography

KARL KEEGAN is currently a managing director and global head of life sciences equity research at CanaccordAdams, a global investment bank focussing on small to mid cap companies. Karl has been a financial analyst covering the biotechnology sector for over eleven years and has previously worked at Dresdner Kleinwort Benson, UBS and Banc of America. Karl and his team have been consistently highly ranked in institutional surveys throughout his career. Prior to embarking on his finance career, Karl completed postdoctoral assignments in the US and UK and worked in the pharmaceutical industry both as a bench scientist and in strategic planning. Dr. Keegan holds a BSc in Pharmacology from University College Dublin, Ireland, MPhil and PhD degrees in Pharmacology from University of Cambridge, UK and MSc in Finance from London Business School, UK. A native of Dublin, Ireland, he now lives in Kent, UK.

Table of Contents

Acknowledgementsp. xi
Introductionp. 1
Biotechnology Backgroundp. 5
Traditional Valuation Methodsp. 11
The Value of a Companyp. 11
Accounts - Providing the Data for Valuation Analysisp. 12
The Income Statementp. 13
Balance Sheetp. 17
Cash Flow Statementp. 20
Income Statement Multiplesp. 22
Balance Sheet Multiplesp. 26
Summaryp. 27
Discounted Cash Flow Analysisp. 27
Net Present Valuep. 27
Constructing the DCFp. 28
Projecting the Cash Flow Streamp. 29
Choosing a Discount Ratep. 30
Other Thoughtsp. 37
The Drug Development Processp. 39
The Drug Development Processp. 40
Drug Discovery and Researchp. 44
Pre-Clinical Developmentp. 44
Clinical Trialsp. 48
What Investors Should Look For When Analysing Clinical Trialsp. 56
Conclusionp. 59
The Regulatory Processp. 59
Regulation in the USp. 60
Regulation in Europep. 63
The Labelp. 64
Timelines for Approvalp. 65
Post Approvalp. 65
Investment Lessonsp. 66
Case Study #1p. 66
Biotechnology Company Valuationp. 69
Data Collationp. 71
NPV of the Pipelinep. 75
Calculationsp. 80
Sensitivity Analysesp. 86
DCF of Whole Companyp. 92
EBIT DCF of Productsp. 97
Comparables Valuationp. 99
NPVs are Additivep. 101
Using all the Tools Available to Reach a Valuation Conclusionp. 101
Market Modelsp. 104
Conclusionp. 105
Appendix 1p. 106
Example 1p. 106
Example 2p. 108
Example 3p. 108
Appendix 2p. 116
Biosimilar Updatep. 116
Decision Trees and Real Optionsp. 119
Decision Treesp. 120
Discount Ratep. 124
Deriving Scenariosp. 125
Conclusionp. 125
Decision Tree Examplep. 126
Real Optionsp. 126
Valuing Optionsp. 129
Estimation of the Input Variablesp. 138
Conclusionsp. 139
Biotechnology Investingp. 141
Types of Healthcare Investmentp. 141
Biotechnology Sector Evolutionp. 143
Biotechnology Investment Cyclesp. 145
Biotechnology Business Modelsp. 152
Focus on Peoplep. 154
Cashp. 155
Product Pipelinep. 155
Commercial Risksp. 156
Newsflowp. 158
Lessons from Biotech Investingp. 160
Early-stage Valuationp. 161
Private Valuationp. 162
Discounted Cash Flow Methodp. 166
Comparable Valuationp. 168
Venture Capital Methodp. 170
Discount Ratesp. 173
Conclusionp. 173
Glossaryp. 175
Referencesp. 189
Indexp. 193
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