Biotechnology Valuation
An Introductory Guide
Erschienen am 15. Januar 2009
216 Seiten
978-0-470-74134-4 (ISBN)
Beschreibung
* The first book to provide a simple and practical means ofvaluing biotech companies
* The book begins with a short history of the biotechnologyindustry; this is important as although it is about 30 years old,the first company went public only in 1996, so it is possible toplot the course of investment waves and dips
* It examines the European industry and its evolvement, and drawsparallels between the similarities and differences between that andthe US
* Looks at the various companies which make up the biotechindustry (therapeutic; life sciences; and the medical technologycompany) and gives tools for the investor to properly evaluatethem
Praise for Biotechnology Valuation
"Keegan states that the valuation of Biotech companies is asmuch an art as a science. This brief but comprehensive review ofthe skills and knowledge required, not of just the financial marketand sentiment, but also of the technical attributes of a companyand the drug development and regulatory hurdles that must beovercome, highlights the importance of the breadth of understandingrequired. Biotech investing is not for the timid, but it can bringsubstantial returns. Keegan's book, punctuated with his personalexperience and opinions, is a good place to start."
--Chris Blackwell, Chief Executive, Vectura Groupplc
"A user-friendly, yet thorough discussion of a notoriouslydifficult topic. Dr Keegan's book is a fine resource for bothbusiness types and academicians."
--Steve Winokur, Managing Director, CanaccordAdams
"A highly readable and comprehensive explanation of thetechnical and commercial parameters that influence biotechnologycompanies at all stages of development, providing clear context forselection from the toolkit of valuation methodologies the authorrecommends to assess company and product performance, or ascribevalue."
--Dr L.M. Allan, Director, Bioscience EnterpriseProgramme, University of Cambridge
"A fabulous approach to a difficult topic."
--Deirdre Y. Gillespie, MD, President & CEO, LaJolla Pharmaceutical Company
* The book begins with a short history of the biotechnologyindustry; this is important as although it is about 30 years old,the first company went public only in 1996, so it is possible toplot the course of investment waves and dips
* It examines the European industry and its evolvement, and drawsparallels between the similarities and differences between that andthe US
* Looks at the various companies which make up the biotechindustry (therapeutic; life sciences; and the medical technologycompany) and gives tools for the investor to properly evaluatethem
Praise for Biotechnology Valuation
"Keegan states that the valuation of Biotech companies is asmuch an art as a science. This brief but comprehensive review ofthe skills and knowledge required, not of just the financial marketand sentiment, but also of the technical attributes of a companyand the drug development and regulatory hurdles that must beovercome, highlights the importance of the breadth of understandingrequired. Biotech investing is not for the timid, but it can bringsubstantial returns. Keegan's book, punctuated with his personalexperience and opinions, is a good place to start."
--Chris Blackwell, Chief Executive, Vectura Groupplc
"A user-friendly, yet thorough discussion of a notoriouslydifficult topic. Dr Keegan's book is a fine resource for bothbusiness types and academicians."
--Steve Winokur, Managing Director, CanaccordAdams
"A highly readable and comprehensive explanation of thetechnical and commercial parameters that influence biotechnologycompanies at all stages of development, providing clear context forselection from the toolkit of valuation methodologies the authorrecommends to assess company and product performance, or ascribevalue."
--Dr L.M. Allan, Director, Bioscience EnterpriseProgramme, University of Cambridge
"A fabulous approach to a difficult topic."
--Deirdre Y. Gillespie, MD, President & CEO, LaJolla Pharmaceutical Company
Weitere Details
Weitere Ausgaben
Person
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.
Inhalt
Acknowledgements xi
1 Introduction 1
Biotechnology Background 5
2 Traditional Valuation Methods 11
The Value of a Company 11
Accounts - Providing the Data for Valuation Analysis12
The Income Statement 13
Balance Sheet 17
Cash Flow Statement 20
Income Statement Multiples 22
Balance Sheet Multiples 26
Summary 27
Discounted Cash Flow Analysis 27
Net Present Value 27
Constructing the DCF 28
Projecting the Cash Flow Stream 29
Choosing a Discount Rate 30
Other Thoughts 37
3 The Drug Development Process 39
The Drug Development Process 40
Drug Discovery and Research 44
Pre-Clinical Development 44
Clinical Trials 48
What Investors Should Look For When Analysing Clinical Trials56
Conclusion 59
The Regulatory Process 59
Regulation in the US 60
Regulation in Europe 63
The Label 64
Timelines for Approval 65
Post Approval 65
Investment Lessons 66
Case Study #1 66
4 Biotechnology Company Valuation 69
Data Collation 71
NPV of the Pipeline 75
Calculations 80
Sensitivity Analyses 86
DCF of Whole Company 92
EBIT DCF of Products 97
Comparables Valuation 99
NPVs are Additive 101
Using all the Tools Available to Reach a Valuation Conclusion101
Market Models 104
Conclusion 105
Appendix 1 106
Example 1 106
Example 2 108
Example 3 108
Appendix 2 116
Biosimilar Update 116
5 Decision Trees and Real Options 119
Decision Trees 120
Discount Rate 124
Deriving Scenarios 125
Conclusion 125
Decision Tree Example 126
Real Options 126
Valuing Options 129
Estimation of the Input Variables 138
Conclusions 139
6 Biotechnology Investing 141
Types of Healthcare Investment 141
Biotechnology Sector Evolution 143
Biotechnology Investment Cycles 145
Biotechnology Business Models 152
Focus on People 154
Cash 155
Product Pipeline 155
Commercial Risks 156
Newsflow 158
Lessons from Biotech Investing 160
7 Early-stage Valuation 161
Private Valuation 162
Discounted Cash Flow Method 166
Comparable Valuation 168
Venture Capital Method 170
Discount Rates 173
Conclusion 173
Glossary 175
References 189
Index 193
1 Introduction 1
Biotechnology Background 5
2 Traditional Valuation Methods 11
The Value of a Company 11
Accounts - Providing the Data for Valuation Analysis12
The Income Statement 13
Balance Sheet 17
Cash Flow Statement 20
Income Statement Multiples 22
Balance Sheet Multiples 26
Summary 27
Discounted Cash Flow Analysis 27
Net Present Value 27
Constructing the DCF 28
Projecting the Cash Flow Stream 29
Choosing a Discount Rate 30
Other Thoughts 37
3 The Drug Development Process 39
The Drug Development Process 40
Drug Discovery and Research 44
Pre-Clinical Development 44
Clinical Trials 48
What Investors Should Look For When Analysing Clinical Trials56
Conclusion 59
The Regulatory Process 59
Regulation in the US 60
Regulation in Europe 63
The Label 64
Timelines for Approval 65
Post Approval 65
Investment Lessons 66
Case Study #1 66
4 Biotechnology Company Valuation 69
Data Collation 71
NPV of the Pipeline 75
Calculations 80
Sensitivity Analyses 86
DCF of Whole Company 92
EBIT DCF of Products 97
Comparables Valuation 99
NPVs are Additive 101
Using all the Tools Available to Reach a Valuation Conclusion101
Market Models 104
Conclusion 105
Appendix 1 106
Example 1 106
Example 2 108
Example 3 108
Appendix 2 116
Biosimilar Update 116
5 Decision Trees and Real Options 119
Decision Trees 120
Discount Rate 124
Deriving Scenarios 125
Conclusion 125
Decision Tree Example 126
Real Options 126
Valuing Options 129
Estimation of the Input Variables 138
Conclusions 139
6 Biotechnology Investing 141
Types of Healthcare Investment 141
Biotechnology Sector Evolution 143
Biotechnology Investment Cycles 145
Biotechnology Business Models 152
Focus on People 154
Cash 155
Product Pipeline 155
Commercial Risks 156
Newsflow 158
Lessons from Biotech Investing 160
7 Early-stage Valuation 161
Private Valuation 162
Discounted Cash Flow Method 166
Comparable Valuation 168
Venture Capital Method 170
Discount Rates 173
Conclusion 173
Glossary 175
References 189
Index 193
