Valuation Analysis in Pharmaceutical Licensing and M&A Transactions A Tutorial By Tim Opler, Benj Garrett and Susan Langer
January 2014
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AG
END
A Agenda
• Discuss role of valuation and project assessment
• Introduce valuation tools
• Show how to use the tools in business development
• Go over a variety of cases
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Table of Contents
1. Value Creation and Business Development
2. Valuation of Pharmaceutical Projects
3. Revenue Forecasting
4. Cost Estimation
5. Risk Estimation
6. The Discount Rate
7. Valuation Considerations in Licensing
8. Valuation Considerations in M&A
VALUE CREATION AND BUSINESS DEVELOPMENT
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Typical Value Creating Profile
-100
-50
0
50
100
150
200
250
300
350
1 2 3 4 5 6 7 8 9 10 11 12 13
Revenues and Costs Over Time ($ millions)
Acquisition Cost R&D Launch Cost
Selling Cost Other Cost Revenue
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PR
OC
ESS Value Creation Process
Finding projects that fit
Assessing the projects
Negotiating deals for the projects in the face of competition
Delivering on the potential of the projects
Realizing the value
Assessment and negotiation calls for strong valuation and analysis work. This is our focus today.
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LYSIS FITS IN
TO S
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Where Financial Analysis Fits into Business Development Strategy
Financial Analysis
• What is the time horizon to peak revenues for each product?
• What will sales and marketing costs be?
• What are the total cash requirements?
• What is the value of each product opportunity?
Ability to Execute / Risks
• How achievable are the returns and how significant are the risks?
• Do we have the competencies to succeed?
• Can we control the key success factors?
Fit with Future Strategy
• How does each product fit with our long-term vision?
• Are there other products in the pipeline to realize our goals?
• What is the opportunity cost of pursuing these initiatives?
Perception of Wall Street / Shareholders?
• Is Wall Street likely to invest in a company pursuing these products?
• How has Wall Street responded to other companies that have adopted this strategy?
Evaluation Criteria
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Identify the
Opportunity
Initial Technical Evaluation
Commercial Due
Diligence
Contract Negotiations
Technical Due
Diligence Detailed Technical
Evaluation
Detailed Commercial Evaluation
Final Approval
Example: Licensing Process at Bristol-Myers Squibb
Source: Talk by BMS: “The Role of Licensing / Business Development in the Pharma Industry”, 2004.
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Product Profile / Pricing / Competition
Sales Forecast
P&L Assumption (COGS, S&M, R&D)
Deal Terms
Manufacturing / Tax Considerations
PTRS
Risk Adjusted NPVs & IRRs
BR
ISTOL-M
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QU
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Bristol-Myers Squibb Deal Valuation Process
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Assets
Opportunity ID PTRS ENPV EIRR
Assets
Opportunity ID PTRS ENPV EIRR
1 92% 370 535% 25 6% 3 29%
2 78% 120 345% 26 48% 411 29%
3 20% 250 318% 27 25% 129 27%
4 80% 182 301% 28 10% 71 27%
5 74% 80 230% 29 82% 837 26%
6 58% 80 230% 30 63% 288 26%
7 30% 250 210% 31 40% 12 26%
8 85% 80 90% 32 14% 116 24%
9 27% 90 83% 33 21% 137 24%
10 53% 18 83% 34 21% 132 24%
11 81% 23 76% 35 43% 183 24%
12 26% 214 59% 36 14% 80 23%
13 59% 582 58% 37 35% 151 22%
14 72% 87 54% 38 45% 12 20%
15 62% 1,400 48% 39 35% 8 19%
16 36% 77 42% 40 46% 230 19%
17 40% 27 41% 41 19% 28 19%
18 24% 371 40% 42 60% 3 19%
19 26% 102 40% 43 42% 123 19%
20 89% 1,538 35% 44 8% 15 18%
21 55% 633 34% 45 31% 52 18%
22 7% 100 33% 46 7% 22 17%
23 24% 152 31% 47 18% 7 15%
24 64% 272 30% 48 38% 6 13%
Bristol-Myers Squibb Ranking of Potential Licensing Deals
PTRS = probability of technical and regulatory success eNPV = expected NPV eIRR = risk-adjusted internal rate of return
Illustrative Table by Kazuo Edaza of BMS
Source: Talk by Kazuo Ezawa, Bristol-Myers Squibb, “Pharmaceutical Portfolio Management”, DAAG, February 2004.
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TO
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Y’S DISC
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Our Approach
The approach that we will discuss today is very similar to that used by Bristol-Myers Squibb.
In fact, almost every large pharmaceutical company uses the same approach to deal valuation.
Consulting firms like BCG, Campbell Alliance, LEK, Mattson Jack and McKinsey have standardized the industry in this way.
A key area of emphasis from us is to keep an eye on risk-adjusted returns in transactions.
There are numerous fine points and ways in which firms differ in approach.
We will discuss many of these but the key focus will be on the “hands on” – how to approach to valuation.
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General View: Go Big and Go for IRR / ROI to Create Value
The key to creating lasting value is to bet big and win.
ROI (IRR)
Scale of Project
Big Project Big Payoff (The zone of shareholder bliss)
Big Project Low Payoff
Small Project Low Payoff
Small Project Big Payoff
Examples in Specialty Pharma Allergan – Botox Biovail – Wellbutrin XL Cephalon - Provigil ENDO – lidoderm patch Forest – Lexapro Gilead - Truvada King – Altace Reliant - Lovaza Salix – Rifaximin Viropharma - Vancomycin
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Some Key Differences Across Pharmaceutical Firms - Method
Sometimes employ real options tools in project assessment. The idea is to look at a drug development project as a sequence of choices or options. The most important insight is the “option to abandon” a project is valuable. A further insight involves the value of the option to expand indications. Focuses largely on “pie splitting” – the sharing of the rNPV of a project. Other inputs like IRR are not looked at all. Have historically used higher discount rates for risky projects but without risk-adjustment.
Big Pharma A, B, C
Biotech A
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Differences Across Firms - Process
An organization called that carries out financial analysis of licensing and M&A projects. They have prepared an internal manual on how to value every aspect of a project which standardizes their approach. Tends to do careful valuation work with reasonable discount rates. Always have at least three scenarios. Organization tends to be intelligent but financially conservative in looking at opportunities. Will occasionally look at real options and offer option deals to biotechs. Has created a management science group that engages in sophisticated predictive modeling of pharma product performance. Their view is that good forecasts are the most important and most difficult aspect of pharma licensing. This group has been driving real options work but hard for organization to grasp. The focus is much more on simplicity, insight and medical soundness than say Big Pharma E. Every projects gets summarized on two pages (and not more ever) for either the head of commercial or the head of R&D. Once there is a preliminary approval an AIF (autorissation investiment financiere) is prepared (30 to 50 pages). This document does not skimp on commercial analysis but uses basic rNPV models.
Big Pharma D Big Pharma E Big Pharma F
VALUATION OF PHARMACEUTICAL PROJECTS
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Q: Suppose we can invest $50 today & receive $60 later today. What is our increase in value?
Initial Investment
Added Value
$50
$10
A: Profit = - $50 + $60 = $10
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NET P
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T VA
LUE
Q: Now suppose we can invest $50 today and receive $60 in one year. What is our increase in value given a 10% expected return?
This is the definition of NPV
55.4$1.10
60+-50=Profit
Initial Investment
Added Value
$50
$4.55
The idea of an expected rate of return or discount rate reflect the time value of money, otherwise known as the underlying cost of capital in society.
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NET P
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LUE
NPV = PV - required investment
tr)(t
CCNPV
10For two
periods
N
tt
t
r
CNPV
1 )1(
Where N=Number of years
t = year
C = cash flow
r = discount rate
Sigma = Summation Symbol
or
t
t
r
C
r
C
r
CCNPV
)1(...
)1()1( 2
2
1
10
With multiple periods
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Net Present Value Rule
If the net present value of a project is positive then it creates value and should be carried out. If resources are finite and there are more positive NPV projects than time, money or other constraints would allow then the group of projects that maximize NPV should be implemented.
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Risk Adjusted NPV
Pharmaceutical cash flows are risky and the risk can be characterized based upon stage of development. Risk-Adjusted NPV or rNPV is a risk weighted NPV and should be used in assessing risky project.
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INP
UTS TO
RNP
V M
OD
EL Elements of Risk Adjusted NPV Model
Revenues Costs Other Cash Outflows
Net Cash Flow
- - =
Total Market Prescriptions
Written X
Penetration of Product
= Units Sold
X Price
= Revenue
COGS
+ Research and Development
Expense
+ Selling Costs
+ G&A / Other
Costs
+ Acquisition Costs
Capital Expenditures
+ Change in
Working Capital -
Cash Taxes
Risk Adjustment at Each Stage rNPV
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RNP
V F
OR
MU
LA The rNPV Formula
N
tt
t
r
CRrNPV
1
1
)1(
Where N=Number of years
t = year
t=1 (now)
C = cash flow
R1 = Probability of cash flow now
r = discount rate
Sigma = Summation Symbol
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IRR
AN
ALYSIS The risk-adjusted IRR is the discount rate that would give an rNPV equal to zero.
In other words, it is the expected rate of return on a project. We refer to the rIRR as the risk-adjusted IRR.
rIRR
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AP
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F IRR
TO L
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Issue Equity
Partner Drug vs.
Both of the choices shown at left involve bringing cash today by causing current equityholders to give up future cash flow (either by sharing the cash flow through issuance of more equity) or instead by giving away product cash flows to a partner. There is an embedded opportunity cost which is computed in the rate of return given up in future cash flows for cash today. This is the internal rate of return or IRR. When derived from a probabilized model we refer to this as a rIRR (risk-adjusted IRR).
An Example Trade-Off
1 )1(
Licensee toGiven Up FlowCash Licensorby ReceivedCash
t
t
tt
r
The internal rate of return is the discount rate that is impounded in the equation comparing cash received to cash flow given up.
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How will the expense be amortized?
– Straight-line amortization
• Negative EPS impact in later years due to smaller profit share payments
• Acquisition price set standard treatment
– Amortize based on profit share payments
• EPS accretive each year
• What happens if we don’t achieve projections? Write-down
– Amortize in full each until asset is gone, then recognize full benefit
• Most conservative approach
• Not EPS accretive in the beginning years
Many pharma companies are highly focused on EPS management
• Will prefer to use investment dollars over R&D dollars whenever possible
• Will prefer to push out spending into the future
Accounting Considerations – EPS Impact
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EPS
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
$0.02 $0.03 $0.05 $0.06 $0.07 $0.08 $0.04 $0.04 $0.01 $0.01 $0.01
Assumptions
Discount Rate: 10%
Amortization: Based on projected profit share payments
Tax rate: ~35%
Example of EPS Impact in a Transaction to Restructure an Alliance
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Building an rNPV Analysis of a Project
Revenue Forecasting
Cost Assumptions
Tax and Working Capital
Risk Cash Flow Estimates
Discount Rate Selection
rNPV Computation
REVENUE FORECASTING
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TH
REE W
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EVEN
UE F
OR
ECA
STS Approaches to Developing Market Sizes
Estimating Product Revenue Trajectory
Bottom Up Market Analysis
Analyst Reports and
Research Reports
Looking at Similar
Products
We believe the best approach is to have a good bottom up model and check the thinking by looking at external reports and similar product revenues.
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VEN
DO
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LYSIS Commonly Used Research Vendors
Market / Valuation Analysis
Full Service Analysis / Consulting / Support
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BU
ILDIN
G A B
OTTO
M’S U
P REV
ENU
E FO
REC
AST
% Prescription of Drug
Price per Day of Drug
Penetration, Pricing Studies, Competitive Analysis, Compliance Analysis, Reimbursement Analysis and Utilization Patterns
% Diagnosed
% Treated for Disease
Addressable Market Size
Incidence/Prevalence
Total Population, Population in Target Markets
Potential Market Size
Use 10 year planning horizon: 2012-2022. Assume 2012 launch
Going from Market Size to Revenue Estimates (Bottom Up)
Actual Ave Days Used
Revenue Estimates over the Planning Horizon
It is very common to
build several scenarios
(good, poor, expected)
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EX
AM
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OV
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DR
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Thin Pipeline of New Treatments Many Patients Poorly Controlled with Existing Treatments
U.S. Patients are Not Controlled with ACE’s, ARBs and Beta Blockers Global Burden of Hypertension, Millions of Persons with Hypertension
0
100
200
300
400
500
600
700
800
DevelopedMarket
Economies
China India OtherEconomies
2000 2025
Source: Kearney et.al., Lancet, 2005, 365: 217-223
National Health and Nutrition Examination Survey
Percent
1976–80 1988–91 1991–94 1999–2000
Awareness 51 73 68 70
Treatment 31 55 54 59
Control 10 29 27 34
Trends in awareness, treatment, and control of high
blood pressure in adults ages 18–74
Source: JNC 7
Diuretics, Beta blockers, Calcium Channel Blockers
ACEs, ARBs
Direct Renin Inhibitors
The only major recent innovation in anti-hypertensive therapy on the horizon is the direct renin inhibitor class (e.g., aliskiren/Tekturn) from Novartis.
Renin inhibitors are not more effective than ACEs and ARBs and may be unsafe.*
*Source: Sealey and Laragh,
American Journal of
Hypertension, May 2007
0
10
20
30
40
<100 100-109
110-119
120-129
130-139
140-149
150-159
160-169
170-179
180+
ALLHAT Study: Distribution of Patients by SBP Before and After Treatment with HCTs, CCBs and ACEi’s
Baseline 36 Months
SBP (mm hg)
Source: Cushman, et al. J Clin Hypertens 2002, 4:393.
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DIFFER
ENTIA
TION
OP
PO
RTU
NITY
Taking Share by Differentiation
Opportunity for Segmentation / Differentiation by Patient Subgroups
There are four important ways in which the novel drug can take share in the hypertension market:
1. Better efficacy and/or safety than current treatments
2. Synergistic with existing treatments (e.g., consider a triple ARB, HCT, novel combo)
3. Better outcomes in certain patient subgroups
4. Better marketing in the face of generics
Novel Anti-hypertensive
Better outcomes in nonresponders to existing anti-hypertensives
Better outcomes in salt sensitive hypertensives
Better outcomes in patients with inflammation
Better outcomes in obese patients
Better outcomes in cardiac patients
Better outcomes by genetic biomarker
Better outcomes in patients at risk of nephropathy
Better outcomes in patients on Cox-2’s and
NSAIDs
Rationale for a Synergistic Effect with Current Treatments
The Novel drug is a vasodilator that operates independently of the RAAS cascade and is likely to be synergistic with RAAS inhibitors.
It is likely that a many uncontrolled hypertensive persons would be controlled with the novel drug given its mechanism.
Likely to be synergistic in salt-sensitive hypertension
• The drug appears more effective than other meds in animals that are salt sensitive.
• Salt sensitive patients are some of the poorest responders to existing medications.
Likely to be synergistic in obese patients
• The drug appears to be effective in the presence of obesity.
• Obese patients are some of the poorest responders to existing medications.
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DR
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Revenue Forecast for Novel Hypertension Drug
Key Assumptions Daily Cost of Therapy $4
ROW as % of US Market 80.0%
2010 2012 2014 2015 2016 2018 2019 2023 2028 2031
Hypertension - US Begin Year Patient No. 80,000,000 84,872,000 90,040,705 92,741,926 95,524,184 101,341,607 104,381,855 117,482,697 136,194,645 148,823,566
Growth in Patients 3% 3% 3% 3% 3% 3% 3% 3% 3%
Diagnosis Rate 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0%
Treatment Rate 70.0% 70.0% 70.0% 70.0% 70.0% 70.0% 70.0% 70.0% 70.0% 70.0%
# of Patients Treated 28,000,000 29,705,200 31,514,247 32,459,674 33,433,464 35,469,562 36,533,649 41,118,944 47,668,126 52,088,248
Compliance Rate 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0%
Penetration Rate 0.0% 0.0% 0.0% 0.0% 0.0% 6.0% 8.0% 12.0% 12.0% 12.0%
Patients on drug 0 0 0 0 0 2,128,174 2,922,692 4,934,273 5,720,175 6,250,590
Average Days of Therapy 250 250 250 250 250 250 250 250 250 250
Cost Per Day 0 0 $ 4.00 $ 4.20 $ 4.41 $ 4.86 $ 5.11 $ 6.21 $ 7.92 $ 8.73
Cost per Day * Days of Therapy 0 0 1,000 1,050 1,103 1,216 1,276 1,551 1,980 2,183
Total Revenues $0.0 $0.0 $0.0 $0.0 $0.0 $ 2,586.81 $ 3,730.18 $ 7,654.68 $ 11,325.56 $ 13,644.25
Probabil. Adj Revenues 5.0% 0.0 0.0 0.0 0.0 0.0 129.3 186.5 382.7 566.3 682.2
Hypertension - ROW Begin Year Patient No. 64,000,000 67,897,600 72,032,564 74,193,541 76,419,347 81,073,285 83,505,484 93,986,158 108,955,716 119,058,853
Growth in Patients 3% 3% 3% 3% 3% 3% 3% 3% 3%
Diagnosis Rate 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0%
Treatment Rate 70.0% 70.0% 70.0% 70.0% 70.0% 70.0% 70.0% 70.0% 70.0% 70.0%
# of Patients Treated 22,400,000 23,764,160 25,211,397 25,967,739 26,746,771 28,375,650 29,226,919 32,895,155 38,134,501 41,670,598
Compliance Rate 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0%
Penetration Rate 0.0% 0.0% 0.0% 0.0% 0.0% 6.0% 8.0% 12.0% 12.0% 12.0%
Patients on drug 0 0 0 0 0 1,702,539 2,338,154 3,947,419 4,576,140 5,000,472
Average Days of Therapy 250 250 250 250 250 250 250 250 250 250
Cost Per Day 0 0 $ 4.00 $ 4.20 $ 4.41 $ 4.86 $ 5.11 $ 6.21 $ 7.92 $ 8.73
Cost per Day * Days of Therapy 0 0 1,000 1,050 1,103 1,216 1,276 1,551 1,980 2,183
Total Revenues $0.0 $0.0 $ - $ - $ - $ 2,069.45 $ 2,984.14 $ 6,123.74 $ 9,060.44 $ 10,915.40
Probabil. Adj Revenues 5.0% 0.0 0.0 $ - $ - $ - $ 103.47 $ 149.21 $ 306.19 $ 453.02 $ 545.77
Total Worldwide Revenue $ - $ - $ - $ - $ - $ 4,656 $ 6,714 $ 13,778 $ 20,386 $ 24,560
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Defining the Market
Estimate Incidence and Prevalence
• Prevalence:
• Total number of potential customers at any one point in time
• Best for products purchased by same customer on a recurring basis (chronic Rx)
• Incidence:
• Number of new potential customers each year
• Best for products treating onetime acute event (heart attack)
Identify Segments
• All potential customers are not alike
• Segmentation helps refine penetration and share forecasts
• It also allows you to refine estimates and focus efforts by identifying “early adopters”
• Example in RA
• Severely affected patients (25% of the market)
• Moderately affected
• Mildly affected
Change Over Time
• Customer base and segmentation are influenced by factors that change over time
• Growth driver analysis provides insight into changing and/or emerging markets
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IMP
OR
TAN
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F MA
RK
ET PEN
ETRA
TION
SC
ENA
RIO
S Building Penetration Scenarios
1. Historical penetration of comparable products 2. Objective comparisons versus currently available treatments (efficacy, safety,
convenience) 3. Physician interviews to gauge acceptance and potential use versus competing
treatments (preference share analysis) 4. Analysis of likely reimbursement and factors related to achieving reimbursement
from key payor groups 5. Mapping of commercial effort into physician prescribing behavior (companies
often use IMS analysis) 6. Almost all “bottoms up” approaches to penetration analysis tend to overestimate
penetration in practice. Preference analysis tends to do a poor job of predicting actual prescribing behavior in the face of detailing and sampling
7. Comparison versus pipeline products and relative timing to market
Penetration is usually the main driver of revenue forecasts. There are a few different means to estimate the peak penetration that a new product can be expected to achieve:
Can then build low, expected and high penetration scenarios (important to understand limitation of forecasts in practice)
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IT IS PO
SSIBLE TO
TA
KE A
N E
VID
ENC
E-BA
SED AP
PR
OA
CH
Research Methods for Market and Penetration Analysis
Estimates of usage and dependence on pricing
Payor Research
P&T Committees
Physicians by Segment
By Physician Segment
By Disease State (e.g., first line,
second line)
Build demand curve, make pricing estimates
Primary Market Research (Structured Interviews)
Total Products on Market
1st 2nd 3rd 4th 5th 6th
1 100
2 58 42
3 43 31 26
4 35 26 21 18
5 30 22 18 16
6 26 19 16 14 13 12
Expected Product Market Share By Order of Entry
Research Sources: G. Kalyanaram,”The order of entry effect in prescription (Rx) and over-the-counter (OTC) pharmaceutical drugs,” International Journal of Pharmaceutical and Healthcare Marketing, 2008, pp. 35-46. Hans Bauer and Marc Fischer, “Product life cycle patterns for pharmaceuticals and their impact on R&D profitability of late mover products,” International Business Review, 2000, 703-725.
Historical Analysis of Impact of Order of Entry
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LYSIS AN
D PEN
ETRA
TION
Leads to suggested sales force sizing and territory coverage with a managed care strategy in light of a launch budget. This facilitates building a penetration forecast that is market based. Typically such forecasts are much lower than those derived from physician preference share analysis.
Target Payers*
Plan Type
Estim
ated
Com
mercial
Lives
New
Product
Januvia
Metform
in
Glipizide
Avandia
WellPoint/Anthem National 24,900,000 T3 T2 T2 T3 T3
Aetna/US Healthcare National 12,020,000 T3 T2 T2 T3 T3
United Healthcare National 10,960,000 T3 T2 T2 T2 T2
Prime Therapeutics Internal PBM 9,000,000 T3 F NF NF NF
Cigna National 8,990,000 T3 T2 T3 T3 T2
Kaiser Regional 7,290,000 NF NF NF NF F
RxSol / PacifiCare Internal PBM 3,340,000 T3 T2 T2 T2 T2
Coventry Regional 2,730,000 T3 T3 T3 T2 T2
HealthNet Regional 2,520,000 T3 T2 T3 T3 T2
Humana National 2,290,000 T3 T2 T3 T3 T3
Caremark PBM 69,000,000 T3 T2 NF NF NF
ExpressScripts PBM 49,000,000 T3 T2 T3 T3 T3
Medco PBM 49,000,000 T3 T2 T3 T3 T3
PharmaCare PBM 6,000,000 T3 T2 NF NF NF
MemberHealth Rx PBM 5,000,000 T3 T3 T2 T2 T2
Anthem PBM 3,300,000 T3 T2 T3 T3 T3
NMHCRx PBM 8,900,000 T3 T2 T2 T2 T2
Coventry PBM 1,200,000 T3 T3 T3 T2 T2
PBM 275,440,000
Penetration Analysis Should Understand Prescriber Concentration, Sales Force Design, Prescribing Behavior and Reimbursement Positioning
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Historical Ramp Speed Analysis
Bauer and Fischer (2000) show that Early Movers Ramp Slowly
Source: H.H. Bauer, M. Fischer, International Business Review 9, 2000, pp 703–725
COST ESTIMATION
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Estimating Costs
Research Costs / Clinical Development Costs
• Identify remaining steps to IND (Toxicology, PK, etc.)
• Estimate cost of remaining steps
• Evaluate anticipated time and numbers of patients per phase
• Examine patient enrollment issues, treatment length and cost, ease of establishing endpoints, long-term safety, regulatory complexity, etc.
COGS
• Look at COGS estimates on comparable products
• Use expected dosing and treatment length to generate unit sales. Estimate COGS at that sales volume
• Important to be aware of fixed / variable elements of COGS
• Review status and current data on scale-up issues
Sales and Marketing Costs
• Examine concentration of customer base: hospital or office based physicians, etc.
• Use IMS sales force sizing / penetration studies.
• Evaluate potential market issues: requirements for physician training and education, patient education, direction to consumer marketing, etc.
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Estimating Costs
Pre-Clinical Costs Clinical Development Costs
From lead to IND: $5 to $15mm
From target to lead: $5mm to $50mm
Pre-Clinical Cost Drivers Difficult of chemically reaching target Existence of pool of potential targets Existence of predictive animal models Cost and complexity of pharmacology work Need for extensive animal toxicity work Need for formulation / scale-up work
Number of Patients in Trials
Complexity and Length of Protocol
Time in Trial
Demand for Patients / U.S. vs. ROW
Drug supply costs
A good rough benchmark is to assume $25,000 per patient and count the number of patients.
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COGS Factors
Input Costs
• Raw materials
• Inventories
• Small molecular versus biologic
… and production costs
• Batch size
• Production process (complexity, steps)
• Storage and inventories
• Delivery to customers
Estimating COGS can be based on a number
of factors
• Similarity to other drug profiles
• Complexity
• Economies of scale
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Sales Force Costs: Example of Costing Grid
Level
Number of Personnel
Fully Loaded Cost
Total Annual Costs
Senior Management
2 $380,000 $760,000
Regional Managers
5 $260,000 $1,300,000
MSLs 8 $250,00 $4,000,000
Sales Reps 120 $180,000 $21,600,000
Support Staff 12 $80,000 $960,000
Total $28.6 million
45 I
AC
CO
UN
TING
T
REA
TM
ENT
SG&A Typically is Typically Much Higher than Direct Sales Force Cost
It is important to estimate variable cost components of a new drug introduction beyond direct sales force costs.
Company
Revenues 2006 ($mil)
SG&A Expense
($mil) SG&A
Margin
Salesforce Cost ($mil) Revenue / Rep U.S. Reps
Worldwide Reps
Pfizer $ 48,371 $ 15,589 32% $ 4,140 $ 1,389,971 8,800 34,800
GlaxoSmithKline $ 45,500 $ 14,268 31% $ 4,375 $ 1,229,730 9,000 37,000
Sanofi-Aventis $ 38,934 $ 10,641 27% $ 3,342 $ 1,364,191 6,500 28,540
Novartis $ 36,749 $ 13,157 36% $ 1,940 $ 2,370,903 5,200 15,500
AstraZeneca $ 26,475 $ 9,464 36% $ 1,950 $ 1,765,000 6,000 15,000
Merck $ 22,636 $ 8,165 36% $ 1,900 $ 1,741,231 8,000 13,000
Wyeth $ 20,351 $ 6,501 32% $ 1,575 $ 1,695,917 5,000 12,000
Bristol-Myers Squibb $ 17,914 $ 6,270 35% $ 1,348 $ 1,628,545 3,300 11,000
Eli Lilly $ 15,691 $ 4,890 31% $ 2,175 $ 950,970 7,000 16,500
Schering-Plough $ 10,594 $ 4,718 45% $ 1,618 $ 827,656 4,500 12,800
King Pharmaceuticals $ 1,998 $ 714 36% $ 193 $ 1,816,364 1,100 1,100
Sepracor $ 1,196 $ 764 64% $ 333 $ 629,474 1,900 1,900
Reliant Pharmaceuticals $ 800 $ 550 69% $ 126 $ 1,111,111 720 720
Sciele $ 293 $ 145 49% $ 114 $ 450,769 650 650
Source: Cowen Pharma, Jan 2007 and Torreya Partners Analysis
46 I
AC
CO
UN
TING
T
REA
TM
ENT
Illustration of a Launch Budget for a Primary Care Product
New Drug Launch Costs 2011
Marketing
Travel 1,000,000
Advertorial Media 6,000,000
Patient Starter Kit 30,000
Launch Sales Aid 86,500
Launch Campaign Art 100,000
Small Science Flash Card 43,000
Patient Ed Booklet & Holder 98,750
Direct to Patient Concepts 58,000
Printing Sales Aids 250,000
Testing 12,000
Media to PCPs and GI docs -
Launch Journal Advertising 1,500,000
Launch Media 2,000,000
Launch Convention Panels 40,000
MDAlert 37,000
PharmAlert 32,000
Pharmacy Sell Sheet 27,000
Managed Care Sales Aid 37,000
Formulary Stickers 15,000
Shelf Talker 20,000
Web site 250,000
Direct Mail 205,000
Product Website Development 60,000
Premium Item Give-Aw ays 107,000
Launch Meeting (does not include hotel and flight arrangements) 1,000,000
Marketing Plan -Consulting
Sales Training Modules 120,000
Promo Items -
Rebate 20,000
Trade Show Booths 150,000
RCW Account service fee 630,500
Drug Med Ed 3,000,000
Sample packaging 568,000
Marketing Total 17,496,750
Regulatory & Prod Development
Surveillance system 250,000
800 number 20,000
Orange book costs 100,000
PDUFA establishment 50,000
Total 420,000
Personnel
Representatives (1500) including salary, benefits & f leet 262,500,000
Recruiting, Travel and Misc Personnel Expenses 75,000,000
Managed care organization (100) 15,000,000
Sales Management, MSLs, Outcomes Grp (80) 20,000,000
Total 372,500,000
Samples
Manufacturing, Packaging 50,000,000
Sales
Sales Incentive (trip/other) 3,000,000
Training 1,500,000
Inventory sample cost 1,000,000
Total 5500000
Shipping costs 1,000,000
Total
446,916,750$
RISK ESTIMATION
48 I
KEY C
LINIC
AL E
VEN
TS AN
D PO
TENTIA
L OU
TCO
MES
48
AR9281 Phase 1a Safety Trial
Phase 1b: Initial Proof of Concept
Phase 2: Dose and Safety Confirmed
Phase 3: Large safety confirmation
trial / write label
Drug Safe and Superior to existing
meds
Drug Safe, not Superior but adds to existing meds
Drug approvable but inferior to existing meds
Phase 3: Not Safe Terminate /
Consider Other Indications
Phase 1b: Not Safe Terminate /
Consider Other Indications
Terminate / Consider Other
Indications
Phase 1: Not safe Terminate
Development Terminate
Development Terminate
Development
Phase 1: Done Q3 2008
Phase 1b: Done Q2 2009
Phase 2: Done 2010
Phase 3: Done 2012
Drug Approval / Label: 2013
Opportunity to show range of doses
Opportunity to find clear efficacy and start to see safety profile. Hopefully, primate tox is complete and we have a backup compound in Phase 1.
Critical to get the dose right, establish a safety profile and begin to write the label. Animal carcinogenicity done.
Write the label, confirm the safety profile and dose. Consider head to head trials vs. standard of care, noting points of differentiation. Get QT study done.
If we can beat on efficacy and match safety we have a giant drug.
Important to Diagram Key Development Steps and Risks
49 I
MO
ST DR
UG
CA
ND
IDA
TES FA
IL TO B
E AP
PR
OV
ED Using Industry Average Failure Rates to Handicap Risk (PTRS)
0%
20%
40%
60%
80%
100%
Pre-Clinical SuccessfulIND
Submission
Phase I/IIaSuccessful
Phase IIbSuccessful
Phase IIISuccessful
NDASuccessful
100%
80%
52%
26%
18% 15%
Cumulative probability of success (percent)
Stage of Development
50 I
WID
E RA
NG
E OF S
UC
CESS R
ATE E
STIMA
TES
Probability of FDA Approval
Probability of FDA Approval for Products Entering (%)
STUDY Preclinical Phase I Phase II Phase III FDA Notes
Lehman Brothers (1997) 4 10 30 63 90
Myers / Howe (1997)(1) 22 24 32 64 75
DiMasi / Manocchia (1997) – – – – 90 (2)
Kaitin (1995)(1) – 20 30 62 75
DiMasi / Hansen / Grabowski / Lasagna (1997, 1995) – 23 31 64 –
Struck (1994 biotech) 38 69 79 92 100
Struck (1994 conventional NCE) 11 25 33 66 100
DiMasi / Seibring / Lasagna (1994) – – – – 83
Wenzel (1993) – 30 63 –
Grabowski (1991) – 23 31 64
Tucker / Blozan / Coppinger (1988) ? ? ? ? ?
Sheck / Cox / Davis et al. (1984) – 17 – – –
Hansen (1979) – 19 50 – –
Recombinant Capital (o.D.) 19 30 60 –
Bienz-Tadmor / DiCerbo / Lasagna (1992) – 29 – – – (3)
Grosse / DiMasi / Nelson (1996) – 21 – – – (4)
Average 19 25 38 66 87
Average (excl. high and low) 18 23 34 64 87
Source: "Real Option Valuation in R&D Decision-Making in Pharmaceuticals" by Dr. Gunnar Pritsch, Associate Principal, McKinsey & Co.
(1) No empirical study, but “conclusion estimates”.
(2) Gastrointestinal: 79%; anti-infective: 84%; cardio: 90%; oncology: 92%; antiviral: 93%; endocrine: 94%; neuropharmacologic + radiologic: 100%.
(3) Peptide hormone analogous: 24%; antiviral 29%; antineoplastics: 33%; cardiovascular: 34%.
(4) Data 1980-89; number reflects average expected success for all recombiment protein and monoclonal antibody drugs; all recombinants: 19-43%;
new recombinants: 15-39%; therapeutic MAbs: 4-29%.
Studies of Drug Approval Risk
51 I
OV
ERA
LL SU
CC
ESS RA
TE OF D
RU
G A
PP
RO
VA
L: 21
%
Stage
Cost ($ million)
Success Rate / Transition
Probability (%)
Duration (Months)
Phase I 5 71% 12
Phase II 12 44% 26
Phase III 68 69% 34
NDA 3 NA 18
Total 88 21% 90
Success Rates from a Recent Study
Avance published a study in November 2009 of over 200 companies listed on public stock exchanges, tracking their clinical drug candidates from 2003-2009.
In biotech the success rate was even lower, averaging 9% for NCEs and 15% for biologicals.
52 I
Source: JA DiMasi, L Feldman, A Seckler and A Wilson, “Trends in Risks Associated With New Drug Development: Success Rates for Investigational Drugs,” Clinical Pharmacology and Therapeutics, March 2010, pp. 272-277.
Another Updated Study: DiMasi – March 2010
53 I
Success Rates Depend on Therapeutic Indication
Source: DiMasi, J.A., 2001, “Risks in New Drug Development: Approval Success Rates for Investigational Drugs”, Clin Pharmacol Ther, vol. 69, p. 297-307.
54 I
Source: JA DiMasi, L Feldman, A Seckler and A Wilson, “Trends in Risks Associated With New Drug Development: Success Rates for Investigational Drugs,” Clinical Pharmacology and Therapeutics, March 2010, pp. 272-277.
Transition Probabilities by Therapeutic Class
55 I
Source: JA DiMasi, L Feldman, A Seckler and A Wilson, “Trends in Risks Associated With New Drug Development: Success Rates for Investigational Drugs,” Clinical Pharmacology and Therapeutics, March 2010, pp. 272-277.
Small versus Large Molecule
THE DISCOUNT RATE
57 I
AC
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TING
T
REA
TM
ENT
Discount Rates Used in Industry
Company
Nominal / Real Discount Rate Source
Actelion Nominal 13.2% HY Report 2009
Large Pharma A Real 10% 2010 Interview
Spec Pharma A Nominal 12% 2010 Interview
Large Biotech A Nominal 10% 2009 Interview
Spec Pharma B Nominal 14% 2009 Interview
Large Pharma B Nominal 12% 2009 Interview
AstraZeneca Nominal 11% Annual Rpt 2008
Range 10 to 14%
58 I
AC
CO
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TING
T
REA
TM
ENT
Nominal Versus Real Discount Rates
Nominal rates include the effects of inflation. Real rates have been adjusted for inflation. It is important to match cash flows in the forecast to the type of rate used: Nominal cash flows with nominal rates and real cash flows with real rates. It’s an important distinction because many pharma revenue forecasts are real whether stated or not. Price increases that are modeled in are above and beyond normal inflation.
59 I
What is the Cost of Capital?
The cost of capital is a measure of the opportunity cost of capital in an economy. A company’s cost of capital should equal the marginal return available to investors in the next best investment opportunity of similar risk available in the capital markets
The cost of capital should reflect:
The return available to investors in the economy on risk-free instruments
The return that investors require for taking systematic risk over and above the risk-free rate
Systematic risk is that which cannot be diversified away.
Traditionally measured as the weighted average of the cost of equity and debt. Known as the Weighted Average Cost of Capital (WACC).
The Cost of Capital is the opportunity cost of money in a competitive market economy and is a guide to the right discount rate.
Discount Rate Should Reflect the Cost of Capital
60 I
TH
E TR
AD
ITION
AL A
PP
RO
AC
H TO
WA
CC
WACC is a weighted average of cost of equity and debt, where the weights for cost of debt and cost of equity are determined by market values of equity and debt. Because a number of inputs to WACC are of statistical nature, WACC is a range rather than a point estimate.
Weighted Average Cost of Capital (WACC)
Cost of Equity Cost of Debt
Risk-Free Rate
Credit Spread
Country/ Political Risk Premium
Tax Shield Risk-Free Rate
Equity Beta
Equity Market Risk Premium
Country/ Political Risk Premium
Business Risk
Financial Risk
Estimating The Cost of Capital using WACC Approach
61 I
Because equity is a long-term investment, a risk-free rate representing a long-term horizon is most appropriate. Consequently, we utilize the 30-year U.S. Treasury as the risk-free rate in the CAPM.
The beta is a risk measure which represents the non-diversifiable risk associated with an equity investment measured relative to the overall equity market. It is a function of asset risk and financial risk.
The equity market risk premium is the excess return expected for the equity market relative to the long-term bond market. The figure that is used normally ranges between 4 and 8%.
The political risk premium represents the incremental return investors require for use of their funds in international investments and represents non-systematic risks such as expropriation.
TR
AD
ITION
AL A
PP
RO
AC
H TO
WA
CC
(CO
NT’D)
RISK-FREE RATE EQUITY BETA(1)
EQUITY MARKET RISK PREMIUM POLITICAL RISK PREMIUM
(1) When calculating the asset beta for high-levered, non-investment grade companies, it is important to utilize a “debt beta” in the calculation.
62 I
Discount Rates in Practice
CAPM near useless (betas on risky pharma companies often very
low)
Industry betas are better if you must use
beta
We prefer to pick a fixed rate that reflects
the leveraged opportunity cost of
equity
Another approach is to look at industry wide implied cost of equity
from actual market prices.
VALUATION CONSIDERATIONS IN LICENSING
64 I
PA
RTN
ERSH
IP AN
D NP
V
Partnering a Program Splits the NPV Between the Original Developer and the Partner
Illustrative
Total Program Value
Value to Original
Developer
Value to Partner
R&D
License
R&D
R&D
Sales
S&M
COGs
NPV= $80
NPV= $30
NPV= $50
License
Sales
Milestones
Milestones
Royalties
Royalties
S&M
COGs
65 I
Negotiating and Valuing Licensing Deals
• What percent of the rNPV goes to the licensor and licensee?
• Generally the licensor can get more than 50% of the value
• Generally the split is more favorable to the licensor on earlier deals
• Generally the split is more favorable to the licensor when the licensee is small or in financial difficulty
NPV Split
• A key benchmark is what return on investment goes to the licensee (risk-adjusted internal rate of return)
• A smart licensee avoids putting his capital to work in order to boost the rIRR
• A smart licensor tries to get the lowest rIRR deal possible
• Surprisingly, many counterparties in pharma negotiations pay less attention to this metric than they should.
rIRR to the Licensee
66 I
PA
RTN
ERSH
IP DA
SHB
OA
RD
Partnership Economics in a Recent Torreya Advised Transaction
67 I
BA
RG
AIN
ING
TA
CTIC
S WH
EN IN
-LIC
ENSIN
G
1. Pick deals with large scale and high rIRRs
2. Know your rIRR limit – generally in the 20 to 30% range.
3. Focus on putting largest payments after key risk points have been passed
4. Focus discussion on precedent transactions (example at right)
5. Focus discussion on key issues (e.g., reimbursement, compliance, other related product revenues)
6. Focus discussion on fit and good job that can be done
7. Include equity as consideration if licensor is cash-strapped (often is misvalued)
8. Understand liquidation preferences of licensor / seller
Bargaining Tactics when In-Licensing
68 I
BA
RG
AIN
ING
TA
CTIC
S WH
EN O
UT-L
ICEN
SING
1. Ask licensor to show what they can do for you. Get financial forecasts if possible. Ask for a capabilities presentation.
2. Figure out the licensor’s financial modeling approach and assumptions as best as possible.
3. Figure out the licensor’s hurdle rate on rIRR.
4. Solve for the licensor’s model and the rIRR as terms change.
5. Focus less on deal comparables.
6. Try to get payments made early in the collaboration.
7. Avoid including equity as consideration.
Bargaining Tactics when Out-Licensing
69 I
ON
E SH
OU
LD ALW
AYS T
RY TO
GU
ESS THE O
THER S
IDES V
ALU
E Solving for the Other Side’s Model
The deal on the table here is for a Phase 1b cardiometabolic drug. The proposal made of 20mm upfront gives the licensor (big pharma company) a generous return of 36%. However, the project is highly risky. The licensee should keep bargaining to try to get the pharma’s return down to a sub 25% area. This will require getting the upfront to be higher.
Assume $20 million upfront, $160 million in milestones and a 22% royalty.
Cash Flows to BigPharma from Partnership Transaction - US
Items 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2024 2029
Forecast Revenue 0 0 0 0 0 0 0 624 1,686 2,918 4,339 5,972 8,836 12,450
Cost of Goods Sold 0 0 0 0 0 0 0 62 169 292 434 597 884 1,245
Royalty payment to Biotech 0 0 0 0 0 0 0 137 371 642 954 1,314 1,944 2,739
BigPharma development expense 5 10 20 20 50 50 10 0 0 0 0 0 0 0
SG&A and launch cost 0 0 0 0 (30) (30) 0 (156) (422) (642) (954) (1,314) (1,944) (2,739)
Milestone payments to Biotech 20 0 40 0 60 60 0 200 0 0 0 0 0 0
BigPharma Pre-tax cash flows (25) (10) (60) (20) (140) (140) (10) 68 725 1,342 1,996 2,747 4,064 5,727
After-Tax Cash Flow (25) (10) (60) (20) (140) (140) (10) 53 565 1,047 1,557 2,143 3,170 4,467
Probability of Success in Year 10% 20% 40% 40% 70% 70% 85% 100% 100% 100% 100% 100% 100% 100%
Probability of Payment if Deal in 2008 100% 50% 25% 25% 20% 20% 15% 10% 10% 10% 10% 10% 10% 10%
Probability Adjusted Cash Flow (25) (5) (15) (5) (28) (28) (2) 5 57 105 156 214 317 447
EPS Impact with success
$
(0.00)
$
(0.00)
$
(0.01)
$
(0.00)
$
(0.02)
$
(0.02)
$
(0.00) $ 0.01 $ 0.08 $ 0.15 $ 0.22 $ 0.31 $ 0.45 $ 0.64
BigPharma Tax Rate 22%
BigPharma Rate of Return on
Partnership 36%
Value created at BigPharma by deal: $6,104 million for an investment of $ (78) million in expected terms.
THE M&A SETTING
71 I
M&A and Licensing Valuation Analysis are Conceptually Similar
Same exercise but now we are valuing a company rather than a drug. Sum the rNPVs of the projects of the target company with adjustment for overhead costs or model the company as a whole (will shown an example for Eli Lilly). This gives the target company intrinsic valuation. Try not to overpay. Valuation is treacherous, particularly with terminal value assumptions. Problem is that most M&A deals involving later stage and marketed assets are NPV negative. Two ways to think about this: 1. Look at the IRR on your own company – what is your cost of cash? 2. Look at missing elements – particularly the target’s pipeline.
72 I
OU
R U
ND
E
RSTA
N
DIN
G
OF
LILLY’S
VA
LUA
TION
A
PP
RO
AC
H
• The Pharma has a well developed approach
– Step 1. Identify cash flows from identifiable products
– Step 2. Discount the cash flows at a rate in the low teens to get the DCF value
– Step 3. Compute the target purchase price as the equity value plus a premium of 30 to 50% (typically 40%) plus debt less cash
– Step 4. Compare the DCF to purchase price of the target
• The difference between enterprise value and DCF is known as pipeline or science value
• If pipeline value is negative then the valuation test suggests acquire
• If pipeline value is greater than 50% then the valuation test suggests avoid
• If pipeline value is between 0 and 50% then study further and make a business judgment
• This approach leaves significant room for quantitative and qualitative judgment. It is intelligent and designed to avoid situations where the pharma overpays for targets.
M&A Analysis Approach at One Pharma
$1,377
$625$726
$856
$1,000
$216$270
$351 $377
$841
$996
$1,207
Op
era
tin
g I
nco
me
(e
x-s
ye
rgie
s)
Allergan Warner Chilcott Pro Forma
2005 2006 2007 2008
Revenues Operating Income (ex-Synergies)
EPS
$3,163
$2,777
$2,373$2,199
$803$772$699$526
$3,966
$3,549
$3,072
$2,725
Revenues
Allergan Warner Chilcott Pro Forma
2005 2006 2007 2008
$6.51
$5.48
$4.62
$3.87$3.28
$5.54
$4.42
$3.55
Allergan Pro Forma
2005 2006 2007 2008
Source: Wall Street projections
Source: Wall Street projections Source: Wall Street projections
8.4% accretive
14.1% accretive
19.9% accretive 18.8% accretive
Operating Margin 28.4% 41.1% 30.7% 38.9% 32.5% 30.8% 30.6% 45.4% 33.9% 46.9% 31.6% 34.5%
20.5%21.4% 22.4%
18.7%17.0%
12.9%
15.2%
17.9%
13.3%
20
05
-20
08
CA
GR
Allergan Warner Chilcott Pro Forma
Revenue Operating Income (ex-synergies) EPS
2003-2008 CAGR
Consequences of a Hypothetical 2004 Acquisition of a Specialty Pharma
74 I
Factors to Consider in NPV Models of Pharmaceutical Companies
• Revenues and cost curves for each drug.
• Use reasonable estimates to the curves for the models.
Model each drug in an additive manner.
• Analyst reports generally stop too soon
• Pay careful attention to patent issues and associated cliffs
• Use analyst reports to get the estimates started
Take drugs out at least 10 to 15 years – past patent expiration dates
• If you keep R&D in then you need a terminal value
• If you leave it out or scale it down then no terminal value required
Carefully think about the role of R&D in the model.
• For the purpose of a stock for stock merger it’s important to look at each party with the same analytical approach
• If you ignore their pipeline, you should ignore yours etc.
Be aware of how your own company looks through the same lens
DISCLAIMER These materials have been provided to you by Torreya Partners LLC or Torreya Partners (Europe) LLP together with their respective affiliates and the members, directors, officers, employees, advisers or agents of each of them (together “Torreya Partners”) and may not be used or relied upon for any purpose other than as specifically contemplated by a written agreement with Torreya Partners. t The information used in preparing these materials was obtained from public sources and is intended only for educational and illustrative purposes. The material herein was prepared by the authors and may not represent the opinions or methods employed by Torreya Partners. Torreya Partners assumes no responsibility for independent verification of the validity of the content herein nor can it indicate that the content is complete and accurate in all material respects. No representation, warranty or undertaking, express or implied, is made and no responsibility is accepted by Torreya Partners as to or in relation to the accuracy or completeness or otherwise of these materials or as to the reasonableness of any other information made available in connection with these materials (whether in writing or orally) to any interested party (or its advisers). Torreya Partners will not be liable for any direct, indirect or consequential loss or damage suffered by any person as a result of relying on any statement contained in these materials or any such other information. None of these materials, the information contained in them or any other information supplied in connection with these materials will form the basis of any contract. To the extent such information includes estimates and forecasts of future financial performance (including estimates of potential cost savings and synergies) prepared by or reviewed and discussed with the managements of your company and/or other potential transaction participants or obtained from public sources, we have assumed that such estimates and forecasts have been reasonably prepared on bases reflecting the best currently available estimates and judgments of such managements (or, with respect to estimates and forecast obtained from public sources, represent reasonable estimates). These materials were designed for us by specific persons familiar with the business and the affairs of your company and Torreya Partners assumes no obligation to update or otherwise review these materials. These materials have been prepared by Torreya Partners and its affiliates and accordingly information reflected or incorporated into these materials may be shared with employees of Torreya Partners and its affiliates and agents regardless of location. This presentation speaks only as of the date it is given, and the views expressed are subject to change based upon a number of factors, including market conditions and the Company’s business and prospects. Nothing contained herein should be construed as tax, legal or accounting advice. You (and each of your employees, representatives or other agents) may disclose to any and all persons, without limitation of any kind the tax treatment and structure of the transactions contemplated by these materials and all materials of any kind (including opinions or other tax analyses) that are provided to you relating to such tax treatment and structure. For this purpose, the tax treatment of a transaction is the purported or claimed US federal income tax treatment of the transaction and tax structure of a transaction is any fact that may be relevant to understand the purported or claimed US federal income tax treatment of the transaction. Torreya Partners (Europe) LLP, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is not acting for you in connection with any potential transaction(s) described in these materials and thus will not be responsible for providing you the protections afforded to clients of Torreya Partners (Europe) LLP or for advising you in connection with any potential transaction(s) as described in these materials except and unless subject to a subsequent specific written agreement relating to such potential transaction(s) between you and Torreya Partners (Europe) LLP.
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