Valuing a Healthcare / Pharmaceutical Company

Part One

Session 1

• Defining the nuances of healthcare companies: Types of healthcare companies Biotech

• Pharmaceuticals

• Medical devices

• Diagnostic tools

R&D and upfront spend

Handling unknowns in healthcare business valuation:

• Regulatory risk

• Clinical trial risks Patient enrolment

• Finding the right endpoints

Risk adjustments

• Using probabilities of success

Summary of valuation techniques which could be applied

• DCF

• Trading Comps

• Transaction Comps

• Cost of capital and discount rate

Considerations for valuing early-stage clinical / biotechnology companies

• Phases of Drug Development & Probability of Success

• Patent life

• Loss of exclusivity

Case study example of valuing a clinical (early) stage biotechnology company [On-screen follow-along exercise]

Session 2

Valuing a start-up biotechnology company

• Key clusters for start-up biotechnology companies: University spin-offs

• Big Pharma R&D spin-offs

Lifecycle of biotech companies:

• Different stages of development and commercialisation Discovery

• Clinical development

• Peak penetration

• Loss of exclusivity

Clinical trials

• What is key? Efficacy profile

• Safety profile

• Regulatory labelling

Valuation issues

• How to value know-how and R&D

• Impact of cash burn

• Estimating market size

• Inherent problems of using the DCF model

• Apply peak sales multiples

• Case study example of valuing a start-up biotechnology company [On-screen follow-along exercise] DCF-derived valuation

• Problems with peak-sales multiple analysis

• Competitive dynamics How do we know if we have the better product?

• Mechanisms of action

Part Two

Session 1

• A map of some of the key players in healthcare (Pharmaceuticals): Major therapeutic areas in development Oncology

• Infectious diseases

• Neurology

• Haematology

• Endocrinology

• Respiratory

• Dermatology

• Cardiovascular

• Psychiatry

• Ophthalmology

• Rheumatology

• Others

Key pharmaceutical company valuation drivers

• Financials

• M&A for brand/product acquisitions Buy-and-build

• Multiple arbitrage

Nature of commercialised products

• OTC

• Generics

• Specialty Pharmaceuticals

Understanding the commercialisation strategy

• Own sales force

• Out licensed

• Cost and margin impacts from commercialisation strategy

• Case study example of a bolt-on acquisition and using multiple arbitrage to create value [On-screen follow-along exercise]

Session 2

• Understand the peak revenue opportunity: Links to Epidemiology (disease prevalence and stratifying patient populations)

• Peak penetration

• Price per year

Building blocks for a pharmaceutical/biotech SOTP (Sum Of The Parts analysis):

• DCF on a product-by-product basis

• Other sources of tangible value (land, FDA priority review vouchers and others)

• Allocation of central overhead costs

Case study example of valuing a commercial-stage pharmaceutical company [On-screen follow-along exercise]:

• Royalty revenue streams and monetisation What is royalty financing?

• Emergent trends and TA focus areas for royalty financing

• Key counterparties engaged in biopharma royalty financing

• Types of licensing opportunities (horizontal vs vertical)

• Tail and Cap provisions

Case study example of valuing a royalty consideration [On-screen follow-along exercise]

Training Objectives

Redcliffe's valuation of pharmaceutical companies course will enable you to:

• Gain a thorough, practical review of the valuation of healthcare companies & pharmaceutical companies.

• Analyse the financial and operational nuances of healthcare businesses, including: High R&D costs

• Regulatory hurdles

The impact of patent exclusivity

Master advanced valuation techniques such as Discounted Cash Flow (DCF), Trading Comps, and Transaction Comps, with emphasis on cost of capital and discount rate considerations.

Apply valuation methodologies to different company stages, from early-stage biotechnology to commercial-stage pharmaceutical companies.

Navigate challenges in valuing early-stage and start-up biotechnology companies.

Address clinical trial risks, patient enrolment challenges, and uncertainties in drug development.

Examine the lifecycle of biotech companies, including:

• Discovery

• Clinical development

• Peak penetration

• The loss of exclusivity

Training Course Summary

Redcliffe Training’s healthcare and pharma valuation course provides a comprehensive review of practical valuation techniques for healthcare businesses.

Delivered over 2 half-days, this course focuses on assessing pharmaceutical companies and their specific valuation drivers. With extensive use of real-world examples, participants will gain hands-on experience in valuing healthcare companies, analysing industry metrics, and tackling valuation challenges.