spacer
home > ebr > autumn 2007 > net profit
PUBLICATIONS
European Biopharmaceutical Review

Net Profit

While more biotech companies are trying to go public in Europe there are only a few specialised investors, and the vast majority of shareholders are not familiar with the specifics of the sector in terms of valuation methodologies.

Investors like to compare companies and usually look at a limited number of variables within a sector: growth and growth prospect, margins, multiples and newsflow. Unfortunately, due to their lossmaking structure, traditional P/E or EV/EBITDA valuation multiples cannot be applied to drug discovery companies. Even discounted cash flow-type valuation (DCF) is often the subject of controversy, as mastering the ‘fair valuation’ of a biotech company requires a large number of assumptions: probability of success, competitive positioning, timeto- profitability, cash requirements and discount rate, to name but a few.

FAIR VALUE: A MYTH

As an example of the disparate valuations an investor can get from different experts, consider a pharmaceutical compound in development and entering Phase II with a sales potential of roughly US$170-200 million. What follows are two scenarios that differ only slightly in a few key hypotheses for which non-specialists would find it impossible to assert the correct figures (see Table 1).

Conducting a direct net present value (NPV) of the project, it is interesting to note that even without considering the risk of failure inherent to the industry, by simply delaying the date of launch by one year and reducing the peak sales by 10 per cent, the value of the project is reduced by about 25 per cent. Note also that both scenarios give a NPV before adjusting the cash flow to their probability of realisation – between seven and eight times the level of required investments.


Read full article from PDF >>

Rate this article You must be a member of the site to make a vote.  
Average rating:
0
     

There are no comments in regards to this article.

spacer

Frédéric Desdouits is a Managing Partner at Bionest Partners and the President of Hinvest Partners. Beforeworking for Bionest, Frédéric was Head of the Pharma/Biotech Equity Research and a partner at Exane BNPParibas. Previously, he was Team Head at GlaxoWellcome (France) in research and preclinical developmentfor cardiovascular diseases and has been a Scientific Consultant for Hoechst (US) for the neurodegenerativeteam, as well as a Guest Investigator at the Rockefeller University (New York, US). Frédéric has a MSc inpharmacology from Ecole Normale (Paris, France), graduated from the Ecole Polytechnique (Palaiseau, France) and CEFA (as a Financial Analyst). He also holds a PhD in Neuro-Biochemistry obtained at the Collegede France (Paris, France) in collaboration with Rhône-Poulenc Central Nervous System department.

Catherine Pichereau is a Manager for Bionest Partners. Since joining Bionest Partners in January2004, She has been committed to the development of the financial advisory franchise. Catherinebegan her career in the corporate finance teams of Robertson Stephens and Bank of AmericaSecurities, both in London, and dedicated entirely to healthcare. She worked on M&A and privateplacement transactions for European companies, including biotechs, speciality pharma and medtechs.Catherine graduated from HEC Business School (Paris, France) with additional qualifications from theStockholm School of Economics (Sweden) and the Vienna University of Economics and BusinessAdministration (Austria).

spacer
Frédéric Desdouits
spacer
spacer
spacer
Catherine Pichereau
spacer
spacer
Print this page
Send to a friend
Privacy statement
News and Press Releases

3P Biopharmaceuticals initiates partnership with American Biotech Zhittya for Parkinson’s disease treatment

3P and Zhittya began their relationship at the beginning of 2019 with 3P being selected as the CDMO to transfer the process for scaling up and performing cGMP manufacturing for clinical studies. After successfully achieving transfer of the process, 3P anticipates manufacturing of the first cGMP batch by the second quarter of 2020.
More info >>

White Papers

The Key To Tableting Success: How To Choose The Right Tooling

Natoli Engineering Company, Inc.

Choosing the right tooling can increase tablet output, decrease waste and ultimately determine the success of a product launch.
More info >>

 
Industry Events

World Vaccine Congress Washington

27-29 September 2020, Walter E Washington Convention Center, Washington, US

The World Vaccine Congress is an award-winning series of conferences and exhibitions that have grown to become the largest and most established vaccine meeting of its kind across the globe. Our credibility is show through the prestigious scientific advisory board that spend months of hard work creating a new and topical agenda, year on year.
More info >>

 

 

©2000-2011 Samedan Ltd.
Add to favourites

Print this page

Send to a friend
Privacy statement