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Library | Item Barcode | Call Number | Material Type | Item Category 1 | Status |
|---|---|---|---|---|---|
Searching... | 30000010191550 | HD9999.B442 K44 2008 | Open Access Book | Book | Searching... |
Searching... | 30000010201707 | HD9999.B442 K44 2008 | Open Access Book | Book | Searching... |
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Summary
Summary
The first book to provide a simple and practical means of valuing biotech companies The book begins with a short history of the biotechnology industry; this is important as although it is about 30 years old, the first company went public only in 1996, so it is possible to plot the course of investment waves and dips It examines the European industry and its evolvement, and draws parallels between the similarities and differences between that and the US Looks at the various companies which make up the biotech industry (therapeutic; life sciences; and the medical technology company) and gives tools for the investor to properly evaluate them Praise for Biotechnology Valuation
"Keegan states that the valuation of Biotech companies is as much an art as a science. This brief but comprehensive review of the skills and knowledge required, not of just the financial market and sentiment, but also of the technical attributes of a company and the drug development and regulatory hurdles that must be overcome, highlights the importance of the breadth of understanding required. Biotech investing is not for the timid, but it can bring substantial returns. Keegan's book, punctuated with his personal experience and opinions, is a good place to start."
-- Chris Blackwell , Chief Executive, Vectura Group plc
"A user-friendly, yet thorough discussion of a notoriously difficult topic. Dr Keegan's book is a fine resource for both business types and academicians."
-- Steve Winokur , Managing Director, CanaccordAdams
"A highly readable and comprehensive explanation of the technical and commercial parameters that influence biotechnology companies at all stages of development, providing clear context for selection from the toolkit of valuation methodologies the author recommends to assess company and product performance, or ascribe value."
-- Dr L.M. Allan , Director, Bioscience Enterprise Programme, University of Cambridge
"A fabulous approach to a difficult topic."
-- Deirdre Y. Gillespie , MD, President & CEO, La Jolla Pharmaceutical Company
Author Notes
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
| Acknowledgements | p. xi |
| 1 Introduction | p. 1 |
| Biotechnology Background | p. 5 |
| 2 Traditional Valuation Methods | p. 11 |
| The Value of a Company | p. 11 |
| Accounts - Providing the Data for Valuation Analysis | p. 12 |
| The Income Statement | p. 13 |
| Balance Sheet | p. 17 |
| Cash Flow Statement | p. 20 |
| Income Statement Multiples | p. 22 |
| Balance Sheet Multiples | p. 26 |
| Summary | p. 27 |
| Discounted Cash Flow Analysis | p. 27 |
| Net Present Value | p. 27 |
| Constructing the DCF | p. 28 |
| Projecting the Cash Flow Stream | p. 29 |
| Choosing a Discount Rate | p. 30 |
| Other Thoughts | p. 37 |
| 3 The Drug Development Process | p. 39 |
| The Drug Development Process | p. 40 |
| Drug Discovery and Research | p. 44 |
| Pre-Clinical Development | p. 44 |
| Clinical Trials | p. 48 |
| What Investors Should Look For When Analysing Clinical Trials | p. 56 |
| Conclusion | p. 59 |
| The Regulatory Process | p. 59 |
| Regulation in the US | p. 60 |
| Regulation in Europe | p. 63 |
| The Label | p. 64 |
| Timelines for Approval | p. 65 |
| Post Approval | p. 65 |
| Investment Lessons | p. 66 |
| Case Study #1 | p. 66 |
| 4 Biotechnology Company Valuation | p. 69 |
| Data Collation | p. 71 |
| NPV of the Pipeline | p. 75 |
| Calculations | p. 80 |
| Sensitivity Analyses | p. 86 |
| DCF of Whole Company | p. 92 |
| EBIT DCF of Products | p. 97 |
| Comparables Valuation | p. 99 |
| NPVs are Additive | p. 101 |
| Using all the Tools Available to Reach a Valuation Conclusion | p. 101 |
| Market Models | p. 104 |
| Conclusion | p. 105 |
| Appendix 1 | p. 106 |
| Example 1 | p. 106 |
| Example 2 | p. 108 |
| Example 3 | p. 108 |
| Appendix 2 | p. 116 |
| Biosimilar Update | p. 116 |
| 5 Decision Trees and Real Options | p. 119 |
| Decision Trees | p. 120 |
| Discount Rate | p. 124 |
| Deriving Scenarios | p. 125 |
| Conclusion | p. 125 |
| Decision Tree Example | p. 126 |
| Real Options | p. 126 |
| Valuing Options | p. 129 |
| Estimation of the Input Variables | p. 138 |
| Conclusions | p. 139 |
| 6 Biotechnology Investing | p. 141 |
| Types of Healthcare Investment | p. 141 |
| Biotechnology Sector Evolution | p. 143 |
| Biotechnology Investment Cycles | p. 145 |
| Biotechnology Business Models | p. 152 |
| Focus on People | p. 154 |
| Cash | p. 155 |
| Product Pipeline | p. 155 |
| Commercial Risks | p. 156 |
| Newsflow | p. 158 |
| Lessons from Biotech Investing | p. 160 |
| 7 Early-stage Valuation | p. 161 |
| Private Valuation | p. 162 |
| Discounted Cash Flow Method | p. 166 |
| Comparable Valuation | p. 168 |
| Venture Capital Method | p. 170 |
| Discount Rates | p. 173 |
| Conclusion | p. 173 |
| Glossary | p. 175 |
| References | p. 189 |
| Index | p. 193 |
