needed documents: words for the report and excel showing the simple calculations. For the following
Required: Calculate the value of TP using the following methods (a, b, and c):
a. Comparable multiples (p/s and p/e)* as a valuation method. The most important aspect of (a) is the selection of inputs and the associated documentation, discussion, and motivation for why certain companies and numbers were selected.
b. Acquisition Premium. Again, defend your input(s)!
c. Discounted Cash Flow Analysis, which must include the Terminal Value
(TV). As in (a), document your selections. The forecast must be for 5 years in total. Then, assume an appropriate terminal value. Document your assumptions and defend your position.
d. Compare the computed values and comment in detail on the firm ?s performance and valuation as related to your selection of comparables. Also use the PEG Ratio to check your valuation range, in addition to the previously calculated valuation metrics. Decide on a value or narrow range of values.
e. You must discuss your selection of inputs that you use in the models. This is a very important part of the assignment. Also, discuss how you forecasted the income statement.
Valuation Case
DueALP (DP) Inc, a European diversified pharmaceutical company is looking
to acquire Thunderbird Pharma, Inc. (TP), a privately held pharma company
located in Ireland. The main business of TP is pharmaceuticals that treat
relatively rare diseases, thus too small for large international pharmaceutical
companies to invest in. The following data is available for TP:
COMPARABLES*
Industry Information:
Forecasted (F) and Actual (A) Statement of Income
2022 (A)
2023 (A)
2024 (F)
Sales
Cost of Sales
Gross Profit
SG&A
EBITDA
D&A
EBT
$60.6
49.5
$ 11.1
5.6
5.5
2.1
$ 3.4
$58.2
45.2
$13.0
8.5
4.5
2.0
$ 2.5
$105.1
74.3
$ 30.8
16.0
14.8
4.0
$ 10.8
PS Ratio 5.5x
PE Ratio 31.5x
Operating Margin 25%
Market PEG Ratio 1.56x
*****************
Acquisition Premiums:
Again, the main business of TP is pharmaceuticals that treat relatively rare
diseases, i.e. diseases that are not very common.
Required: Calculate the value of TP using the following methods (a, b, and
c):
a. Comparable multiples (p/s and p/e)* as a valuation method. The most
important aspect of (a) is the selection of inputs and the associated
documentation, discussion, and motivation for why certain companies
and numbers were selected.
b. Acquisition Premium. Again, defend your input(s)!
c. Discounted Cash Flow Analysis, which must include the Terminal Value
(TV). As in (a), document your selections. The forecast must be for 5
years in total. Then, assume an appropriate terminal value. Document
your assumptions and defend your position.
d. Compare the computed values and comment in detail on the firm´s
performance and valuation as related to your selection of comparables.
Also use the PEG Ratio to check your valuation range, in addition to the
previously calculated valuation metrics. Decide on a value or narrow
range of values.
e. You must discuss your selection of inputs that you use in the
models. This is a very important part of the assignment. Also,
discuss how you forecasted the income statement.
Again, be sure to state any assumptions you make. Also, discuss and support
why you picked certain numbers and companies. As stated earlier, this is an
important aspect of this problem. If needed, use a discount rate of 20 percent.
If needed, the tax rate = 25%. Discovering treatments is a risky business.
Use only the comparable firms on this page. Useful sources include (but are
not limited to):
https://www.investopedia.com/articles/analyst/043002.asp
www.marketwatch.com.
www.gurufocus.com
www.simplywall.st
www.finance.yahoo.com.
Virtuous Pharma (France)
Grind Avik Pharma (Iceland)
Troms Pharma (Norway)
OTR Pharma (CDN)
80%
65%
125%
95%
Potential Competitors (there are others,
as well):
SOBI
Advanced Clinical
Boston Medical Group
Pyramid Laboratories
CMRC
Ferring Pharmaceuticals
Joerns Healthcare
Kindeva
Amgen
Asdia
Astra Zeneca
Note: you must select some
from these comparable/
competitor companies. Not
all of the above firms are
relevant as comparables.
There are others, as well.
Deliverables: A report (including a title page listing all team members and an executive summary) not exceeding 6 pages (body
and appendix). Calculations should not exceed two pages (put in the appendix using Excel) and be incorporated by reference
in the body of the paper. Due dates: You will present your first draft (PPT) between noon and 11 PM in my office between April
21st through April 24th. Schedule your preferred time via email. You will receive feedback on your valuation during our meeting,
which will last approximately 30 minutes. The final report is due on May 4 @ midnight via email.
Number of Group Members: Maximum 5 Members.
© Jan Smolarski
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