ER - Monte Carlo Simulation
Do you use Monte Carlo simulations in your ER work? If so, what are the applications and programming software you normally use? Looking to get a feel for how commonly this and other analytic approaches are for valuation.
Hey epharm, what a lonely thread. I'm here since nobody responded ...so maybe one of these discussions will help:
More suggestions...
You're welcome.
We are happy with coming up with random target price and tell investors what the implied multiple is. Why get so scientific?
I've seen it used in a couple of very specific situations: valuing O&G exploration companies (where you are drilling a series of prospects with a rough idea of % chance of success on each and the probabiltiy distribution, plus there is some path dependency) or early stage pharma (similar).
For most companies - what would the point be? You're trying to value a company based on fundamentals, unless you're going to start putting together probability distributions for what the revenue line looks like (which would be garbage in / garbage out) there's nothing to 'simulate'.
Thanks for sharing your thoughts. I was mainly thinking it might apply to the probability of success for a pharma company’s trial or for a valuation of an early-stage pharma company.
If you have a very good idea of the % chance of success of each drug in a company's development pipeline at each stage of approval, and there are a few different drugs in the pipeline, then yeah running a Monte Carlo simulation could make some sense.
I'm not a pharma investor but I'd be amazed if you ever have enough information on the probabilities to make Monte Carlo anything other than garbage in / garbage out.
Okay thanks! Helpful to know.
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