Does anyone know how to value company with zero revenue; basically, a healthcare company in the trial phase. Can you use a DCF and just discount far out projected revenue?
I searched the forums and found prior subjects regarding private companies. Would that be the same method?
Oftentimes companies that are prerevenue are valued based on their assets. If the company is a pharma manufacturer, they may incur heavy net losses due to R&D prior to bringing their products to market. I have seen DCFs built for these types of deals, which of course rely heavily on management's financial projections.
Adding to this you would look at success rate of potential pipeline products and future projected revenue with a heavy discount then run DCF.
Problem is that for many ventures, management still consists of lab coats. In my experience, CEOs of early stage pharma ventures have a particularly difficult time communicating their science to the market and projections have so little sustainable data to go on that bringing a DCF into the mix warrants a discount on valuation in itself.
Asarina Pharma is about to start trading on Nasdaq Stockholm First North next week. Their IPO valuation was set to the accumulated capital that they had raised in previous rounds. A humble, straight-forward approach that does not rely on crystal balls.
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