Can someone explain a DCF for a biopharma company and how you would say it in an interview? I understand that you have to take into account POS, other specific considerations, etc, but would love to get others' thoughts! Thanks
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check the RBC Biotech valuation report or Torreya report, know the different POS (e.g. if its in phase I, II, III), know that revenue is 0 until drug hits the market (always assuming drug gets market approval) and expenses gradually increase until then (first because you need to recruit & monitor more patients and then for manufacturing/marketing expenses.
Read about the patent cliff (theres gonna be a negative gordon growth afterwords)
make sure you know how to find the revenue its actually really cool and a general basis is (# of patients * price per therapy annualized * market penetration of the drug)
at the deeper level know difference between a therapy vs small molecule vs biolgoic in terms of Terminval Value, patent cliff, market pentration estimates etc
sorry for typos
Would you need to know all this for a general healthcare group interview? Or is it just the pharma group specific? i.e. what if the gorup focuses on medical facilities instead? would it just be a normal DCF?
Nah for general healthcare (services / providers) the dcf is more similar with that of industrials and conusmer companies. Rely on EBITDA Multiples, FCF etc. This is moreso for the the Life Sciences team or BioPharma team.
Medtech has its own nuances such as every medical facility / technology needs to go through the FDA process but those have much higher POS than the life sciences. Tbh just started my first year and havent worked on any medtech deals but they have their own nuances as well.
and also read ER reports. BigPharma DCF's are valued in different parts (could be by therapeutic region, time cycle etc) but they all tend to be sum of the parts regarding the DCF. Pfizer's breakdown was like Pipeline (drugs that haven't yet hit market), LOE Drugs (gonna each patent cliff soon), Drugs that just hit the market and then generics.
Really high lvl overview but point being that diff large companies should be looked at diff ways considering their products and specilziations
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