Biotech/Life Sciences Vertical in IB: Day to day

My experience may be very different than what is typical because I'm at a very small boutique, but with that caveat I'll give a quick description of what my time has been like. Would also be interested to hear what working in biotech at a bigger bank is like because I don't know.

For almost every client we create a long-term operational model. These are really fun to work with because they rely on a huge number of different factors. When calculating revenue you have to be able to input different launch year, launch curve, addressable market (based on indication and line of treatment, safety profile, KOL support, reimbursement rates, market share, comparable drugs, geography, patient adherence rates, etc. etc.) and then apply a risk-adjustment for the probability of getting FDA approval.

Since I've been here we've worked on typical M&A deals and done a lot with pre-clinical and clinical-stage venture rounds. I think the most interesting/unique thing is the significant amount of work on drug partnership/alliance deals.

Typically a clinical-stage client will partner with a global pharma company to develop or market a drug. We work with the clinical-stage company to value and negotiate these deals using the types of models I mentioned. Basically you take the model and then build in any number of different scenarios based on up-front payments, development milestones, sales milestones, tiered royalties, development cost sharing, marketing/sales force synergies/strength, different launch timing. A lot of these deals are for ex-U.S. drug licensing, which introduces a whole new aspect to the model by building in different geographies, such as EU, Japan, China or Asia ex-Japan (which each have unique assumptions based on everything from differing regulatory environments to population genetic impact on clinical trials). It gets even more interesting when your client is pursuing multiple deals for different drugs or indications at once.

Using these assumptions and scenarios, you take the risk-adjusted revenue and project out cash flows for the period of the patent, or slightly longer. Usually no terminal value is used, and you just discount the projection period cash flows back to the present. Then as negotiations continue you can tweak the model by changing one of the different inputs to compare present values. Some projects end up with 50 different scenarios and intrinsic values.

Day to day a lot of time is spent on these models, as well as the typical slides to be made for various reasons. I think we probably spend more time on random research than other industries.. e.g. if a company is using a certain FDA designation or drug-approval pathway you need to research comps that used that same designation or pathway. One time I spent a day scrolling through the FDA's drug approval database to find a comps set that had a drug with the combination of an orphan disease designation and very specific approval pathway.

Because of the early-stage nature of most of our clients, I also usually will often have to research drug launch dates and adjust comps by year. For example, if I have a set of comps that have the same type of drug I will want to switch from calendar periods to periods based on launch-date. Then I will align the comps so that each drug launch happens on period 0 and you can compare changing metrics along the launch curve.

A big plus is the amount of client visits. All of the inputs in the model have to come from somewhere, which means extensive time spent with management working on assumptions and scenarios. Meetings like this happen once or twice a week, and as an analyst I've been able to walk through my models with CFOs and CEOs of publicly-traded biotech companies.

Personally, the biggest downside of working in the industry is the inability to as readily pursue industry or venture capital roles without an established scientific background. If you take a look at bios of the biggest biotech venture funds or industry executives, the vast majority have PhDs or other impressive life science-specific backgrounds. As a finance-only guy, I feel very limited. Minus that, it is a very exciting place to be working in right now.