Pharmaceutical Industry Financial Analysis


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This is a presentation that was completed for my Corporate Finance class my senior year with a team of three other students. I did my valuation of Eli Lilly.

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  • I did my analysis on the pharmaceutical company, Eli Lilly. When I developed my sales projections, my primary consideration was Eli Lilly’s drug portfolio. What I found interesting was that 91% of their $21B in sales came from only 10 drugs. With 4 of their top 6 drugs losing their patents by 2012, I chose to project a 5% decline in revenues over the next four years for my DCF analysis. Patents are a critical part of the pharmaceutical industry. It is very easy to duplicate a manufacturing process,
  • Pharmaceutical Industry Financial Analysis

    1. 1. Pharmaceutical Industry Financial Analysis<br />FE 449: Corporate Finance<br />James Potts<br />Richard Su<br />Hin Mok<br />Emily Wu<br />
    2. 2. Industry Highlights<br />2009 Industry Sales: $300.3B<br /> Brand Name vs. Generics<br />Patents<br />High Fixed Costs<br />Lengthy Drug Development Cycle<br />Consolidation by M&A<br />Bio-tech<br />
    3. 3. Research & Development<br />The pharmaceutical industry is the most research-intensive in the US.<br />FY2009: Over $65.3 Billion invested in R&D<br />Constantly striving to produce more drugs<br />Est. $1B spent in R&D per drug under development.<br />
    4. 4. Consolidation and M&A<br />Big pharmaceuticals look to diversify products as well as gain valuable IP rights, expertise, capacity, etc<br />Biotech and big pharmaceuticals have driven M&A over the past year<br />Alliances to overcome economy, innovate<br />Recent notable M&A’s:<br />Wyeth > Pfizer, $64B<br />Schering-Plough > Merck, $47B<br />Genentech > Roche Holdings, $44B<br />
    5. 5. Firm Valuation Overview<br />
    6. 6. Eli Lilly <br />Based in Indiana<br />History of success with anti-depressants <br />Notable Former Board Members<br />George H.W. Bush<br />Kenneth Lay<br />
    7. 7. DCF: Growth vs. Discount Rate<br />
    8. 8. Eli Lilly <br />
    9. 9. AstraZeneca (NYSE: AZN)<br />Incorporated in 1992, based in the UK<br />Focused on the discovery, development, and commercialization of prepared medicines.<br />7th largest pharmaceutical company based off revenues<br />Operated in over 100 countries<br />
    10. 10. AstraZeneca Major Products<br />Focused in 6 areas of healthcare<br />10 drugs each over $1B in revenues annually in 2009<br />60 major R&D collaborations last three years<br />
    11. 11. AstraZeneca Valuation<br />Compared with Pfizer, Abbott, Roche, Novartis, GlaxoSmithKline<br />EBITDA<br />Represents profit of business when only considering operations<br />Good way to predict growth of business<br />
    12. 12. Bristol Myers<br />Headquartered in New York City<br />11 Key drugs,<br />Plavix<br />7 drugs in phase III as of 2009<br />Focused on<br />Cancer<br />HIV/AIDS<br />Cardiovascular<br />diabetes<br />
    13. 13. Bristol Myers<br />Compared with: Pfizer, Gilead, Baxter, Eli Lilly, and Amgen<br />BEV/REV = $25.38<br /> BEV/EBITDA = $25.28<br />Price/Sales = $24.79<br />Plavix exclusive loss in US in 2011 and in Canada in 2012<br />Avapro exclusive loss in US 2012 and in Europe in 2013<br />
    14. 14. Pfizer, Inc. (NYSE: PFE)<br />The largest prescription drug manufacturer worldwide<br />Holds a diversified arm that also manufactures drugs for animals, as well as gelatin capsules<br />Notable products: Lipitor, Viagra, Celebrex<br />
    15. 15. Notable Events<br />Pfizer acquired Wyeth in 2009 for over $64 B.<br />Beneficial through legacy products, expertise, capacity, savings on R&D.<br />Result: on pace to grow in FY2010 over 50% versus FY2009 (3.55%)<br />
    16. 16. Pfizer Valuation<br />CompCo: <br />BEV/EBITDA: $23.18<br />BEV/REV: $21.74<br />CompM&A:<br />BEV/EBITDA: $27.97<br />BEV/REV: $21.86<br />DCF: $44.54<br />High due to unpredictability of extraordinary items, Wyeth legacy products<br />Blended Price: $26.34<br />
    17. 17. Thanks for your time!<br />Questions?<br />Comments?<br />