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