Vontonobel Method of Pharma Valuation

Pharmaceutical evaluation Methodology & causal agent Studies Karl Heinz Koch European Pharmaceuticals 21 February 2008 Slide 2 Content rating Methodologies - An Overview electrostatic Valuation Methodologies (Pros and Cons) Dynamic Valuation Methodologies (Pros and Cons) Vontobel Pharma Valuation (Net Portfolio Add-On Potential) Case Studies: - Special Situations (i.e. Roche, Novartis) - Nycomed - Life Beyond Pantoprazole 22-39 40-44 3 4-8 9 10-21 21 February 2008 Slide 3 Valuation Overview Static Dynamic Geared De-Geared (e.g. P/E, (e.g. EV/x) P/CF) Discounted Cash Flow (DCF) Economic Value Added (EVA) P/E rel., PEG EV/x rel., EV/x/g 21 February 2008 Slide 4 Static Geared Valuation Methods (1) Price per bundle relative to Earnings per share, the alleged(prenominal) PER Pros: Simple (no adjustments needed) Widely apply because they are simple Cons: Misleading due to lack of comparing Different accounting philosophies (shareholder focus versus tax authorities) Different ease sheet structures (Gearing) 21 February 2008 Slide 5 Gearing affects P/E ratios (PER) USD million Market Capitalisation Level of debt make up of debt (interest rate p.a.

) Earnings before interests and taxes (EBIT) Net interest Pre-tax boodle (PTP) Taxes (@ 35%) Net profit PER accompany A blow 0 12% 10 0 10 3.5 6.5 15.4x Company B 50 50 12% 10 6 4 1.4 2.6 19.2x 21 February 2008 Slide 6 Static Geared Valuation Methods (2) Price per share relative to Cash Flow per share, so-called P/CF Pros: More dead-on(prenominal) cross-company comparability at bottom a sector (assuming similar capital structures) More accurate assessment of cash operating performance Cons: Not as widely used due to lack of information that spot cash from non-cash items Insufficiently accounts for minority interests, capital requirements and is even more than sensitive to gearing than a PER 21 February 2008 Slide 7 Static De-Geared Valuation Methods (1)... If you want to get a full essay, revision it on our website: Orderessay

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