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    GRP 8 - Roche and Genentech

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    Rohit Shaw
    This document presents a discounted cash flow valuation of Genentech using projected financial figures from 2009-2018. It calculates a firm value of $72.7 billion and a fair share price range of $70.05-$76.68 based on revenue growth rates of 6.5%-8.5% and a terminal growth rate of 2%. Comparable company analyses using P/E, EBITDA/Revenue, and Enterprise Value/Revenue multiples suggest a value within the DCF range, with the industry median providing the most reasonable validation of the DCF firm value.

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    GRP 8 - Roche and Genentech

    Uploaded by

    Rohit Shaw
    1K views9 pages
    This document presents a discounted cash flow valuation of Genentech using projected financial figures from 2009-2018. It calculates a firm value of $72.7 billion and a fair share price range of $70.05-$76.68 based on revenue growth rates of 6.5%-8.5% and a terminal growth rate of 2%. Comparable company analyses using P/E, EBITDA/Revenue, and Enterprise Value/Revenue multiples suggest a value within the DCF range, with the industry median providing the most reasonable validation of the DCF firm value.

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    Grp 8 - Roche and genentech.xlsx

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    This document presents a discounted cash flow valuation of Genentech using projected financial figures from 2009-2018. It calculates a firm value of $72.7 billion and a fair share price range of $70.05-$76.68 based on revenue growth rates of 6.5%-8.5% and a terminal growth rate of 2%. Comparable company analyses using P/E, EBITDA/Revenue, and Enterprise Value/Revenue multiples suggest a value within the DCF range, with the industry median providing the most reasonable validation of the DCF firm value.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    1K views9 pages

    GRP 8 - Roche and Genentech

    Uploaded by

    Rohit Shaw
    This document presents a discounted cash flow valuation of Genentech using projected financial figures from 2009-2018. It calculates a firm value of $72.7 billion and a fair share price range of $70.05-$76.68 based on revenue growth rates of 6.5%-8.5% and a terminal growth rate of 2%. Comparable company analyses using P/E, EBITDA/Revenue, and Enterprise Value/Revenue multiples suggest a value within the DCF range, with the industry median providing the most reasonable validation of the DCF firm value.

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    Synergies by Expense category

    WACC
    Year
    Manufacturing
    Research
    Development
    Mkting & Dist
    Roche G & A
    Genentech G & A

    Terminal Value
    PV of Terminal Value
    NPV of Cash Flows
    Total Value ( Synergies)
    No. of Shares
    Shares to be bought
    Value per share

    9%
    2009
    0
    0
    44
    0
    38
    38
    38
    38
    63
    47.25
    40
    14.8

    2010
    102
    51
    114
    0
    98
    98
    98
    98
    103
    77.25
    103
    38.11

    2011
    205
    102.5
    118
    0
    109
    109
    101
    101
    113
    84.75
    106
    39.22

    2012
    256
    128
    121
    0
    111
    111
    104
    104
    123
    92.25
    109
    40.33

    138.05

    362.36

    436.47

    475.58

    3529.9218
    $1,423.28
    $4,953.21
    1052
    463
    $10.70

    e category
    2013 and Thereafter
    % Dependent
    270
    135
    50%
    125
    0
    0%
    112
    112
    100%
    107
    107
    100%
    124
    93
    75%
    113
    41.81
    37%
    488.81
    5431.22

    Genentech's Valuation Using DCF Technique


    All Figures in $ millions
    Period
    Year
    Total revenue
    Cost of sales
    R&D
    SG&A expenses
    Profit Sharing
    Other expenses
    Total Costs and expenses
    EBIT
    Tax
    PAT

    1
    2009
    13535
    1792
    2644
    2058
    1403
    0
    7897
    5638
    1973
    3665

    2
    2010
    14482
    1376
    2679
    2187
    1303
    0
    7545
    6937
    2428
    4509

    3
    2011
    15496
    1472
    2867
    2340
    1395
    0
    8074
    7423
    2598
    4825

    4
    2012
    16581
    1575
    3067
    2504
    1492
    0
    8639
    7942
    2780
    5162

    Depreciation & Ammortization


    Increase in net working capital
    Capex
    Free Cash Flow

    577
    457
    672
    3113

    478
    188
    565
    4234

    511
    201
    604
    4530

    547
    216
    647
    4847

    Equity based compensation


    FCF after settling equity compensation
    Terminal Value 2% growth rate
    PV Factor
    Discounted FCF
    Firm Value
    Cash excluding debt
    Equity Value
    Total number of shares outstanding
    Share Price

    1567
    1546

    188
    4046

    201
    4329

    216
    4632

    0.92
    1,418
    72695
    6716
    79411
    1052
    $75.49

    0.84
    3,405

    0.77
    3,343

    0.71
    3,281

    Range of Genentech's Possible Share V

    Terminal Grow

    Revenue
    Growth
    Rate

    $75.49
    6.50%

    1.00%
    67.99

    7.00%
    7.50%
    8.00%
    8.50%

    70.05
    72.19
    74.40
    76.68

    Range of values
    reasonable for Highlighted
    in Green
    Genentech

    All Figures in $ millions


    5
    6
    2013
    2014
    17742
    18984
    1685
    1803
    3282
    3512
    2679
    2867
    1597
    1709
    0
    0
    9243
    9890
    8498
    9093
    2974
    3183
    5524
    5911

    7
    2015
    20312
    1930
    3758
    3067
    1828
    0
    10583
    9730
    3405
    6324

    8
    2016
    21734
    2065
    4021
    3282
    1956
    0
    11324
    10411
    3644
    6767

    9
    2017
    23256
    2209
    4302
    3512
    2093
    0
    12116
    11139
    3899
    7241

    10
    2018
    24884
    2364
    4603
    3757
    2240
    0
    12964
    11919
    4172
    7747

    585
    231
    692
    5187

    626
    247
    740
    5550

    670
    264
    792
    5938

    717
    283
    848
    6354

    767
    302
    907
    6799

    821
    323
    970
    7275

    231
    4956

    247
    5303

    264
    5674

    283
    6071

    302
    6496

    0.65
    3,221

    0.60
    3,162

    0.55
    3,104

    0.50
    3,047

    0.46
    2,991

    323
    6951
    101289
    0.42
    45,722

    Terminal Growth rate


    1.50%
    2.00%
    2.50%
    70.42
    73.20
    76.40

    3.00%
    80.14

    of Genentech's Possible Share Values

    72.59
    74.83
    77.15
    79.55

    75.49
    77.85
    80.30
    82.84

    78.83
    81.34
    83.94
    86.62

    82.73
    85.41
    88.18
    91.05

    Forecast Ratios
    Revenue Growth rate
    Cost of sales/Revenue
    R&D/ Revenue
    Selling, G&A/Revenue
    Profit Sharing/Revenue
    Other Cost/Revenue
    Total Cost/Revenue
    EBIT/Revenue
    Tax Rate
    Depreciation/Revenue
    Change in WC /Revenue
    Capex/Revenue
    Equity based compensation/Revenue
    WACC
    Terminal Growth Rate
    Cash & Cash Equivalents
    Commercial Paper
    Long-term Debt

    7%
    9.50%
    18.50%
    15.10%
    9.00%
    0.00%
    52.10%
    47.90%
    35.00%
    3.30%
    1.30%
    3.90%
    1.30%
    9%
    2%
    9545
    500
    2329

    Analysis of comparable companies


    All Figures in $ millions

    EBIT (excluding other expenses)


    Tax
    Earnings
    No. of Shares
    EPS

    P/E Multiples
    Amgen P/E
    Gillead P/E
    Average
    Industry MEAN (from exhibit 13)
    Industry Median (from exhibit 13)
    Genentech Share Price

    EBITDA/Revenue Multiples
    EBITDA
    Multiple
    Amgen
    Gillead
    Average
    Industry MEAN (from exhibit 13)
    Industry Median (from exhibit 13)

    2008
    5241
    1834
    3407
    1052
    3.24

    2009
    5638
    1973
    3665
    1052
    3.48

    2008
    2009
    12.6
    12.1
    25.4
    22.1
    19
    17.1
    24.1
    18.8
    19.7
    16.5
    $75.49 DCF
    $76.99 P/E Valuation
    2008
    5833

    2009
    6195

    9.5
    18.3
    13.9
    16.7
    12

    9.3
    16.2
    12.75
    14
    11.3

    GENENTECH'S Share
    VALUE
    $
    40.81 $42.15
    $
    82.26 $76.99
    $
    61.53 $59.57
    $
    78.05 $65.50
    $
    63.80 $57.48

    Enterprise Value

    55414 57614
    106744 100359
    81079 78986
    97411 86730
    69996 70004

    Firm Value
    72695 Using DCF
    Industry mean looks insufficient comparable however, Industry median might provide a reasonable firm value
    Enterprise Value/Revenue Multiples
    Revenue
    Multiple
    Amgen
    Gillead
    Average
    Industry MEAN (from exhibit 13)
    Industry Median (from exhibit 13)

    2008
    13418

    2009
    13535

    4.1
    9.3
    6.7
    6.7
    4.8

    4
    7.8
    5.9
    5.6
    4.3

    Firm Value
    72695 Using DCF
    EV/Revenue multiple looks poor, should not be considered

    Enterprise Value

    55014 54140
    124787 105573
    89901 79857
    89901 75796
    64406 58201

    nable firm value

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