PURPOSE OF MODEL

Highly versatile and user-friendly Excel model for the preparation a of 5-year rolling 3 statement (Income Statement, Balance Sheet and Cash flow Statement) financial projection with a monthly timeline for a startup or existing biopharma business generating royalty and license fee revenue through the R&D of new drugs.

The model allows the user to model the sale of up to 10 drugs at different stages of development (research, preclinical study, clinical trial, approval, and market). The model calculates revenues based on probabilities of the drugs progressing across the different stages. It includes different research or development costs across each stage, the capitalization of development costs, staff costs, marketing costs, other expenses, fixed assets, tax, dividends, borrowings, and capital changes.

KEY OUTPUTS

The key outputs include:
– Projected full financial statements presented on a monthly basis across up to 5 years and summarised on an annual basis.
– Dashboard with:
o Summarised projected Income Statement and Balance Sheet
o Compounded Annual Growth rate (CAGR) for each summarised income statement and Balance Sheet line item
o List of key ratios including average revenue growth, average profit margins, average return on assets and equity, and Average Debt to Equity ratio.
o Bar charts summarising income statement and Balance Sheet projections
o Revenue and R&D spend by drug type in table and bar-chart format
– Discounted cash flow valuation using the projected cash flow output.

KEY INPUTS

Most inputs include user-friendly line-item explanations and input validations to help users understand what the input is for and populate correctly.

Setup Inputs:
– Name of business;
– Currency;
– First projection year and month;
– Naming for drug types, staff costs, marketing costs, other expenses, fixed assets, and borrowings;
– Sales tax applicability for revenue, expense, and fixed asset items.

Actuals Inputs:
– Opening balance sheet (for existing businesses);
– Income Statement actuals (for trend analysis);

Projection Inputs:
– Drug royalty revenue including probabilities of progression to next development stages, months duration at each stage, royalty rates, product demand, and credit terms offered;
– Licence fee revenue;
– R&D spend for each development stage and each drug;
– Other costs inputs including staff costs, marketing costs, and other expenses;
– Sales and corporate tax inputs including rate and payment periods;
– Dividend inputs including amount or percentage of retained earnings and frequency;
– Fixed Assets including additional amounts and useful life;
– Borrowings including addition amounts and interest rate;
– Share Capital additions;
– Discount rate inputs (for valuation calculation).

MODEL STRUCTURE

The model comprises of 9 tabs split into input (‘i_’), calculation (‘c_’), output (‘o_’) and system tabs. The tabs to be populated by the user are the input tabs (‘i_Setup’, ‘i_Actuals’ and ‘i_Assumptions’). The calculation tab uses the user-defined inputs to calculate and produce the projection outputs which are presented in ‘o_Fin Stats’, ‘o_Dashboard’, and ‘o_DCF’.

KEY FEATURES

Other key features of this model include the following:
– The model follows good practice financial modeling guidelines and includes instructions, line item explanations, checks, and input validations;
– The model contains a flexible timeline that allows for a mix of Actual and Forecast periods across a 5-year period. This allows projections to be easily rolled forward;
– Timeline is split on a monthly basis and summarised on an annual basis;
– The model allows the user to model 10 drug categories each with their own unique stage of development, the probability for progression to next stages, and R&D spend;
– The model is not password protected;
– The model allows for the following number of underlying categories for each line item (these can be easily expanded if required):
o Drug categories – 10 categories;
o Development stages – 5 stages (2 research, 2 development, and 1 market stage)
o Staff costs – 5 categories;
o Marketing costs – 5 categories;
o Other expenses – 15 categories;
o Fixed assets – 5 categories;
o Borrowings – 5 facilities
– Apart from projecting revenue, R&D spend, and expenses the tool includes the possibility to model capitalization of development costs, receivables, fixed assets, borrowings, dividends, and corporate tax;
– Business Name, currency, starting projection period and volume units are fully customizable;
– Revenue, cost, and fixed asset descriptions are fully customizable;
– The model included an integrated discounted cash flow valuation using the projected cash flow outputs;
– The model includes instructions, line-item explanations, checks, and input validations to help ensure input fields are populated accurately;
– The model includes a checks dashboard that summarises all the checks included in the various tabs making it easier to identify any errors.