Pharma Biotech Valuation Model Template (Risk-Adjusted)

The Pharma Biotech Valuation Model Template calculates the risk-adjusted DCF Value of a Pharma or Biotech Startup Company with several products under development. The product forecasts are probability adjusted to take into account the success probabilities at different stages during the product development stages and simulates the effect on the company’s valuation. The model also allows to calculate the required funding and simulates the calculated returns from a financial investor point of view during a fund-raising exercise.

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The Pharma-Biotech Valuation Model Template calculates the risk-adjusted DCF (Discounted Cash Flow) Value of a Pharma or Biotech Company. This Excel spreadsheet template contains a great set of useful tools to better understand the value of a Pharma or Biotech company.

Typically, Pharma or Biotech companies have several products – such as drugs, vaccines, substances, medicines, or similar products – in their pipeline at various stages of development. Therefore, each product is subject to different development risks validation through clinical studies, and approval by the appropriate authorities is required. The risk will be captured in the success probability factor for each product in this biotech valuation model. The model is suitable for Biotech Startup Valuation or the Valuation of established Pharmaceutical companies. The forecast horizon covers 25 years.

The model is intended to serve the following use cases:

  • Risk-Adjusted Biotech Valuation (rNP)
  • Biotech Startup valuation
  • Pharma Financial Model
  • Fundraising – Calculation of required Funding
  • Investment case evaluation

This video provides an overview of this Pharma-Biotech valuation model template:

 

Some highlights of this spreadsheet model template:

  • Biotech Startup Valuation – rNPV: The model template can also be used for Biotech Startup valuation as it is able to capture the development risk at the product level.
  • Probability adjustments: Financial forecasts are probability adjusted at the product level to capture the development risk during clinical trials.
  • Include/Exclude: Each product can be included/excluded in the consolidation as needed which allows simulating a variety of different development scenarios and their financial consequences.
  • Product Comparisons: The Excel spreadsheet template calculates all the relevant metrics at the product level and allows a comparison of those metrics across the company’s product portfolio.
  • Required Funding: The Excel model also allows to calculate the required funding and simulates the calculated returns from a financial investor point of view during a fund-raising exercise. The model can also capture several layers of debt financing.
  • Investor Returns: A shareholder and investment participation structure is applied to the Cash Flows to Equity Shareholders. This allows forecasting Pro-forma cash flows per shareholder and their expected returns (via the Internal Rate of Return, IRR) until exit.
  • Venture Capital Valuation: Another data point of interest is to value a Biotech Startup Company based on the Venture Capital Valuation method which discounts the value at the exit to today.
  • Financial Feasibility Metrics: The model calculates important financial feasibility metrics such as IRR, Payback Period on a product level and at a consolidated level.
  • Market Size estimations: For each product, it is also foreseen to estimate the market sizes. Each product targets a specific market, therefore some sort of analysis will be needed to understand the Total Addressable Market (TAM), the Serviceable Available Market (SAM), and the Serviceable Obtainable Market (SOM) Size.
  • Monthly Budget (PREMIUM Version only): The yearly budget for the first two years can be broken down by month for the first two years.
  • Licensing or Manufacturing: The product can either be manufactured and sold or licensed to somebody else

 

The Pharma-Biotech valuation template is an ideal Excel spreadsheet model to better understand the value composition of your pharmaceutical business. You can analyze each product in detail, their financial prospects, returns and combine products into a consolidated forecast as you like. This financial model template allows you to run a variety of simulations by including products in the consolidated forecast or removing them (ON/OFF Switch), adjusting their probabilities, timing, revenue, cost, and investment assumptions.

The highlights of this financial model template are the following:

  • General assumption sheet which captures
    • Currency
    • Inflation rate
    • Depreciation periods, Interest rates, taxes
    • Net Working Capital Assumptions
    • Funding assumptions
    • Overhead expenses
    • New Product Rollout Assumptions
    • Terminal Value, Discount Rate, and investment period assumptions
    • Shareholder assumptions
  • Product portfolio: 10-20 products (number of products dependent on the model version). Assumptions used in the model are the following ones:
    • Product Stages
    • Probabilities
    • Market Size estimation
    • Timing assumptions
    • Bottom-up revenue estimation based on the number of clients and average price
    • Two Periods: Patent and Post-Patent period
    • Monetization model: Product sale or Licensing per product
    • License rate assumption
    • Cost assumptions
    • R&D development expenses
    • Accounting treatment of R&D expenses (expensed or capitalized)
    • CAPEX
  • Financial Forecast Worksheet per Product
    • Timeline, Probability Forecasts
    • Fixed Asset Schedules
    • Profit and cash flow forecast (probability adjusted per product)
    • Risk-adjusted DCF Valuation per Product
    • Financial Feasibility Metrics per Product
    • Funding required per product
  • Financial Forecast for Overhead
  • Consolidated Forecast for the Company
    • Consolidation of the probability-weighted revenues, costs, profits, and cash flows
    • Three Statement Model with forecasted Income Statement, Balance Sheet and Cash Flow statement
    • Forecasted Financial Ratios
    • Debt schedules
    • Free Cash Flow Forecast
    • Consolidated Risk-Adjusted DCF Valuation
    • Consolidated Financial Metrics and Funding Required
    • Investor Cash Flow Forecast
  • Summary Sheet
    • Summary of Financial Statement Forecasts
    • Various Charts and Tables
    • Breakdowns of Revenues and EBITDA
    • Breakdown of the Company’s risk-adjusted DCF Valuation by product
    • Market size summary
    • Investor return comparison
  • Monthly Budget Sheet:
    • Monthly Budget Allocation (Premium Version only) for the first two years
  • Sheet with instructions on how to use the model
  • Terms and Abbreviations

 

We hope this Pharma-Biotech valuation model template provides an essential tool when it comes down to value a Pharma or Biotech Startup company.

This model is aimed at advanced users, familiar with MS Excel and Life Science Valuation Methods.

The current model version is 2.0 and it is available in two fully editable Excel versions and PDF Demo versions:

  • Premium Version (20 products, 10 shareholders, Monthly Budget sheet)
  • Basic Version (only 10 products, 5 shareholders, without Monthly Budget Sheet)
  • PDF Demo Versions which outline the exact model structure

File types: .xlsx and .pdf

Reviews

  • Pharna Biotech

    Incredibly comprehensive and well thought out, detailed template. You are definitely getting your monies worth. Customer Service is great too.

    1 of 2 people found this review helpful.

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  • Nice model, a lot of useful info! sufficiently clear even for a non technical

    1 of 2 people found this review helpful.

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  • Saved me hours of work

    Instead of spending hours on a model and fine tuning it for days, the model I bought a real time saver.

    1 of 2 people found this review helpful.

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  • Pharma Biotech Valuation

    Seems excellent and sufficiently clear even for a non technical (financial speaking) user.
    Only a remark so far: the list of candidate or actual drugs. Additional couple of lines and spreadsheet shall suffice.

    1 of 2 people found this review helpful.

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  • Excellent model

    This model is very powerful and useful in valuation of companies. I would like to evaluate it in real case.

    1 of 2 people found this review helpful.

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