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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