By Jeff Williamson
A healthcare company with a portfolio of products in development for treating cardiac conditions was fielding investor interest for a potential acquisition. The company wanted to weigh the relative merits of raising additional equity financing versus exploring multiple M&A offers, as these initial discussions indicated a price range that did not fully reflect its value. The company engaged RNA Advisors to help articulate the valuation narrative so that it could have productive discussions with potential investors and acquirers by portraying the company’s value as a standalone company compared to the offers it could receive from a strategic acquirer.
RNA Advisors developed a comprehensive, bottom-up revenue forecast model that covered all of the planned products and indications, along with a detailed development budget that would enable the achievement of key milestones and commercialization. In addition, our model included a breakout of each step along the development pathway, associated probability weights, and a benchmark analysis of analogous transactions for comparable assets in the same indications. These features allowed the company to communicate all of the work that had been done to de-risk the assets, and to demonstrate that an appropriate valuation should acknowledge that this asset portfolio had been developed by a leadership team that was experienced in taking products to market. Using the analysis as a reference, the company was able to reframe the valuation discussion with investors, and bring their perspectives more closely in alignment.
Most importantly, our analysis included valuation portrayals on a standalone basis as well as in the context of an acquisition by a large, strategic healthcare company, and helped the company to weigh trade-offs between current and future value. Accounting for differences in discount rates and sales & marketing expenses, and other operational efficiencies associated with each scenario, allowed the company to have a robust view of likely valuation ranges from both an internal and external perspective. The valuation analysis enabled the company to command a higher valuation that ultimately resulted in a successful $400M acquisition that credited its assets with a valuation greater than simply as a sum of its parts.
RNA Advisors has a wealth of experience in supporting companies through transactions, and knows how to work quickly and flexibly to help clients articulate their valuation narrative in a compelling way. We know that negotiations can often hinge on the different perspectives held by each party, and that it is critical to develop analytical frameworks within tight timelines in order to address issues as they arise.