After working as a Registered Nurse for several years, I transitioned into financial analysis, earning my MBA and developing expertise in healthcare & technology investments. Since 2017, I’ve published investment analyses on Seeking Alpha, focusing on thorough valuation modeling. My approach centers on examining core assumptions that drive stock valuations, particularly through detailed discounted cash flow analysis. I provide readers with various scenarios to help them understand potential outcomes. The principles in works like “Superforecasting” and “Antifragile” have shaped my investment philosophy. I advocate for a conservative approach that puts 90% in stable investments while allocating 10% to growth opportunities for balanced returns. ——————————— Base Valuation Framework: This analysis projects free cash flows over an 9-year period, starting from a baseline year (Year 0). The model applies consistent annual growth rates to these projections. Each year’s cash flow is discounted using a rate calculated through CAPM, accounting for both time value and risk factors. The model extends beyond Year 8 by calculating terminal value – projecting Year 9 cash flows and applying a sustainable long-term growth rate. This framework assumes steady growth patterns and discount rates, with the latter exceeding long-term growth to maintain mathematical validity. The projections assume business conditions remain relatively stable.Pharmaceutical Revenue Model (Current as of February 2025): The model assumes market adoption begins at 12.5% penetration at launch and grows linearly to 100% by the peak sales year. After exclusivity ends, penetration drops sharply by 80% in the first year (to 20% of peak levels) and then declines by 5% annually in subsequent years. Revenue is calculated by multiplying the number of patients (based on market penetration and share) by the annual treatment cost. Costs, including COGS and operating expenses, scale proportionally with revenue. The model incorporates a probability of success to account for development and regulatory risks, and cash flows are discounted to present value using a standard discount rate to reflect the time value of money and risk-adjusted returns. The timeline extends 3 years post-exclusivity to capture the post-peak revenue decline.
Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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