Corporate Finance Assignment Harvard Case Solution & Analysis

ANALYSIS

1. VALUATION DRIVERS, OPPORTUNITIES AND THREATS

The valuation drivers are the drivers through which we can measure a company, these are basically valuation tools. The valuation driver for the three companies, (AbbVie Inc., Amgen Inc., Roche Holding AG), are cost of equity, pre-tax cost of debt, weighted average cost of capital and EBI growth rate.

OPPORTUNITIES

Abb Vie is an overvalued company in the bio similar market. However it has the famous products for the treatment of rare diseases. Currently their license has been expired and they have an opportunity to capture the market for the disease hepatitis. Therefore,they can renew their license to work out on it and get the market share. The impact of this opportunity on the fair value analysis would be that the value of the company will be increase because of the increase of sales.

Amgen Inc. is a specialized company and is expert in manufacturing Cholesterol drug. The opportunity here is that the U.S. is expected to approve the cholesterol drug repatha and this would obviously increase the sales along with the value of the company.

Roche Holding AG is a growing company. It is the market leader in both biotech and diagnostics. The brand of the company can lead to launching the new products easily therefore,this is the opportunity for the Roche that it can exploit the new products in the category of cancer and hepatitis. It has a strong pipeline which will help Roche to offset to biosimilar competition.

THREATS

AbbVie is an overvalued company and this is the major threat for the company, as the market can try to attempt the pressure on it to get it back to the market. If this happens then this would affect the valuation as the value of the company would decrease.

The threat to Amgen is it is going to face extreme competition on the pipeline from the Novartis Zarxio. This intense competition can lead Amgen to suffer in its profits and this would create a significant fall in the value of the company.

The threat for the Roche is that it will be facing intense competition as the market is mature and price war has just started. Roche has the successful products; however the market is performing well so it would impact overall.

2. INITIATIVES GENERATED

At the second quarter, the results of Abb Vie were not on the line as expected by the analyst. However, the international Humira’s growth warned the analyst. As this is the key value driven for the valuation therefore,this increased the value a little bit.

For Amgen, at the start the value was not changed in the first quarter over there because the performance was not changed. However, in the second quarter the performance was impressive as the revenue increased by 4% and ultimately led to 8% growth, there fore this point changed the value.

For Roche, at the beginning the analysts valued the company at the normal basis. After that they changed the value as the cost of research and development department would increase and this would affect on the value of the company.

3. IMPACT ON THREE COMPANIES

The recent acquisition by Abb Vie will affect on the fundamentals of Biotech and Bio similar. This latest acquisition will reduce the market share per player which means that Abb Vie might have the large market share and this can reduce the intense competition among the existing rivals. Moreover, when Abb Vie will have the large share of the market then it can increase its profits following the increase of revenue and hence the value of the company as an overall will increase. If the competition changes then the value of the market would increase further.

Corporate Finance Assignment Case Solution

The recent acquisition of Onyx by Amgen will give competitive advantage over its rivals. These products will raise the market share of Amgen as they would have the new products and therefore the overall revenue would increase. It can be the market leader as its cost cutting practice also provides it to maintain the profit margins. Hence, the value of the company would increase if the new products will be successful. However, if the products will not be successful, then the value can be decreased.

Finally, the acquisition of Inter Mune by Roche can increase the overall profits of this group if Roche can expand Inter Mune’s products. However, it is the expectation of the analysts that it is difficult for Roche to do that and therefore,the overall value might not increase. If it can market and sell the products of Inter Mune, then the value can be increased...................

This is just a sample partial case solution. Please place the order on the website to order your own originally done case solution.

Other Similar Case Solutions like

Corporate Finance Assignment

Share This