Strategic Analysis and Valuation of Genmab

Abstract

The objective with my thesis was to make a valuation of Genmab the 22 of February 2017, and challenge the market value of this date.
Genmab are a small Danish biotech company, specializing in the development of human antibodies, used within cancer treatments. Until 2015, Genmab only had one drug on the market, marketed through its collaborating partner Novartis. The success of this drug has been mixed, but has decreased over the last couple of years. Ever since the introduction of Darzalex, things have changed around for Genmab, and they are now a profitable biotech with a potential blockbuster drug in their portfolio.
Some of the things I discovered through my strategic analysis was, that the markets Genmab operates in at the moment are small markets which are in the need of better treatments. These markets are driven by special regulatory designations which helps bring new therapies to patients. These regulatory designations also increase the competition within these markets. The expected competition is judged to be increasing in the coming years, which Genmab needs to face in the future. Further the industry is seeing increased price pressure from political side, which can decrease the future profit margin for Genmab.
I also found out that Genmab are heavily relying on its collaborating partners, in order to bring their drugs to the market. Both of Genmabs marketed drugs are marketed through Novartis and Janssen Biotech Inc. This means that Genmab are relying on these collaborating partners effort in selling Genmabs drugs. Further Genmabs focused strategy seems to pay of relative to other small biotech companies, which are one of Genmabs strong sides.
In my valuation of Genmab, I have chosen to use the DCF model and the RI model. Both yields an enterprise value of 68,648.827 million, as of 22 of February 2017. The stock price was estimated to be DKK 1137.5, which is well under the quoted price of DKK 1415. But this value is highly sensitive to the cost of capital used and the input parameters used to calculate the Cost of Capital. The lowest share price found through my sensitivity analysis was DKK 898, while the highest share price was DKK 1524.