Assignment #3, Comparable Companies

For my comparable companies I chose Brystol-Myers Squibb, Merk & Co., Spectrum
Pharmaceuticals, Celgene Corporation, Incyte Corporation, and United Therapeutics
Corporation. Brystol-Myers Squibb and Merk & Co. are direct competitors of Seattle Genetics as
they have drugs that compete with ADCEDRIC. Celgene, United, and Spectrum are currently
undergoing clinical trials for their Hodgkin’s Lymphoma treatments. And finally, I picked Incyte
because of the company is a similar size and in the same industry as Seattle Genetics. All of
these companies are based in the U.S. and have December 31st Year Ends.
I calculated the EBITDA multiple for Seattle Genetics to be the average of all other
competitor EBITDA multiples. This value was calculated to be 4.8. The median value was 4.6
which indicates that the data is not greatly skewed. For each competitor, the EBITDA multiple
was calculated by taking the Enterprise Value divided by Adjusted EBITDA. The adjusted
EBITDA takes into account any non-recurring items in COGS and any depreciation and and
amortization. None of the companies had any non-recurring items.
The Equity Value for each competitor was calculated by taking the number of basic
shares outstanding multiplied by the current stock price. The Enterprise Value for each
competitor was calculated by taking the Equity Value plus any debt, preferred stock, and non
controlling interest and the less cash and cash equivelents. To calculate the Equity Value for
Seattle Genetics, I took the average of Equity Value from Incyte and United. The reasoning for
this is that no company had a similar size to Seattle Genetics. Some companies were very big
and some were super small. But based on the sales and other metrics, Incyte seemed to be
worth just slightly more and United seemed to be worth slightly less. Taking the average
resulted in an equity value of 9.86B which is slightly below the actual value of 10.9B. The same
method was used to calculate the Enterprise Value which was determined to be 9.0B.