See the excel file, Go to line 97,
Find the new net income for Genetic Diseases on lines 99-105, for 2006, 2007, and 2008. Replace .25 with .2 in each cell.
Find the new net income for BI on lines 99-105, for 2006, 2007, and 2008. Replace .25 with .1 within each cell.
Scroll down to the computation of CFROI. Compute a new CFROI for 2006-2008 for GD and BI.
Example,
2006 for GD
CFROI = .2*999569/7191188
These 2 numbers are cash flow, and total assets.
Complete the CFROI computation for 2007, and 2008 for GD and for all 3 years for BI.
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Please make a spreadsheet out of the instructions above based on the information below, thank you for your help.
(Answer will be scanned, including within chegg answers, thumbs down for plagiarism)
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23 Genzyme: Case 4 Genzyme had grown to be one of the top five U.S. biotechnology firms. It was targeted by Relational Investors, an "activist" investment fund that had a 2.6% stake in the company at the end of March 2009 . RI had a history of engagement with the boards of numerous companies. Q 1. Should Termeer fight Whitworth, or can he manage him by agreeing to some of Whitworth's demands, but avoid giving into demands that might compromise the core mission of Genzyme? Q 2. Why is Whitworth arguing that Genzyme needs to implement a share repurchase program ? What problem would a share repurchase solve ? Couldn't Genzyme just as easily announce a dividend to achieve the same objective of returning cash flow to the shareholders ? Q 3. Is there any way that Termeer could have avoided this conflict with Whitworth, or was it unavoidable? What's a biotech company? Rare diseases/genetic disorders/small populations FDA approval expensive, slow, low probability of FDA approval How do you succeed? Orphan drug (7-year exclusive), Intensive R\&D pipeline Genzyme's business model \begin{tabular}{|r|l|l|l|l|} \hline GD & CR & BI & \multicolumn{1}{l|}{ HO } & \multicolumn{2}{l|}{ Other } \\ \hline 53% revenues & 22.8% revenues & 10.6% revenues & 2.4% rev & 11.1% rev \\ \hline 25.80% & & 8.80% & & \\ \hline 12 & 1943 & 942 & 2081 & 596 \\ \hline \end{tabular} Acquisitions No dividends and open-market purchases, no debt. Financial Strategy Diversification outside GD is destroying shareholder value because of low CFROI Capital Allocation FCF should be returned to shareholders in buybacks when internal use is generating less than the cost of capital. Executive Pay Incentives are based on revenue generation, not profitability. What is Relational Investors ? Activist investor (vs. Carl Icahm or others ?) Engagement Battles (\% acquired, changes, length of stay ?) Case Exhibits 10 and 11 \begin{tabular}{l|l|l} Performance & Case Exhibit 9 \\ \hline \end{tabular} Keys to success? Industry Expertise--CFROI analysis Case Exhibit 8 Focus: corporate governance Quick turnover: invest, make changes, exit Why target Genzyme ? Case Exhibit 12 Intrinsic versus market value Case Exhibit 13 Free Cash Flow Case Exhibit 7 and Case Exhibit 8 Focus on GD -CFROI Case Exhibit 2 and Case Exhibit 11 2.6% stake Genzyme Income Statement Net Revenue \begin{tabular}{|r|r|r|} \hline 2006 & 2007 & 2008 \\ \hline 2887409 & 3457778 & 4196907 \\ \hline \end{tabular} 592.6% stake 60 Genzyme Income Statement \begin{tabular}{|l|r|r|r|r|} \hline 61 & & 2006 & 2007 & 2008 \\ \hline 62 & Net Revenue & 2887409 & 3457778 & 4196907 \\ \hline 63 & Total Revenue & 3187013 & 3813519 & 4505039 \\ \hline 64 & Operating costs & & & \\ \hline 65 & Research \& Development & 649951 & 737685 & 1308330 \\ \hline 66 & In-process R \& D & 552900 & 106350 & 0 \\ \hline 67 & Operating income (EBIT) & 190509 & 653865 & 581479 \\ \hline 68 & Net income & 16797 & 480193 & 421081 \\ \hline 69 & & & & \\ \hline 70 & Changes in Accounts & & & \\ \hline 71 & Growth & & & \\ \hline 72 & Change in Revenue & 0.196580936 & 19.6% increase in revenue \\ \hline 73 & 2006-2007 & 0.213758373 & 21.3% increase \\ \hline 74 & 2007-2--8 & 0.203937355 & 0.193439445 & 0.2904148 \\ \hline 75 & R D as a percentage of revenue =28% acceptable. & 20062007 & 4.432200054 & 4% increase \\ \hline 76 & Change in Operating Income & 20072008 & 0.110704809 & 11% decrease \\ \hline 77 & & & & \\ \hline \end{tabular} 78 possible in selling and administrative expenses. 79 Profitability 80 Profit margin Net income/Sales \begin{tabular}{l|l|} \hline 81 & \\ \hline 82 & \\ \hline 83 & \\ \hline 84 & ROE \\ \hline \end{tabular} Net income/Stockholder's equity \begin{tabular}{|r|r|} \hline 2006 & 0.002967295 \\ \hline 2007 & 0.07261418 \\ \hline 2008 & 0.057635013 \\ \hline \end{tabular} Net income/ Total assets \begin{tabular}{|r|r|} \hline 2006 & 0.002335775 \\ \hline 2007 & 0.057754552 \\ \hline 2008 & 0.048560443 \\ \hline \end{tabular} CFROI Cash Flow/ Total Assets \begin{tabular}{|r|r|} \hline 0.123563589 & 2006 \\ \hline 0.110492009 & 2007 \\ \hline 0.087550552 & 2008 \\ \hline \end{tabular} 96 Financial Analysis by Market Segment 97 Genetic Diseases \begin{tabular}{r|l} \hline 98 & \\ \hline 99 & Net Revenue \\ 100 & Total Revenue \\ 101 & Operating costs \end{tabular} 102 Research \& Development 103 In-process R \& D 104 Operating income (EBIT) 105 Net income 25% 106 Changes in Accounts Growth Change in Revenue (Ending value-Beginning value)/Beginning Value 115 possible in selling and administrative expenses. 116 Profitability 117 Profit margin Net income/Sales \begin{tabular}{|r|r|} \hline 2006 & 0.005270452 \\ \hline 2007 & 0.138873288 \\ \hline 2008 & 0.100331268 healthy \\ \hline \end{tabular} Net income/Stockholder's equity 122 123 124 125 ROI \begin{tabular}{|r|r|} \hline 2006 & 0.000741824 \\ \hline 2007 & 0.018153545 \\ \hline 2008 & 0.014408753 \\ \hline \end{tabular} Net income/ Total assets \begin{tabular}{|r|r|} \hline 2006 & 0.000583944 \\ \hline 2007 & 0.014438638 \\ \hline 2008 & 0.012140111 \\ \hline \end{tabular} Cash Flow/ Total Assets 130 \begin{tabular}{|r|r|} \hline 0.034749787 & 2006 \\ \hline 0.027623002 & 2007 \\ \hline 0.021887638 & 2008 \\ \hline \end{tabular} 23 Genzyme: Case 4 Genzyme had grown to be one of the top five U.S. biotechnology firms. It was targeted by Relational Investors, an "activist" investment fund that had a 2.6% stake in the company at the end of March 2009 . RI had a history of engagement with the boards of numerous companies. Q 1. Should Termeer fight Whitworth, or can he manage him by agreeing to some of Whitworth's demands, but avoid giving into demands that might compromise the core mission of Genzyme? Q 2. Why is Whitworth arguing that Genzyme needs to implement a share repurchase program ? What problem would a share repurchase solve ? Couldn't Genzyme just as easily announce a dividend to achieve the same objective of returning cash flow to the shareholders ? Q 3. Is there any way that Termeer could have avoided this conflict with Whitworth, or was it unavoidable? What's a biotech company? Rare diseases/genetic disorders/small populations FDA approval expensive, slow, low probability of FDA approval How do you succeed? Orphan drug (7-year exclusive), Intensive R\&D pipeline Genzyme's business model \begin{tabular}{|r|l|l|l|l|} \hline GD & CR & BI & \multicolumn{1}{l|}{ HO } & \multicolumn{2}{l|}{ Other } \\ \hline 53% revenues & 22.8% revenues & 10.6% revenues & 2.4% rev & 11.1% rev \\ \hline 25.80% & & 8.80% & & \\ \hline 12 & 1943 & 942 & 2081 & 596 \\ \hline \end{tabular} Acquisitions No dividends and open-market purchases, no debt. Financial Strategy Diversification outside GD is destroying shareholder value because of low CFROI Capital Allocation FCF should be returned to shareholders in buybacks when internal use is generating less than the cost of capital. Executive Pay Incentives are based on revenue generation, not profitability. What is Relational Investors ? Activist investor (vs. Carl Icahm or others ?) Engagement Battles (\% acquired, changes, length of stay ?) Case Exhibits 10 and 11 \begin{tabular}{l|l|l} Performance & Case Exhibit 9 \\ \hline \end{tabular} Keys to success? Industry Expertise--CFROI analysis Case Exhibit 8 Focus: corporate governance Quick turnover: invest, make changes, exit Why target Genzyme ? Case Exhibit 12 Intrinsic versus market value Case Exhibit 13 Free Cash Flow Case Exhibit 7 and Case Exhibit 8 Focus on GD -CFROI Case Exhibit 2 and Case Exhibit 11 2.6% stake Genzyme Income Statement Net Revenue \begin{tabular}{|r|r|r|} \hline 2006 & 2007 & 2008 \\ \hline 2887409 & 3457778 & 4196907 \\ \hline \end{tabular} 592.6% stake 60 Genzyme Income Statement \begin{tabular}{|l|r|r|r|r|} \hline 61 & & 2006 & 2007 & 2008 \\ \hline 62 & Net Revenue & 2887409 & 3457778 & 4196907 \\ \hline 63 & Total Revenue & 3187013 & 3813519 & 4505039 \\ \hline 64 & Operating costs & & & \\ \hline 65 & Research \& Development & 649951 & 737685 & 1308330 \\ \hline 66 & In-process R \& D & 552900 & 106350 & 0 \\ \hline 67 & Operating income (EBIT) & 190509 & 653865 & 581479 \\ \hline 68 & Net income & 16797 & 480193 & 421081 \\ \hline 69 & & & & \\ \hline 70 & Changes in Accounts & & & \\ \hline 71 & Growth & & & \\ \hline 72 & Change in Revenue & 0.196580936 & 19.6% increase in revenue \\ \hline 73 & 2006-2007 & 0.213758373 & 21.3% increase \\ \hline 74 & 2007-2--8 & 0.203937355 & 0.193439445 & 0.2904148 \\ \hline 75 & R D as a percentage of revenue =28% acceptable. & 20062007 & 4.432200054 & 4% increase \\ \hline 76 & Change in Operating Income & 20072008 & 0.110704809 & 11% decrease \\ \hline 77 & & & & \\ \hline \end{tabular} 78 possible in selling and administrative expenses. 79 Profitability 80 Profit margin Net income/Sales \begin{tabular}{l|l|} \hline 81 & \\ \hline 82 & \\ \hline 83 & \\ \hline 84 & ROE \\ \hline \end{tabular} Net income/Stockholder's equity \begin{tabular}{|r|r|} \hline 2006 & 0.002967295 \\ \hline 2007 & 0.07261418 \\ \hline 2008 & 0.057635013 \\ \hline \end{tabular} Net income/ Total assets \begin{tabular}{|r|r|} \hline 2006 & 0.002335775 \\ \hline 2007 & 0.057754552 \\ \hline 2008 & 0.048560443 \\ \hline \end{tabular} CFROI Cash Flow/ Total Assets \begin{tabular}{|r|r|} \hline 0.123563589 & 2006 \\ \hline 0.110492009 & 2007 \\ \hline 0.087550552 & 2008 \\ \hline \end{tabular} 96 Financial Analysis by Market Segment 97 Genetic Diseases \begin{tabular}{r|l} \hline 98 & \\ \hline 99 & Net Revenue \\ 100 & Total Revenue \\ 101 & Operating costs \end{tabular} 102 Research \& Development 103 In-process R \& D 104 Operating income (EBIT) 105 Net income 25% 106 Changes in Accounts Growth Change in Revenue (Ending value-Beginning value)/Beginning Value 115 possible in selling and administrative expenses. 116 Profitability 117 Profit margin Net income/Sales \begin{tabular}{|r|r|} \hline 2006 & 0.005270452 \\ \hline 2007 & 0.138873288 \\ \hline 2008 & 0.100331268 healthy \\ \hline \end{tabular} Net income/Stockholder's equity 122 123 124 125 ROI \begin{tabular}{|r|r|} \hline 2006 & 0.000741824 \\ \hline 2007 & 0.018153545 \\ \hline 2008 & 0.014408753 \\ \hline \end{tabular} Net income/ Total assets \begin{tabular}{|r|r|} \hline 2006 & 0.000583944 \\ \hline 2007 & 0.014438638 \\ \hline 2008 & 0.012140111 \\ \hline \end{tabular} Cash Flow/ Total Assets 130 \begin{tabular}{|r|r|} \hline 0.034749787 & 2006 \\ \hline 0.027623002 & 2007 \\ \hline 0.021887638 & 2008 \\ \hline \end{tabular}
