RBC Target unchanged at 14 $us and 27$ upside for 2017Target price/base case Our $14 price target is based on the average of our EV/EBITDA valuation and DCF analysis. Applying a 7.3x multiple to our 2017 Adj. EBITDA forecast of ~$499MM generates a value of $12.04. Our DCF value (11.0% WACC and a -2% terminal growth rate) equates to $15.74. The average of our EV/EBITDA and DCF values is $13.89, hence our $14 price target. There are no further acquisitions included in our base case. We assume that Photofrin is approved for bile duct cancer in 2018.
Upside scenario Our $27 upside scenario utilizes a 8.0x multiple on 2017E Adj. EBITDA of $550MM, equating to a value of $26.38. Our DCF value equates to $27.12. The average of our EV/EBITDA and DCF values is $26.75, rounded to our $27 upside value. This scenario utilizes a 1% terminal growth rate and higher multiple plus incrementally higher EBITDA to reflect stronger organic growth. We also assume that Photofrin is approved for bile duct cancer in 2018.