Enanta Pharmaceuticals Inc (ENTA)

[DewDiligence]

Re: Leerink’s discount rate

Didn't Leerink just revise their probability of success from 85% to 90% in this report?

You’re right—I got the 85% figure from the old Leerink report dated Aug 2013; however, Leerink is still using an unduly high effective discount rate by incorporating both a “probability” discount (10%) and a “time” discount (12%). The net effect of these two discount rates equates to a single discount rate of 20.8%:

1.0 - 0.90x0.88 = 20.8%.

Regardless of the method used, a 20.8% discount rate lowers the fair-value calculation to an unduly high degree, IMO.