Pharmaceutical Licence

Hi, just a few questions regarding pharmacy values: Is the value of a pharmacy calculated separately from the licence itself? Does the value of a licence vary; or is there a fixed value assumed for the licence? Is the value affected by the proximity of competitors etc? What would be a reasonable value for a suburban pharmacy with a methadone program of approx. 50 persons?

Thank you for your questions Jane,

Here are a few responses. For specific advice, which takes account of the details of your situations or examples, do not hesitate to call us at Medici Capital. These are general comments only and should not be construed as advice to you.

About us

Medici Capital (www.medici.com.au) is a specialist management consulting, finance broker, and business valuation practice which focuses on the health professions and pharmacy in particular.

I, as the principal consultant, have over 29 years of business advisory experience which is backed up by B.Ec. (Hon) and M.Ec. degrees. Our team includes a number of senior specialists and managers.

Our specialty is also Economic Research & Financial Modelling. We are financial analysts and we also complete feasibility studies for new sites. We use econometric and financial modelling skills to forecast likely results and conduct sensitivity analysis. We are able to assess site potential as well as actual results.

Attain (www.iattain.com.au) is a newly formed company that provides the finest Business Brokerage of Professional Practices in Australia based on the highest standard of professionalism, expertise, knowledge, ethics & skill. In doing so, the company endeavours to earn the loyalty & trust of business sellers & buyers across the professions.

Attain offers a business brokerage service that specialises in; Pharmacy, Physiotherapists, Osteopaths, Dentists, Optometrists, Chiropractors, Medical Practitioners, Accountants & Financial Planning.

The company also offers Property Management, Property/Freehold Sales, and Lease Negotiations.

Your 4 Questions regarding pharmacy values:

1. Is the value of a pharmacy calculated separately from the licence itself?

Not really.

Pharmacies are generally sold and valued on the basis of their profitability (adjusted for expected expenses in the hands of a passive owner) and the required return given the risks associated with the business and the qualitative factors about the business and cash flow.

Businesses are sold based on the future prospects for the pharmacy.

The resultant value or price includes all assets and the Pharmacy Approval Number — PAN (licence). The PAN has no value except in use and is not valued separately.

2. Does the value of a licence vary; or is there a fixed value assumed for the licence?

If a PAN is sold for relocation, it has a market value reflecting the intended use of the PAN. That value varies over time depending on demand and supply.

3. Is the value affected by the proximity of competitors etc?

YES — the value of a pharmacy is affected by the proximity to competitors, the strength and market offer of those competitors, and many other factors about the site and location.

4. What would be a reasonable value for a suburban pharmacy with a methadone program of approx. 50 persons?

It depends on the location and state. Where is the pharmacy?

In regard to Methadone, the market generally values the income from methadone patients lower than general pharmacy income. The impact will depend on the level of income, how significant the methadone income is relative to the overall income of the pharmacy, and the stability of the income (has the pharmacy maintained 50 patients for many years, does it vary, is it a recent milestone? etc.).

Disclaimer: While the following response provides some insight into Capital Gains, it does not constitute advice. For specific assistance or advice, please contact Medici Capital on 03 9853 7933.