Is it really a rebuttal if I agree with Stephen? Valuation absolutely matters. We're on the same page there. So can I pack it up and call it a day? Not quite. Because while we agree that valuation matters, we don't see eye-to-eye on what an investor should pay for Protein Design Labs (NASDAQ:PDLI) today. That's OK -- it takes all kinds to make a market.

I don't like looking at book value for biotechs because their most valuable assets, their drugs, don't show up anywhere on the balance sheet. I prefer to add them back into the balance sheet, calculating a present value of the pipeline drugs. In doing so, I make sure to adjust for development risk, since there is no guarantee that the drug will get approved and begin generating cash flow.

For example, I think Nuvion will be approved in 2009 and peak at about $1.3 billion in sales after seven or eight years on the market. After subtracting expenses, discounting the drug's operating profit back to the present, and accounting for the odds the drug will never reach the market, I think Nuvion's value to the company right now totals $1 billion, or $10 per share.

But that's just one way of looking at the company. PDL has a lot going for it: Over the next five to 10 years, I can certainly see the top line growing to between $1 billion and $2 billion in annual revenue from royalties, current marketed products, and drugs that emerge from the pipeline. With so many potential revenue sources, PDL can attain this growth in many different ways; I don't need to force a precise estimate to make it happen. Valuing biotech is more art than science, after all. If PDL comes through on this revenue, the company will be worth more than $10 billion. So in my view, the company is a clear buy today at its current market cap near $2 billion.

Protein Design Labs has beaten the market a few times over since being recommended in the Motley Fool Rule Breakers newsletter service. The average pick has nearly tripled the S&P 500's return. You can take us up on a free 30-day trial to see what all the fuss is about.

Keep up with every step of the duel. Jump back for Charly's original bullish thoughts and Stephen Simpson's bearish opinion, then see Stephen's final rebuttal. Once you're done, don't forget to cast your vote for this week's winner.

Fool contributor Charly Travers owns shares of Protein Design Labs. The Fool has a disclosure policy.