Valuation in Life Sciences: A Practical Guide
Springer Science & Business Media, Mar 23, 2007 - Business & Economics - 249 pages
Capital, whether it originates from venture, public equity, private, or g- ernment sources, continues to be biotech’s source of sustenance. In fact, access to financing can make or break a company, regardless of whether it has Nobel Prize winning science or a top-flight business school mana- ment team. In order to attract capital there has to be a “value proposition” that is sufficiently engaging and well constructed that will not only capture the imagination of investors but also make them want to ultimately invest. This book recognizes that there is no consent on how to apply valuation methodologies in life sciences. One of the complicating factors is that, compared to other industries, valuation of biotech innovation is much more demanding. The long 10-15-year development and clinical trials process still represents the main risks faced by any biotech company. Added to that is the fact that getting a drug across the regulatory goal line and receiving Food and Drug Administration approval (or other regulatory agency - proval in the United States or elsewhere in the world) for marketing is no longer good enough. Since the biotechnology industry is not isolated from the major influences affecting the overall healthcare industry, the reality of de facto healthcare cost controls will mean a significant reduction in “peak sales” for individual drugs. Science will no longer be the deciding factor; payor agents will play a far more activist role via reimbursement criteria, co-payment arrangements and similar rationing technologies.
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Fundamentals in Life Sciences 9 Drug Development 9 Drug Discovery 9 Clinical Trials
Value Drivers 12 Medical Device Development and Approval 18 Development and Approval in Europe 18 Development and Approval in the US 18...
Difference Between Real Options and Financial Options 57 Valuation in Life Sciences 65 Discounting
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abandoned academia Actelion apply approval phase asset assume average back the tree base scenario BigPharma binomial tree biotech company blockbuster drug CAPM clinical phase clinical trials commercialisation company’s compound corresponding DCF calculation debt decision point discount rate discounted cash flows drug development end node expenses feed rate financial options formula Genentech growth rate in-licensing indication information asymmetry input parameters investment investors launch costs license contract licensor Market Market Market method milestone payments negotiation Novartis out-licensing participation rate peak sales estimate Phase 2 Phase pipeline portfolio management potential Preclinical Phase probability profits project value real options valuation risk adjusted risk free rate risk-neutral probabilities rNPV root node royalty rate sales curve sales revenues sciences share price simulations step sublicense contract sublicense node success rates Table Tech Transfer tion uncertainty upfront payment value share value the project volatility zero