Our expertise in performing business and asset valuations covers a wide range of technology types, including small molecules, biologics and gene therapies across a variety of clinical indications. We have developed our experience working with a diverse client base, from investors to universities, biotech and pharmaceutical companies, and provide a tailored service based on the type and subject of the valuation.
We supplement standard methodologies with hand-picked expert consultants who bring deep domain experience and several decades of ‘real world’ judgement. Alacrita also draws upon several proprietary data sources, which we use to buttress assumptions with real-world evidence.
Why valuations are important
Understanding the key value points and defining an overall value for a technology or business is vital in many important areas of life science, especially in transaction negotiations and commercial strategy.
- As a Licensee – it is important to understand the worth of your technology, which type of deal is best suited, and what is achievable and desirable within a partnership
- As a Licensor – it can be highly beneficial to have a professional, independent valuation as part of due diligence of a proposed investment
- Shaping development strategies – identifying the strengths and weaknesses in value for an early development program can be vital for capital allocation and clinical positioning. For example, by comparing valuation scenarios in one disease versus another can make sure you are targeting the most profitable market
The depth of our work in pharmaceutical & biotech valuations varies considerably, from a high-level estimation through to a comprehensive analysis that draws upon extensive primary and secondary market research. We also provide follow-on support to clients and help identify, connect and negotiate with prospective industry partners.
We work closely with you to gain an understanding of the purpose of the valuation work and to develop a detailed understanding of the underlying science, the clinical data generated to date, future development plans, potential commercial costs and revenues.
The accuracy of a valuation depends on the accuracy of the underlying variables and assumptions e.g. time to market, price, patient population etc. For most life science valuations there is a significant uncertainty behind all assumptions; industry standard models often deliver a single number valuation, which provides a false sense of accuracy.
We accommodate real world uncertainty into our proprietary NPV valuation model and incorporate Monte Carlo simulations for virtually every assumption. This results in a range of valuations which is more realistic, and informative, than a single number. Our analysis also identifies which assumptions are contributing most to the uncertainty in the model.
To develop a realistic valuation, we carefully consider each variable and assumption and try to base them on real world evidence and data; typically, we would explore the following areas in order to do this:
- Positioning of the technology (e.g. target product profile)
- Evaluation of scientific, CMC and clinical data (to inform probability of success, development path and commercial performance)
- Assessment of IP and other barriers to entry (to inform franchise durability)
- Market size and dynamics (number of patients, pricing strategy and comparables)
- Commercial potential and market penetration (including competitive landscape, current standards of care and the competitiveness of the target product profile)
- Development costs, timelines and probability of success
- Sub-license fees due to a technology originator
We often supplement a bottom-up risk adjusted rNPV with a comparables analysis, to ensure our assumptions are in line with market trends.
Anthony Walker discussing Alacrita’s valuation methodology with Mike Ward:
Featured Case Study: Valuation of a first in class, Phase I/II oncology drug
Our client was preparing for an IPO to fund a registration study of a first-in-class targeted small molecule in a genetically defined patient population. The product was also in early clinical trials in a number of other cancer types in combination with established therapies, including pembrolizumab. The company needed a robust, defendable valuation to communicate the company’s prospects to new public equity investors.
Alacrita’s team reviewed extensive documentation from the company to develop a clear picture of the compound, the clinical data generated to date, the toxicology profile, the clinical strategy, intellectual property and other important parameters. We then used data from a 225-physician survey in the major pharmaceutical markets to precisely understand the incidence and prevalence of patients in the target patient population who would be eligible for this treatment. For every other assumption in the model, we researched comparable drugs and companies and interviewed experts in the field to develop robust, evidence-based valuation inputs. These spanned development costs, development timings, oncology drug prices, historic cancer drug sales curves, numbers of oncology sales and marketing personnel for comparable companies launching their first drug, historic market share for other oncology drugs, average CoGS for commercial products, and typical Sales and G&A.
We inputted these assumptions into our proprietary valuation model, which uses Monte Carlo simulations to accommodate real world uncertainty. After explaining our assumptions and rationale with the client, we issued a formal report which encompassed all the supporting data around each assumption and the key output, rNPV for the compound.
Further case studies regarding Valuations are available here.