INSEAD Library

Includes bibliographical references and index

Digitized

Valuation in Life Sciences A Practical Guide Table of Contents Foreword..................................................................................................... V Abbreviations............................................................................................. XI Introduction................................................................................................ 1 The Life Sciences Industry..................................................................... 2 Academia.............................................................................................2 Biotech................................................................................................ 2 Pharma.................................................................................................3 Valuation................................................................................................. 4 The Role of Valuation......................................................................... 4 Current Problems in Valuation............................................................6 Fundamentals in Life Sciences.................................................................. 9 Drug Development.................................................................................. 9 Drug Discovery................................................................................... 9 Clinical Trials...................................................................................... 10 Value Drivers...................................................................................... 12 Medical Device Development and Approval..........................................18 Development and Approval in Europe................................................18 Development and Approval in the US................................................ 18 Basics of Valuation..................................................................................... 21 Introduction............................................................................................. 21 Fundamentals.......................................................................................... 21 Cash Flows.......................................................................................... 21 Discounting......................................................................................... 23 Valuation Methods.................................................................................. 32 Discounted Cash Flows Valuation...................................................... 32 Real Options........................................................................................ 34 Difference Between Real Options and Financial Options.................. 57 Valuation in Life Sciences..........................................................................65 Discounting............................................................................................. 65 Volatility..................................................................................................69 Peak Sales............................................................................................... 71 Project Valuation.................................................................................... 73 Project Valuation with DCF.............................................................. 75 Project Valuation with Real Options.................................................83 Simulations of Projects..................................................................... 96 License Contract Valuation.................................................................. 105 Structure of License Contracts ....................................................... 105 Value Sharing.................................................................................. 111 Valuation of License Contracts with Two Parties: DCF................ 112 Valuation of License Contracts with Two Parties: Real Options .. 120 Simulation of License Contracts..................................................... 128 Early-Stage Licensing with Possible Sublicensing.............................. 129 Theory DCF.....................................................................................133 Theory Real Options....................................................................... 138 Negotiating License Deals....................................................................154 Valuing Projects with Multiple Indications..........................................160 Valuing Projects with Multiple Markets.............................................. 171 Technology Valuation and Feed Rate.................................................. 172 IP Valuation.......................................................................................... 173 Pipeline Valuation................................................................................ 181 Portfolio Management.......................................................................... 183 Introduction..................................................................................... 183 Qualitative Approaches................................................................... 185 Quantitative Approaches................................................................. 185 Company and Stock Valuation............................................................. 188 Introduction to Company Valuation................................................188 Theory............................................................................................. 190 Interpretation of Valuation Results................................................. 202 Simulation on Company Level........................................................ 204 Case Company Valuation................................................................ 204 Stock Valuation............................................................................... 206 Exercises................................................................................................... 215 Introduction.......................................................................................... 215 Exercises............................................................................................... 215 Solutions.............................................................................................. 221 References.................................................................................................241 Index.......................................................................................................... 243