Case study on valuation

Opportunity: A biotech company‘s product was in Phase 1. Buoyed up by the good results, the company was keen to raise funds and continue drug development.

Challenges: Limited data regarding comparable technologies, technology at early stage.

Product assessment:

  • Assessed the technology : Attributes, Target Profile, Patents, R&D risks, Market potential
  • Evaluated the pre-clinical data : Safety, Efficacy, Toxicology etc
  • Assessed the risks that could impact the approval and market potential of the product: regulatory risks, clinical design, statistical assumptions in the design of clinical trials

Financial Approach:

No historical data to calculate cash flows and cost of capital.

  • Estimation of comparable firm betas (public biotech companies)
  • Conversion of Debt ratio (book value) to Industry averages, estimation of cost of capital
  • Cash Flows (In & Out): Primary and secondary research to validate growth rate assumptions etc.
  • Probabilities to cross the phases and reach the market
  • Decision Tree to value the project


Impact:

  • An independent valuation by Farmantra  with reasonable assumptions helped the client to negotiate better and achieve its financial objective at a valuation greater than the quote of the investor