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.
- 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
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
- 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