Valuation and Deal Support

Oncology company with a preclinical project seeking finance and potential acquisition

For a virtual life science company, Alacrita helped establish a valuation trajectory for one of their products, and performed an evaluation of the benefits of a potential merger with a university spin-out company with complementary proprietary technology.

The client had raised money from angel investors, and anticipated a clinical development strategy for the product targeting two major cancer indications.  The client wanted to raise further funding to complete formal preclinical and process development to have a clinic-ready candidate.  To support this fund-raising, the client asked Alacrita to put together an independent expert report which demonstrated the size of the potential opportunity, and the valuation which could be ascribed to the client at each developmental milestone as the project was progressively de-risked.  Using information provided by the client and secondary research as required, Alacrita developed global market projections and a financial model for the opportunity. Alacrita then developed a risk-adjusted valuation model using its experience and judgement to develop assumptions for key inputs into the valuation model (e.g. clinical development & CMC costs and timelines, adoption curve, marketing costs).  The valuation was set against key development, clinical and commercialization milestones; these being:

  • In vivo Proof of Concept study completion
  • Phase 1 readiness
  • Initiation of phase 2 study
  • Initiation of phase 3 study
  • Submission for regulatory approval

Monte Carlo simulation was used to capture ranges of such values (Min, Mode, Max) and the output of the Monte Carlo simulation was risk-adjusted Net Present Value expressed as a range.

A connected issue was the possibility of merging with or acquiring a substantial equity position in an entity with complementary proprietary technology. The client asked Alacrita to determine the value in, and prospective risks attendant to this proposed transaction.  Alacrita conducted a reality check by reviewing technical documentation and proprietary IP (filed and unfiled). Alacrita then assessed its distinctive proprietary value in comparison with competing technologies; progress towards development objectives and prospective income streams through collaborations or licensing; as well as key risks.  Using this information Alacrita provided an indicative range of valuation scenarios for the business.

Antibiotics business development and deal support

For a pharmaceutical company focused on discovery and development of antibiotics, Alacrita was asked to assist in expanding the search for a development partner for some of its drug candidates.

At the time considerable concern over emerging antibiotic-resistant strains resulted in increased industry allocation of R&D funds to novel antibiotics development.  The client’s lead drug has broad activity across a range of important gram negative bacteria, low toxicity to human cells and a novel mechanism of action.

Although originally funded by big pharma, the client was at the stage where it had to look elsewhere for funding to complete preclinical development, IND enablement and a Phase I clinical study,

Alacrita was asked to provide general business development support with the primary goal of securing an out-licensing partnership for the client’s lead candidate drug as well as other promising programs.

Alacrita’s consultants:

  • Helped refine and optimise PowerPoint Presentations to ensure maximum impact and traction with partners;
  • Identified potential partners and key company individuals to contact;
  • Approached prospective partners;
  • Helped gain the attention of companies the client had already been in touch with (especially those that were already Alacrita clients);
  • Attended partnering and scientific conferences to solicit partnering interest (e.g. ICAAC 2014, Biopharm America, Therapeutic Area Partnerships, Biotech Showcase etc);
  • Met and presented to potential partners.

Front-loaded deal vs. Risk sharing for molecular design collaboration

A drug discovery company was entering discussions with a big pharma around a collaboration with the goal of embarking on a number of drug discovery strategies that would deliver at least one quality clinical candidate.  The pharma company had offered two types of deal; a front loaded arrangement with R&D costs and milestones up to candidate delivery, or a risk-sharing deal where some of the compensation was to be back-loaded with milestones payable up to market and possibly royalties on net sales.  The client asked Alacrita to assess its deal-making strategy, develop valuation models and advise on the negotiation strategy with its prospective partner.

Alacrita worked with the client to develop realistic inputs for its proprietary financial model (e.g. future costs and revenues, probability of success, development timelines) to explore the two types of deal structures that were on offer.  Alacrita’s model essentially helped the client understand how the two potential deal dynamics would affect the value accumulating to the client at that point in time.  Armed with this insight, the client was in a better position to negotiate a more beneficial deal structure. Alacrita consultants continued to provide ongoing support including preparing a high level financial terms sheet, supporting term sheet negotiations and closing the deal, and supporting the client’s strategic decision-making about which therapeutic areas to pursue with the prospective partner and which to pursue in house.

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