We are commissioned by companies and investors of all sizes to develop valuation models, either to support a negotiating position in a transaction or to help make capital allocation decisions. The depth of our work in valuation life sciences can vary considerably, from a high-level estimation, through to a comprehensive analysis that draws upon extensive primary and secondary market research.
We work closely with client teams to gain a deep understanding of the purpose of the valuation work and to develop a detailed forecast of future development, commercial costs and revenues, which form the basis of a risk adjusted NPV valuation model.
The variables and assumptions that Alacrita use in our models are based on real-world data and the experience and expertise of our consulting team. To account for the inherent uncertainty for assets in early stage development, we incorporate Monte Carlo simulation and our proprietary model can accommodate ranges in parameters like sales uptake and duration of clinical development.
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.
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