Asset Valuation and Risk Assessment
In the second part of this two part series, we will be discussing techniques to value assets identified from a search, as well as steps companies can take to mitigate risk. If you missed the first part of this series click here for – “Early Stage Asset Identification“.
Asset Valuation
Once an asset or technology has passed the preliminary screening process, the next step is to determine its worth. Due to the volatility and low success rates of candidates in the biotech and pharmaceutical space, this can be a complicated process. The main factors to consider during this process are the future revenue of the product (broken into components of market size, competition, and pricing), the costs of development (including both financial and temporal costs), and risks encountered along the way (including research, regulatory, and competitive risks). When attempting to value an asset, many start with a basic cash-flow analysis. The result may be in the right ballpark, but in the instance of high-risk biotech ventures, it tends to over-inflate the expected value by underestimating risk. In this article, we cover in-depth methods for generating more accurate estimates.
Asset Valuation
Once an asset or technology has passed the preliminary screening process, the next step is to determine its worth. Due to the volatility and low success rates of candidates in the biotech and pharmaceutical space, this can be a complicated process. The main factors to consider during this process are the future revenue of the product (broken into components of market size, competition, and pricing), the costs of development (including both financial and temporal costs), and risks encountered along the way (including research, regulatory, and competitive risks). When attempting to value an asset, many start with a basic cash-flow analysis. The result may be in the right ballpark, but in the instance of high-risk biotech ventures, it tends to over-inflate the expected value by underestimating risk. In this article, we cover in-depth methods for generating more accurate estimates.