New Approaches to Pre- and Post- Revenue Asset Valuation in Drug Development

April 18, 2024

Speaker: Michael Kane (Telperian)

Abstract:

Accurate valuations of both pre- and post-revenue drug assets plays an instrumental role in a broad range of operations and decisions the biotechnology and pharmaceutical sectors.They inform decisions made not only by pharmaceutical companies but also by a range of stakeholders including venture capitalists, private equity firms, and others. An accurate valuation provides a reliable forecast of the potential return on investment, which directly influences where and how capital is allocated within the industry. It forms the basis of strategic investment decisions, making it possible to identify the most promising opportunities and understand which investments are more likely to yield a satisfactory return. In this talk we present models designed to estimate future sales of post-revenue and pre-revenue assets. The former generates distributional estimates of each asset’s cumulative sales. Pre-revenue assets can then be valued by using sales estimates for similar post-revenue assets in the calculation of the net present value. When applied to Pfizer’s portfolio of post-revenue assets, this model accurately projects the company’s market capitalization—defined as the product of its share price and the number of outstanding shares—to within a 10% margin.