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Guide to Valuation of Pharmaceutical Licensing Deals 2015

The valuation of a deal is the most challenging aspect in the deal negotiation. The Guide to Valuation of Pharmaceutical Licensing Deals Report provides insight and solutions to the challenges faced by deal-makers in the biopharmaceutical industry when valuing projects at various development stages.

1.1 Dealmaking in the Pharmaceutical Industry
1.2 Understanding Value Creation
1.3 Purpose of the Report
2.1 Integrated Methodologies
2.2 Why Use eNPV and Benchmarking?
2.3 Other Methods
2.3.1 Internal Rate of Return
2.3.2 Payback
2.3.3 Real Options
3.1 Introduction to Benchmarking
3.2 Feasibility
3.3 Data Gathering
3.3.1 Avoid the Benchmarking Pitfalls
3.4 Approximate Valuation
3.5 Refinement of the Valuation
3.6 Example Deals: Cancer
3.6.1 Phase I Benchmarking Example
3.6.2 Phase II Benchmarking Example
3.6.3 Phase III Benchmarking Example
3.6.4 Summary
4.1 The Basics
4.1.1 Cash Flows
4.1.2 Relevant Costs
4.1.3 Real vs. Nominal Figures
4.2 Opportunity Cost/Time Value
4.2.1 Example NPV Calculation
4.3 Risk of R&D Failure
4.4 Decision Tree Analysis
4.4.1 Example eNPV Calculation
4.5 eNPV Summary
4.6 Example: Valuation of PRI-123
4.6.1 Input Data and Assumptions
4.6.2 The Spreadsheet Model
4.6.3 More Complex Models
4.6.4 Binomial Model for PRI-123
4.7 Further Refinement of the eNPV Model
4.7.1 Sensitivity Analysis
4.7.2 Monte-Carlo Simulation
4.8 Option Contracts – Which Method to Use?
5.1 Value Split
5.2 Risk Sharing
5.3 Deal Components
5.3.1 Upfront Payments
5.3.2 R&D Funding
5.3.3 Licence Fees
5.3.4 Milestones
5.3.5 Royalties
5.3.6 Shared Costs or Benefits
5.3.7 Equity
5.4 Preferences (Utility)
5.5 Example: Deal Structure for PRI-123
6.1 Drug Delivery Technology
6.1.1 Enabling Technology
6.1.2 Enhancing Technology
6.1.3 Extension of Patent Life
6.2 Drug Discovery Technology
6.3 Example: Valuation of Delivery Enhancement of PRI-123
A.1 Example Benchmarking Deals: Cancer A.2 Reference Deals Tables
Figure 1: Total partnering activity in the pharmaceutical industry.
Figure 2: Mean upfront and headline value by year and development phase.
Figure 3: Integrated valuation methods.
Figure 4: Binomial lattice modelling of Brownian movement in value.
Figure 5: eNPV decision tree model with scenario analysis for commercial risk.
Figure 6: Ideal benchmarking deal cluster.
Figure 7: Non-ideal benchmarking cluster.
Figure 8: IMS PharmaDeals database search engine.
Figure 9: Example pharmaceutical deal valuation force field.
Figure 10: Attrition by phase and therapeutic area.
Figure 11: Example decision tree.
Figure 12: Pharmaceutical product decision tree.
Figure 13: Example decision tree.
Figure 14: Monte-Carlo simulation for PRI-123.
Figure 15: The effect of time and risk on the value of deal components.
Figure 16: A rough guide to NPV split ratios.
Figure 17: Frequency of equity investment as financial component.
Figure 18: Enhanced revenues due to delivery technology.
Figure 19: Enhancement of patent life.
Figure 20: Drug discovery decision tree model.
Figure 21: Extended drug discovery decision tree model.
Figure 22: Drug discovery eNPV model.
Table 1: Pros and cons of benchmarking and DCF-based methods.
Table 2: Benchmarking methodology overview.
Table 3: Sources of benchmarking information.
Table 4: Approximate benchmark valuation.
Table 5: Refined benchmark valuation.
Table 6: Phase I small molecule anticancer deals.
Table 7: Phase II small molecule anticancer deals.
Table 8: Phase III small molecule anticancer deals.
Table 9: Cost of capital (COC) for pharmaceutical firms.
Table 10: Example NPV calculation – part 1 Contribution.
Table 11: Example NPV calculation – part 2 NPV.
Table 12: Selected examples of data sources providing estimates for success and attrition in drug development.
Table 13: Example eNPV calculation.
Table 14: Cumulative probabilities.
Table 15: Example valuation – summary.
Table 16: eNPV spreadsheet valuation of PRI-123.
Table 17: Quarterly eNPV spreadsheet valuation of PRI-123.
Table 18: Valuation of PRI-123 using the binomial method.
Table 19: Sensitivity analysis of the PRI-123 model.
Table 20: PRI-123 deal structure and eNPV share.
Table 21: PRI-123 eNPV valuation and deal structure spreadsheet model.
Table 22: eNPV model for enhanced PRI-123 formulation.
Table A.1.1: Array BioPharma and Novartis Table
A.1.2: Ethical Oncology Science and Les Laboratoires Servier
Table A.1.3: Oryzon Genomics and Roche
Table A.1.4: Clavis Pharma and Clovis Oncology
Table A.1.5: Seattle Genetics and Millennium
Table A.1.6: Pharmacyclics and Janssen Biotech
Table A.1.7: Cell Therapeutics and Baxter
Table A.1.8: Onconova Therapeutics and Baxter
Table A.1.9: Threshold Pharmaceuticals and Merck KGaA
Table A.2.1 Discovery and Preclinical Deals
Table A.2.2 Phase I Deals
Table A.2.3 Phase II Deals
Table A.2.4 Phase III Deals
Table A.2.5 Registered Deals
Table A.2.6 Launched Deals
Table A.2.7 Option Deals
Table A.2.8 Drug Delivery Deals

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