Challenge:
A former venture fund client identified a novel Phase 1-ready asset for treating a rare CNS infectious disease and was interested in licensing the asset and founding a new company to further its development. Alacrita was initially asked for assistance with a triage due diligence (DD) to determine if a deeper assessment was warranted, and potentially a subsequent full DD effort to identify any significant risks, to provide strategies for mitigating those risks, and to provide our recommendation on whether to pursue further licensing discussions. Depending on the outcome of the due diligence, we were also asked to potentially provide a valuation of the asset and license negotiation support.
Solution:
Alacrita consultants, with support from a clinical immunology expert and a CMC expert, evaluated a confidential slide deck and scientific publications supporting the scientific rationale for the asset. We determined that there were no obvious red flags and recommended that a full DD should be conducted. We subsequently reviewed additional documentation for the asset in a secure virtual data room, including investigator brochure, clinical development plan, CMC strategy, and regulatory correspondence.
We concluded that, while there were some moderate risks, they were not insurmountable and advised the client to pursue further licensing discussions. To facilitate the negotiation of deal terms, we provided our client with a risk adjusted net present value (rNPV) valuation of the therapy for the CNS indication, including a sales revenue forecast, discounted cash flow, and time-cost-risk assessments for the US and EU territories.
We further considered deal term structures and modeled the deal returns in rNPV to compare the split in value for each party. Our valuation proved pivotal for the client’s management team in guiding the negotiation and successful licensing deal.
Valuations
Our expertise in performing business and asset valuations covers a wide range of technology types including small molecules, biologics and cell and gene therapies. Valuations have been a staple of our practice since our inception in 2009.