Challenge
A virtual life science company had raised money from angel investors and anticipated a clinical development strategy for their product targeting two major cancer indications. The client wanted to raise further funding to complete formal preclinical and process development to have a clinic-ready candidate.
To support this fundraising, the client asked us to put together an independent expert report which demonstrated the size of the potential opportunity, and the valuation which could be ascribed to the client at each developmental milestone as the project was progressively de-risked.
Solution
We helped produce a valuation trajectory for one of their products and performed an evaluation of the benefits of merging with a university spin-out company which had complementary proprietary technology.
Using information provided by the client and secondary research, we developed global market projections and a financial model. We then developed a risk-adjusted valuation model to develop assumptions for key inputs into the valuation model (e.g. clinical development & CMC costs and timelines, adoption curve and marketing costs). The valuation was set against key development, clinical and commercialization milestones.
These included:
- in vivo proof of concept study completion
- Phase l readiness
- initiation of Phase ll and Phase III studies
- submission for regulatory approval
Monte Carlo simulation was used to capture the ranges of such values (min, mid and max) and the output of the simulation was a risk-adjusted Net Present Value (NPV), expressed as a valuation range.
We also considered the possibility of merging with, or acquiring, a substantial equity position in the entity with complementary proprietary technology. The client asked us to determine the value and prospective risks in this proposed transaction. We reviewed technical documentation and proprietary IP (filed and unfiled) and assessed its: value in comparison with competing technologies, progress towards development objectives and prospective income streams through collaborations or licensing, and key risks. Using this information we provided an indicative range of valuation scenarios for the business.