Challenge:
A biotechnology startup had entered a major licensing deal with Big Pharma and was able to fund operations via the upfront payment rather than needing to raise a Series A. This introduced a complication for the seed investor as initial funds had been placed as a convertible loan due to be priced by the Series A valuation. The client's board of directors engaged Alacrita to conduct a valuation of the company as input into setting the conversion price.
Solution:
Alacrita used its proprietary Monte Carlo simulation rNPV methodology as the core of the valuation approach. The model needed to account for unusual complexity in the underlying partnering deal which involved multiple candidate mAbs as well as potential future candidates that could be developed during the deal horizon. Furthermore, owing to the nature of the infectious disease being targeted, the precise composition of the final product carried significant uncertainty. Alacrita therefore developed scenarios for all potential permutations and combinations of the client's multiple assets and modeled the cash flows of each. We then probability-weighted each scenario based on expert input from specialist medical consultants to arrive at a composite rNPV value. The final valuation also included the cash on hand at the client at the time of valuation as well as the effect of tax.
Valuation Services
As a multi-disciplinary firm, in addition to valuations, Alacrita’s expertise in product development, strategy, and commercialization, allows us to draw on important insights that other valuation firms may not have. Understanding the key value inflection points for a pipeline asset and defining an overall value for a technology or business is vital, especially in transaction negotiations and commercial strategy, and few valuation firms are as well-placed as we are to do so.