Challenge:

A biotech company developing small molecule drugs for oncology was in the process of licensing negotiations with a pharma company for its lead asset. The asset, set to enter the clinic in the next year, was being developed for four CNS cancer indications. The company asked Alacrita to develop a current and future valuation of the lead asset and model various deal term scenarios to guide ongoing licensing discussions.

Solution:

Alacrita developed a current total asset valuation for the biotech company's lead asset, taking into account the aggregate valuation for the two lead indications and the sale of a Priority Review voucher, which would be contingent upon the approval of the drug for one of the indications being pursued. We developed projections for the addressable market, penetration, pricing and associated product revenues in the US, EU5, and RoW. We similarly developed projections for costs, timelines, and probabilities of success at each go/no-go point.

Given the uncertainty around a number of input assumptions, we used Monte Carlo simulation to capture a range of values for each assumption. This provided an rNPV range, instead of a single value, and allowed us to probe the parameters that drove the sensitivity of the model. In addition, Alacrita also projected the future valuation of the lead asset contingent on the successful completion of Phase 2 clinical studies for both indications.

Alacrita also conducted an analysis of various deal term scenarios to determine the value split between the company and potential pharma partner, to help guide ongoing licensing negotiation deal terms.

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