A recently emerged biotech company developing prophylactic monoclonal antibodies (mAbs) against a major viral target for immunocompromised patients asked Alacrita to develop an independent valuation of the company.

The technology had originally been licensed from a university, and the biotech company had received funding fin the form of a convertible loan agreement (CLA) with the intention to convert the loan into equity at a price determined by the equity value of an investment round. Subsequently, the company had also succeeded in establishing a licensing deal with a large Pharma company with headline terms including upfront and milestone payments as well as royalties on sales. The upfront payment had effectively taken the place of an initial financing round.

Under the terms of the agreement, the Pharma company had an exclusive worldwide license to develop, manufacture and commercialize the biotech company’s existing early-stage mAbs against the virus in question and a right of first refusal to take an exclusive license in respect of any additional mAbs against the target. The biotech company therefore required a new independent valuation as a key input into the price to be set for conversion of the CLA into equity.


Alacrita developed a risk-adjusted net present value NPV (rNPV) of the biotech company under two different deal scenarios with the Pharma company:

Scenario 1: the product comprising one mAb from the biotech + one mAb from the Pharma company.
Scenario 2: two mAbs from the biotech company.

The value was derived from three cash flow streams:

  • Value of development milestones;
  • Value of sales milestones and royalties; and
  • Cash value.

To develop the valuation, Alacrita first established projections for the addressable market considering the target patient population, market share, drug pricing and clinical development timelines.

Using this information, product revenues were estimated for the US and EU5 markets. Probability of success at each go/no-go development/regulatory pivotal point and the impact of that on the valuation was also considered.

For some of the input assumptions required for the valuation there was significant uncertainty, particularly given the early stage of development of the assets valued. Therefore, Monte Carlo simulation was used to capture ranges of such values (Min, Mode, Max for namely development timelines and drug price) which provided rNPV as a range rather than as a single number.

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