Challenge
A preclinical stage biotech company developing a novel formulation of insulin to treat diabetes mellitus was in discussions with prospective investors for a next round of funding. To support the negotiations, the company required an independent valuation of its drug to demonstrate the potential return on investment to VCs.
Solution
Alacrita worked with the company to develop realistic input assumptions for the valuation model in both Type 1 and Type 2 diabetes mellitus in Europe, US and Middle East. These key input assumptions included projections for clinical development costs and timelines, drug price, epidemiology and importantly, market share and penetration estimates. Using this information, we developed projections for the addressable market and associated product revenues.
The insulin market is a well established and crowded one, and to disrupt the market and address the unmet need for patients reliant on current insulin products requires a truly innovative alternative product that demonstrates a clear clinical benefit to these patients over the standard of care. Innovation in this space has been lacking over several decades, and so it was important to balance the potential value-add of the company’s novel formulation against the likely expectations of the end user and the entrenched bias of stakeholders in this field.
To account for the uncertainty in the program given its early stage of development, we used Monte Carlo simulation to capture ranges (Min, Mode, Max) of each input assumption, and then risk-adjusted the net present value (rNPV) to deliver a valuation range rather than a single valuation number.
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.
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