What is Biomedical Value and Valuation? Going Beyond the Eyes of the Beholder

John York
University of California San Diego, US

Abstract:

A fundamental question on biopharma business development centers on value and valuation. Such consideration is driven by the need to develop new therapeutic and device technologies to address disease and healthcare delivery challenges that will provide an attractive return to stakeholders. Unfortunately, biopharma development is fraught with risk. Drugs (and devices) do fail. Sometimes value myopically exists within the proverbial “beholder’s eye.” This paper explores biomedical value and valuation, seeking to characterize the concept and define the elements involved with due diligence and valuation. Biomedical value is a complex concept, from its simplest form of Value = Quality/Cost to broader characterizations- “three-legged” stool (science, business, legal), Timmon’s triangle (opportunity, team, and resources), and Boni’s “quick screen” (opportunity, competitive advantage, economics). Multiple factors emerge considering the divergent - the “buyer”, “investor”, and “seller” – stakeholder views that exist around biomedical value. Such perspectives require due diligence to evaluate the opportunity and risk profile, which ultimately needs handicapped. The valuation process involves qualitative, quantitative, and negotiation considerations. Accounting for these elements leads stakeholders to a common understanding of an asset’s or venture’s biomedical value and the relationship between these stakeholders. Such agreements will advance novel technologies offering solutions to healthcare challenges that equitably apportion created and captured value among multiple stakeholders.