Practical approaches to early stage life sciences technology valuations

Abstract

With fierce competition in the market for late stage life sciences assets, pharmaceutical companies seeking partnering strategies to bolster pipelines and drive long-term revenues are increasingly looking towards earlier stage compounds and technologies. Valuations are essential components of effective partnering transactions in the life sciences industry, however owing to the perceived uncertainty and risk associated with early stage life sciences technology, early stage valuations are a contentious area of valuation practice. Meaningful early stage valuations require new approaches that integrate complementary evaluation practices to build more widely accepted, balanced and transparent valuation outputs that facilitate productive and mutually beneficial transactions and form the basis for successful long-term partnerships. This article outlines a series of practical steps that encourage the use of encompassing approaches that blend complementary qualitative and quantitative techniques to build realistic and widely accepted early stage valuations. The methodology promotes rigorous interrogation of early stage life sciences technology to identify and characterise key value drivers, and advocates the development and simulation of robust practical scenarios to generate meaningful valuation outputs with practical relevance.