Considerations for Start-Up Biotech Company Valuation

Authors

  • Walter Bratic OverMont Consulting
  • Justin R Blok OverMont Consulting
  • Megan M Gostola OverMont Consulting

DOI:

https://doi.org/10.5912/jcb648

Keywords:

valuation, bio-tech, start-up, risk, biologics

Abstract

The prospect of government regulation, product liability lawsuits, and customer reliance on third-party payers contribute to the complexity of valuing biotech start-ups. In addition, the inherent complexity of biologic drug manufacturing and storage creates secondary risks that must be considered in a valuation.

Author Biographies

Walter Bratic, OverMont Consulting

Managing Director at OverMont, Mr. Bratic has extensive business and consulting experience across a broad range of industries. With respect to intellectual property, he has performed valuations, conducted licensing negotiations and strategic management studies for corporate clients including multinational and international joint ventures, start-up and development stage companies. He has been involved in a variety of litigation matters, involving patent, trademark, copyright infringement, theft of trade secrets, breach of contract, tax disputes, breach of fiduciary duty, energy, and antitrust matters. He has also performed research and analysis regarding industry dynamics and IP management practices, portfolio optimization, evaluation of corporate IP strategies, and effects of technology investment, innovation, adoption and transfer on competition. Mr. Bratic has testified in federal, district, bankruptcy, and state court, ICC, ITC and AAA proceedings related to a wide variety of civil litigation disputes, including: economic, financial, accounting and business matters. Mr. Bratic has also served as a court appointed expert.

Justin R Blok, OverMont Consulting

Managing Director at OverMont, Mr. Blok has engaged in a variety of litigation matters involving patent, trademark, and copyright infringement, theft of trade secrets, business valuation, business interruption, bankruptcy, and fraud. He has worked with both plaintiffs and defendants in the analysis and determination of economic damages, including business interruption, lost profits, reasonable royalties, price erosion, unjust enrichment, diminution of value and insolvency analyses, valuation, fixed, variable, and semi-variable costs, and pre- and post-judgment interest. Mr. Blok’s experience spans a variety of industries, including oil and gas, consumer products, professional sports, pharmaceuticals, semiconductors, computer hardware and software, among others.

Megan M Gostola, OverMont Consulting

Ms. Gostola is currently an Associate at OverMont Consulting.  She holds an MBA from Rice University’s Jesse Jones School of Business and a Bachelor of Arts from Macalester College.  She has engaged in litigation matters involving patent, personal liability, and trade secret theft to determine economic damages.  Ms. Gostola’s experience spans a variety of industries, including oil and gas, international development, and the non-profit sector.  

References

Adamski, Jakub, Harald Herholz, Silvio Garattini, Kristina Garuolienè, Brian Godman, Lars L

Gustafsson, Roland Gustafsson, Alan Haycox, Saira Jan, Marija Kalaba, Ott Laius, Gabriella Ofierska-Sujkowska, Bogusława Osińska, Catherine Sermet, Kamila Wendykowska, Corrine Zara. Risk sharing arrangements for pharmaceuticals: potential considerations and recommendations for European payers. Accessed on-line at: http://www.biomedcentral.com/1472-6963/10/153.

Annual Report on Whistleblower Program, U.S. SEC, October 2010.

Blackstone, Erwin A. and Joseph P. Fuhr, Jr. The Future of Competition in the Biologics Market.

Temple J Science Technology & Environment L., Vol. XXXI, 2012. 3-4, 25.

Boat, Thomas F. and Marilyn J. Field, editors. Rare diseases and Orphan Products: Accelerating

Research and Development. The National Academies Press: Washington, D.C., 2010. 156, 181, 189-190, 195.

Brumley, James. Why Big Pharma Doesn't Really Need (Or Even Want) A Pipeline. January 17,

Accessed on-line at: http://seekingalpha.com/article/320013-why-big-pharma-doesnt-really-need-or-even-want-a-pipeline.

Cosner, Krista L. Are You Prepared to Defend Biopharmaceuticals? DRI, 2010. 48-78.

Accessed on-line at http://www.drinkerbiddle.com/Templates/media/files/publications/2011/are-you-prepared-to-defend-biopharmaceuticals.pdf.

Danzon, Patricia M. Economics of the Pharmaceutical Industry. NBER Reporter, Fall 2006. 15.

Danzon, Patricia M. and Eric L. Keuffel. Regulation of the Pharmaceutical-Biotechnology

Industry. Revised January 15, 2013. Located on-line from the National Bureau of Economic Research at: http://www.nber.org/chapters/c12572.pdf. Page 7-8, 14, 56.

DiMasi, J. A., J. M. Reichert, L. Feldman, and A. Malins. Clinical Approval Success Rates for

Investigational Cancer Drugs. Clinical Pharmacology & Therapeutics, 2013. 94, 3, 329–335.

Ernst & Young. Strategic Business Risk: Pharmaceuticals 2008. 7, 9-11.

Evaluating Pharmaceutical Companies. November 3, 2011. Accessed on-line at:

http://www.investopedia.com/articles/06/drugmarket.asp.

False Claim Recoveries Top $3 Billion in 2010, Compliance Week, November 29, 2010.

Franco, Pedro. Orphan Drugs: The Regulatory Environment. Drug Discovery Today, Vol. 18

(3/4). February 2013. 169.

Friedhoff, Lawrence T. New Drug: An Insider’s Guide to the FDA’s New Drug Approval

Process for Scientist, Investors and Patients. 2009. 111, 120, 127, 196.

General Information on Counterfeit Medicines. World Health Organization, 2013. Accessed on-

line at: http://www.who.int/medicines/services/counterfeit/overview/en/.

Garnier, Jean-Pierre. Rebuilding the R&D Engine in Big Pharma. Harvard Business Review;

May 2008. 72.

Girotra, Terwiesch, and Ulrich. Valuing R&D Project in a Portfolio. Management Science

(9), 1453.

Hall, Linda, Helen Lawton Smith, and Sharmistha Bagchi-Sen. The US Biotechnology Industry:

Industry Dynamic and Policy. Environment and Planning C: Government and Policy (22) 2004. 199. 206.

Interpretation of News: 12 Years of Exclusivity for Biologics Drugs. Nature Biotechnology’s

Bioentrepreneur Forum: Topic. April 4, 2010. Accessed on-line at: http://network.nature.com/groups/bioentrepreneur/forum/topics/7082.

Issues Monitor: Sharing Knowledge on Topical Issues in the Pharmaceuticals Industry. KPMG

International. April 2011 (9). 4.

Kubik, Thomas T. Beer Cooler Biologics: The Dangers of Counterfeit Drugs. The Police Chief,

vol. LXXV, no. 8, August 2008. Accessed on-line at http://www.policechiefmagazine.org/magazine/index.cfm?fuseaction=display_arch&artic

le_id= 1575&issue_id=82008.

Lazonick, William and Öner Tulum. US Biopharmaceutical Finance and the Sustainability of the

Biotech Business Model. Research Policy 40, 2011. 1170.

Massoudi, Arash and Andrew Ward. Bubble Fears Amid Surge in US Biotech Listings. Financial

Times. February 10, 2014. 13.

Perri, Matthew and Brent L. Rollins. Pharmaceutical Marketing. United States: Jones & Barlett

Learning, 2014. 90-92.

Recent Health Care and False Claims Act Developments. Kutak Rock LLP, April 16, 2010.

Accessed on-line at: http://www.kutakrock.com/files/Publication/523dc22e-03d4-418a-af89-c930826c4a26/Presentation/PublicationAttachment/b76849e8-2935-4520-b34f-e4bbae7f6207/PPACA_050510.pdf.

Rees, Hedly. Supply Chain Management in the Drug Industry. John Wiley & Sons Publishing;

New Jersey, 2011. 109-110, 215.

Roy, Avik S.A. Stifling New Cures: The True Cost of Lengthy Drug Trials. Project FDA Report,

No. 5 April 2012. Manhattan Institute for Policy Research. Accessed on-line at: http://www.manhattan-institute.org/html/fda_05.htm.

Satisfaction Guaranteed or Your Money Back. Biotech. Healthcare at 15 (Oct./Nov.2009) Cited

in: Blackstone, Erwin A. and Joseph P. Fuhr, Jr. The Future of Competition in the Biologics Market. Temple J Science Technology & Environment L., Vol. XXXI, 25.

Steinberg, Jeffrey. Managing the Risks from Outsourcing. Ernst & Young, Strategic Business

Risk. 2008.16.

Steven, Silver, Industry Surveys: Biotechnology. Standard & Poor’s, February 24, 2011. Cited in

Blackstone, Erwin A. and Joseph P. Fuhr, Jr. The Future of Competition in the Biologics Market, Temple J Science Technology & Environment L., Vol. XXXI, 5.

Tambuyzer, Erik. “Rare Diseases, Orphan Drugs and Their Regulation: Questions and

Misconceptions.†Nature Reviews, Drug Discovery. Vol. 9, 2010. 921-922, 924, 927.

Wellman-Labadie, Oliver and Youwen Zhou. The US Orphan Drug Act: Rare Disease Research

Stimulator or Commercial Opportunity? Health Policy (95) 2010. 226.

Downloads

Published

2014-04-01

Issue

Section

From the Boardroom