About Research Events Centers Newsroom Currency of Ideas
 
Milken Institute | Research | Publications | Biotechnology Valuations for the 21st Century
 Biotechnology Valuations for the 21st Century
Biotechnology Valuations for the 21st Century
Jeffrey J. Stewart
April 1, 2002
Business

Buy Printed Version $ 10.00

The biotechnology industry has matured significantly in the last 20 years. In the 1980s, a biotechnology company represented an investment that defied accurate calculation. Biotech firms argued that molecular biology and gene manipulation would provide more efficient methods of drug discovery than the traditional "brute force" screening methods favored by pharmaceutical companies. Nonetheless, biotechnology's model of rational drug discovery and at-scale protein manufacture was unproven. Would biotechnology be able to deliver organism-derived pharmaceuticals (biologics) to the market?

Now, at the beginning of the 21st century, the uncertainties that previously weakened biotech's foundations have been shored up. Biotechnology does provide a rational method of discovering new drug targets. Biotechnology can convert those drug targets into biologics. Biologics can be manufactured cost effectively at scale. In addition, biologics tend to have fewer side effects than do traditional chemical pharmaceuticals. And they are more likely to succeed in clinical trials. With these major uncertainties under control, the value of a biotechnology can be calculated with reasonable certainty so that biotech investment may be made rationally.

The value of biotech R&D projects may be estimated by incorporating clinical-trial success rates into a traditional discounted cash flow analysis. Risk-adjusted net present value (rNPV) is a straightforward valuation method for biotechnology. The author has created a sample spreadsheet (Microsoft Excel format) pre-programmed to do the calculations. Click here to download.

 
Search All Publications
2 ways to subscribe to
the Milken Institute Review
Download the app for
iPhone, iPad and Kindle

Buy new digital editions of our quarterly economics journal for $1.99, purchase back issues for 99 cents or get a year's subscription for $5.99. Access links to related video and other content.
Order a 1-year subscription
Receive hard copies for $59, a small price to pay for our edgy, accessible and expert take on the latest in economics.
About Us
  Careers
  Contact
  Download Annual Report
  FAQs
  Locations
  Our Team

Blog


Topics

Events
  Associates
  Conferences
  Global Conference
  State of the State
  Summits
  Atlanta / California / London
  Forums
  Labs
  Young Leaders

Experts
Newsroom
  Latest News
  News Videos
  Press Releases

Research
  Centers
    Asia
    California
    FasterCures
    Financial Markets
    Israel Center
    Public Health

Initiatives

Publications
  Books
  Financial Innovations Labs
  Milken Institute Review
   Amazon Apps
   App Store
  Research Reports
  Viewpoints
  Search All Publications
Support MI
  Associates
  Donate
  Sponsorships
  Strategic Partners

Follow Us
  @Twitter
  Facebook
  YouTube
  Google+
  LinkedIn
  iTunes U

Related Sites
  Partnering For Cures 2013
  Celebration of Science
  Chairman's Corner
  Melanoma Research Alliance
  FasterCures

©2014 Milken Institute