The Mathematics of Venture Capital Returns

The Mathematics of Venture Capital Returns

How do VCs estimate their return on investment? There have been various studies which have produced varying results due to the different nature of VCs in terms of location, industry focus, fund size, preferred financing stage and team experience. In this post, I have developed a quick, simple, one staged model that determines the minimum …

Implantable biolectronics: The future of biomedicine?

Implantable biolectronics: The future of biomedicine?

Over recent years, biotechnology has uncovered new horizons in transforming patients’ lives. Insulin was the first biologic drug and was approved in 1982. Currently, the biotech market is valued at ~$100bn demonstrating explosive growth the past few decades. Now biotech has come to an era of gene therapy, personalised medicine, stem cell therapies and digital …

Biotech rNPV Valuation using Monte Carlo simulation – A simple approach

The methodology for valuing biotech products using the risk-adjusted NPV (‘rNPV’) approach has been well established. The concept behind the rNPV method is taking into account the risk of success / failure in clinical trials for clinical development products. In this way, companies can prioritise their portfolio based on the expected value of each product. …

Is Novartis leading the way in pharma R&D restructuring?

Is Novartis leading the way in pharma R&D restructuring?

Big pharma companies have undoubtedly been suffering from low R&D productivity pushing them to revise their business strategy. Although inorganic R&D strategies through M&A and in-licensing deals have boosted big pharma’s late stage pipeline, a viable organic R&D model to secure long-term survival is paramount. Novartis is a bright example of a big pharma company …

Can U.S. Drug Prices be Justified? A U.S. vs. E.U. Comparison

Regulators and payers have raised major concerns over recent spikes in drug prices. Unjustified high drug prices (see Valeant case) have triggered not only political comments from U.S. presidential candidates in the previous U.S. elections (see Hillary Clinton’s statement) but also a broader discussion on how drug prices can be regulated and whether the European drug pricing model …

Modern Portfolio Theory: Does it Work for Biotech?

Modern Portfolio Theory suggests that every portfolio has its risk and its corresponding rate of return. Markowitz (1952) showed that there is no “best investment” but rather a “best” trade-off between risk and return, called efficient frontier theory. This theory is based on a critical assumption: the risk and return profile of an asset or portfolio when constructed, …

Winners and Losers in Pharma / Biotech Mergers and Acquisitions: Biogen Shines Again

Pharma / Biotech is one of the most M&A intensive industries. Over a period of approximately 20 years, the industry has spent over USD 1.4 trillion in pharma / biotech acquisitions (excl. generics, OTC, Animal Health, CROs and CMOs acquisitions). The aim of this analysis is to assess which of the acquirers have really gained from …

A Simple VC Investment Model: What Every Biotech Entrepreneur Should Know (Revised)

In my previous post (see here) I developed a static financial model that incorporated all the necessary parameters to evaluate the potential investment return gain for entrepreneurs and VCs after a successful exit (through M&A). The model incorporated what VCs usually ask from entrepreneurs: a percentage of the firm’s equity in the form of convertible preferred stock, …

Sales Forecasting in the Pharmaceutical Industry

One of the main challenges Sales & Marketing teams face is how to forecast the revenue of new products. There exist two principal strategies to estimate the sales of new products hitting the market: Primary research: communicating to KOLs and physicians how a new medicine can add value to patients and its potential side effects. Hence, based …