Tuesday, May 15, 2012

Drug Licensing deals - Valuation Analysis

We have done An Analysis of about 50 drug licensing deals in the global pharmaceutical sector. The analysis has been done with regard to valuation of such deals. The key findings with regard to the deal value, upfront payments are as under :


Upfront Payments to Peak Sales Multiple - The mean upfront payment is generally about 8% of the estimated peak sales of the compound. Estimated peak sales is adjusted for the risk ( development status, novel mechanism that is not validated).

Adjusted Deal Value to  NPV - An analysis of the deal valuation in the current scenario, if things go in line with expectations,  licensee would end up paying as much as 90% of the Net Present value of a Phase 3 compound to the licensor. For a Phase 2 compound, it would be about 80% and Phase I compound it would be 75%.

Obviously there are some major deviations  from the mean value that we have discussed here, but these could be explained on a case by case basis.