PharmaTelevision - PharmaVentures: Valuation methods and trends in licensing deals

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Video title: PharmaVentures: Valuation methods and trends in licensing deals

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In this informative panel discussion, Fintan Walton talks with 3 members of PharmaVentures’ deal advisory team about Royalty Rates, particularly the valuation of deals in the pharmaceutical and biotech industry, and the challenge to find information about Royalty Rates not generally available in the public domain.

Dr Tibor Papp, Head of Advisory, outlines how the consultancy team would advise clients to enable them to arrive at the best Royalty Rates for their deals in the intensive deal-making environment.

Nigel Borshell, Senior Consultant, and the editor of the soon-to-be-published PharmaDeals® Report, The Royalty Rate Report 2009: A Comprehensive Assessment of Valuation in the Pharmaceutical Sector, talks about the methods used for calculating Royalty Rates; use of NPV calculations, market benchmarks, the application of “Real Options” and the 25% rule of thumb.

Steven Renwick, Consultant, who was involved in the design and execution of the recent LES Royalty Rates Survey, talks about the research findings, such as the different valuation methods used by pharmaceutical companies, biotechs, universities and research institutes.

Watch this interview now to find out more about Royalty Rates and how they can be used to increase flexibility around the deal negotiation process.

For further information on The Comprehensive Guide to Royalty Rates in Pharmaceutical and Biotech Deals. 2009 Edition, please visit our website or contact The PharmaDeals Team on +44 (0) 1865 784 177.

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Order now: The report is currently available at a 10% pre-publication price.

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PharmaDeals® is the publishing imprint of PharmaVentures Ltd.

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Trends in deal making

Fintan Walton:

Hello and welcome to PharmaVentures Business Review here live in London. On this show I have Tibor Papp, who heads up the Consultancy Team at PharmaVentures, Nigel Borshell, who is Senior Consultant at PharmaVentures Consulting and also Steven Renwick, who belongs to the same team and he is a Consultant. Welcome to the show gentlemen. We are gathered here today in London to discuss some of the issues relating to royalty rates in particular valuations in deals that are going on within the pharmaceutical industry. We at PharmaVentures obviously are being following valuations for many, many years. But Tibor Papp, for you what are the actual trends that we are seeing first of all in terms of deal making, what is the market like for licensors, licensee's pharmaceutical companies and biotech companies?

Tibor Papp:

Well first of all the key driver for deal making is the intense pressure that we see in the industry now around productivity crisis. We know that pharma companies are facing several big hurdles, increasing hurdles, technology competitive funding, regulatory reimbursement hurdles and these are all intensifying in creating complexities for them so that commercializing products becomes a lot more resource intensive a lot longer plus the generalization of their products coming of the market, large pharma companies are losing a lot of their value, this creates an immense need for sourcing products from outside. And especially acute this need is in the large pharma companies and this creates a very intensive deal making environment. We know recently we have seen recently that in Phase III late stage compound the deal making was very intensive, but essentially what it created is the lack of these mature compounds out there. This pushed the deal making of especially large pharma towards earlier stage compounds, this raised the valuation of earlier stage products and created sophistication in the deal making environment. All these complexities created a game which if played well and some companies have shown this could create a profitable R&D companies.

Fintan Walton:

Right. So you talked about productivity being depleted in pharmaceutical companies, but or biotech companies more productive or are they running into the same problems as biotech as large pharmaceutical companies?

Tibor Papp:

In fact this phenomenon is you can see it everywhere across the board. Early stage companies, R&D companies face the same issues they need more funds, they need more time, they face productivity issues as well.

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Steven Renwick Renwick

Consultant

Tibor Papp is a senior strategy advisor to leading companies, he has 16 years of experience in the healthcare/life sciences industry in corporate strategy, investment appraisal, portfolio development, business transformation, licensing/M&A deal making, marketing strategy, and risk management. He has advised health care and private equity companies about acquisition and transaction strategies in pharmaceuticals, biotechnology, medical devices, drug delivery systems and medical supplies globally. Currently, he is Head of Consultancy at PharmaVentures and focuses on commercialization strategies, product/technology licensing, mergers & acquisition, divestments and alliances. Dr Tibor Papp is also an experienced surgeon and has a PhD from the University of Aberdeen and an MBA from the University of Oxford. Nigel Borshell joined PharmaVentures' consultancy group in 2008 having worked on key projects with the team as an associate consultant since 2006. He is the author of several Pharmaceutical Industry reports including the latest publication on Royalty Rates, and has authored numerous healthcare industry articles on Therapies, deal activity, and research funding. Nigel Borshell began his commercial career in the 1970s after graduating with a degree in Applied Biology and spent some time conducting post graduate research at The National Hospital for Nervous Diseases, Queen Square, London, investigating the neurochemistry of Multiple Sclerosis. At Syva, a drug monitoring specialist company he held the position of General Manager role for the UK operation before being appointed UK Managing Director of the Hoechst division at Behring Diagnostics in 1994. Following the merger of US company Dade with Behring in 1998 his role was expanded to that of Commercial Director Northern Europe for the In-Vitro Diagnostics multinational Dade Behring. More recently Nigel Borshell has worked as Director of European Business Development for Cepheid Inc, California based Biotechnology company specializing in transportable molecular biology detection technology. Steven Renwick is a consultant at PharmaVentures. He joined the company in September 2005 and until recently he was the manager of the Strategic Intelligence department responsible for the development and production of PharmaDeals. In his work with the transactions group he has built up experience in company screening and relationship building for licensing and M&A transactions. Recently he has worked closely with the Licensing Executive Society on the execution of the LES BioPharmaceutical Royalty Rates and Deal Terms Survey. Steven Renwick holds a PhD in genetics from University College London and an honours degree in biochemistry from University of Dundee.

PharmaVentures

PharmaVentures The Royalty Rate Report 2009: A Comprehensive Assessment of Valuation in the Pharmaceutical Sector. The content of this Definitive Industry Reference has been formulated by leveraging over 16 years of PharmaVentures experience in assisting leading pharmaceutical and biotechnology companies worldwide in all aspects of deal making, and in response to valued feedback from our extensive market research. This report provides current thinking on Royalty Rates and follows on from the publication of previous top selling reports on the topic of Royalty Rates. Clear guidance on the best methodologies to use when calculating Royalty Rates to assist with vital decision making and to win the best deals. Opinions and advice from leading industry deal makers on how to calculate Royalty Rates and what drives them in different types of transactions. Analytical arguments supporting the setting of Royalty Rates " The report reviews the appropriate methodologies to use as part of the process to calculate Royalty Rates in-depth. It explores questions such as: "What do royalties mean in terms of value?" and "Where do royalties fit within the deal?" Recent case studies of notable deals " PharmaVentures highlights the issues and pitfalls so that you can avoid them and successes to consider before agreeing to Royalty Rates.