Valuation in Life Sciences: A Practical Guide

Some people read the Old Testament, others may read the New Testament, the Koran, the Bhagavad Gita, or the Guru Granth Sahib, my bible has become…Valuation in Life Sciences: A Practical Guide by Dr. Boris Bogdan and Ralph Villiger. This work has emerged as my one unambiguous go-to text when it comes to evaluation and valuation needs.

Just when I thought the risk adjusted net present value (rNPV) was the model for biotech and pharma valuation work Dr.’s Bogdan and Villiger have opened my eyes (and spreadsheets) to the world of real option valuation (ROV). What is key and fundamental to ROV theory is the development of a project (or company or patent or license or M&A transaction or stock, etc.) is dependent upon the changing market conditions of the real world and the sensitivity to incorporate this dynamic nature into the modeling versus discounted cash flow approaches where the modeling is static and predefined and thus unaccommodating to the dynamic market fluctuations of the real world.

Anyone who has ever sat down to model out a valuation of biotech or pharma assets that are yet to reach market, either pre-NDA, in the clinic or even pre-IND well there are a basket of hurdles (to say the least) associated with achieving a meaningful analysis. Leveraging the tools provided in Valuation in Life Sciences provides a road map on just how to achieve meaningful and flexible analyses. If you are in start-up mode, tech transfer, business development, finance or even still in business school do yourself a favor and pick-up a copy, you will not be disappointed!

UPDATE:

The authors are holding a one-day workshop (6 June in San Francisco, at the Fairmont Hotel and 16 June in San Diego, at the Sheraton Hotel and Marina). Sounds like it will be an incredible day focused on:

• Structure valuation models in Excel
• Source input parameters (success rates, durations, costs)
• Structure license contracts to bridge differing assumptions between licensor and licensee
• Analyze and interpret license contracts for licensor and licensee in terms of: rNPV, IRR/ROI and Value share
  

For more information and registration information click (HERE) or follow this link: http://www.avance.ch/newsletter/Invitation/Workshop_June.pdf

I hope to attend the San Diego workshop, if you are planning to attend too shoot me an email (arubenstein@ranventures.com) and let’s connect.

*NOTE* Feel the power of the Colorado BioScience Association (HERE)!
*NOTE* Take a look at the new Boulder Biotech Company Tree (HERE)!
*NOTE* Read the new eBook CLSDF 2007 - What's In A Year? (HERE)!

If you enjoyed this post get free email or RSS updates (here).

Best Practices in Biotechnology Education

The blogosphere is an amazing place, enabling the cultivation of rich relationships that may otherwise never come to pass. One such contact I have been lucky enough to cultivate is with Yali Friedman, Ph.D. the founder of thinkBiotech and author of Building Biotechnology and the BioTechBlog.

Yali’s newest work released today is Best Practices in Biotechnology Education. The work is directed at faculty seeking to start or expand biotechnology education programs; policy-makers and economic developers seeking to help meet workforce needs; and, students, scientists, and business professionals looking to enter the industry or upgrade their existing skills. The cases within describe a wide variety of programs from high school through Ph.D. programs. Some are in their first years, whereas others are quite mature and have diversified to offer myriad degree and certificate options. There is also strong international representation, with programs from Australia, Canada, New Zealand, South Africa, and the United States.

Best Practices in Biotechnology Education is a wonderfully diverse source of information and may serve as the starting place for installing an architecture of life science related programs at the high school, undergraduate and graduate levels.

So by now you may be wondering how this work relates to CLSDF? One need simply to flip to Chapter 3 and note the author is none other than Colorado’s own Arlen Meyers, MD, MBA the Academic Director of the Bioentrepreneurship Program at the Bard Center for Entrepreneurship at the University Colorado at Denver and Health Sciences Center.

Arlen delves deep into the Colorado Bioentrepreneurship Program (CBP) Fellowship in some ten plus pages. The chapter details CBP as...

...an intensive year-long program that provides a pathway for graduate and postdoctoral life science and engineering students to gain employment in the Colorado and global bioscience industry by delivering academic and real-world technology transfer and bioscience company experience.

As I’ve had the opportunity to observe the inaugural Class I CBP Fellows progress throughout the year the transformation from academician to confident entrepreneur has been unambiguous. Certainly I would have absolutely loved to participate in such a special opportunity. It would be fantastic to have some of the Class I CBP Fellows follow-up with a blog post about their experiences to date! Maggie? Susan? Darius? Sibyl? Freddie? What do you say? I would venture to guess that many readers would be interested in hearing your perspectives from being ‘in the trenches’.

My hope is that this fantastic program matures, grows and flourishes. For more information take a look at the course schedule and application process (here).

*NOTE* Feel the power of the Colorado BioScience Association (HERE)!
*NOTE* Take a look at the new Boulder Biotech Company Tree (HERE)!
*NOTE* Read the new eBook CLSDF 2007 - What's In A Year? (HERE)!

If you enjoyed this post get free email or RSS updates (here).

Valley Boy...The Education of Me

For the first time in years, say since undergrad, I sat down and consumed an entire book, cover-to-cover in a single sitting. It was Valley Boy: The Education of Tom Perkins that sucked me in on a snowy Sunday.

Tom Perkins helped to pioneer the innovation center that is Silicon Valley, first at Hewlett Packard and soon after by founding the venture goliath that is today Kleiner Perkins Caufield & Byers. KPC&B were truly innovators themselves in a nascent venture industry who firmly established the ground rules for how the process essentially functions the same way today since when they first opened their doors back in 1972.

Sure KPC&B has their unbelievable list of out-of-this-world exits but it is the failures that most interest me, for that is where the greatest lessons learned appear to emerge. Thankfully Mr. Perkins did not refrain from detailing the, seemingly few, crashes in his investing career. In addition, of particular interest was learning more about one of their earliest investments (circa 1976) in a tiny little company you may have heard of called Genentech (NYSE: DNA). I was hoping for a bit more flesh on this bone, for obvious reasons. If there are any case studies on the KPC&B and Genentech relationship out their I sure would appreciate you pointing them my way. One very interesting tid-bit that stands out is how Mr. Perkins reads a business plan: 1st Start at the back of the plan and read the financials, are the markets significant? If YES: proceed to front of business plan, If NO: move on to next business plan.

Finally, let me leave you with some laws from the storied firm:

• Make sure the dog wants to eat the dog food. No matter how ground-breaking a new technology, how large a potential market, make certain customers actually want it.
• Build one business at a time. Most business plans are overly ambitious. Concentrate on being successful in one endeavor first.
• The time to take the tarts is when they're being passed. If an environment is right for funding, go for it. Venture capital goes in cycles.
• The problem with most companies is they don't know what business they're in.
• Even turkeys can fly in a high wind. In times of strong economies, even bad companies can look good.
• It's easier to get a piece of an existing market than to create a new one.
• It's difficult to see the picture when you're inside the frame.
• After learning some of the tricks of the trade, some people think they know the trade.
• Venture capitalists will stop at nothing to copy success.
• Invest in people, not just products.
  

***NOTE*** Take a look at the new Boulder Biotech Company Tree (HERE)!
***NOTE*** Read the new eBook CLSDF 2007 - What's In A Year? (HERE)!

If you enjoyed this post get free email or RSS updates (here).

How Do You Spell Telomere? T-T-A-G-G-G

Finishing off Michael West’s (founder of Geron NASDAQ: GERN and Advanced Cell Technology OTCBB: ACTC.OB) The Immortal Cell (TIC) left me with a lingering thought…my geophysical and other biases aside…Colorado truly is an amazing place, and without a doubt has been (since Keith Porter's arrival) and continues to remain at the forefront of innovation from regenerative medicine discovery (I’ll get to the TIC example in a moment) to personalized healthcare (take a peek at what ARCA Discovery is doing).

This post in no way intends to function as a book review, for I can barely link two clauses by a conjunction together, so I’ll steer clear from any evaluation efforts and will simply state that if you are interested in any aspect of regenerative medicine you should read Dr. West’s book.

Now onto the TIC example and the discovery of Telomerase. The founding of Geron and ACT owe a tremendous amount to the work carried out at the University of Colorado and the laboratory of Dr. Thomas Cech (Nobel Prize in Chemistry, 1989); these efforts and discoveries are highlighted in Dr. West’s book. Of great significance...it was members of the Cech laboratory who discovered the catalytic protein subunit of telomerase and cloned and sequenced genes encoding it in Euplotes, S. pombe, human, Tetrahymena and Oxytricha. The active site protein subunits comprise a new class of reverse transcriptases. The group has also identified the Protection of Telomeres protein that caps the very ends of chromosomes in S. pombe, human, and other eukaryotes, and is investigating its sequence specificity of ssDNA binding using both biochemistry and X-ray crystallography. Long-term goals are to understand the regulation of telomerase by DNA-binding telomere proteins and to understand the nuclear localization and trafficking of telomerase.

Science Biz: What Happened to Biotech?

I recently completed Science Business: The Promise, the Reality, and the Future of Biotech. Time spent reading was a rewarding allocation sans for Part I where author Gary Pisano, Professor of Business Administration at Harvard Business School, focuses upon a survey of the technologies, tools and theories that the biotechnology industry is built upon. Don’t get me wrong...I am way way far from all knowing however, to a person such as myself who has had some hands on the pipette experience Part I speaks to some basic concepts. If you are without such a foundation then I highly recommend digging in.

Key concepts hit upon include:

• The biotech industry has underperformed expectations, caught in the conflicting objectives and requirements between science and business.

• The industry needs to realign business models, organizational structures, and financing arrangements so they will place greater emphasis on long-term learning over short-term monetization of intellectual property.

• A lesson to managers: Break away from a strategy of doing many narrow deals and focus on fewer but deeper relationships.