Category: Presentations


  • RESI Conference November 2017- Deal and Product Valuations

    RESI Conference November 2017- Deal and Product Valuations

    RESI Conference, New York November 2017, 37 pages

    Deal and Product Valuations

  • BIO IP & Diagnostics Symposium (IPDx) Keynote Session

    BIO IP & Diagnostics Symposium (IPDx) Keynote Session

    Dr. Patrik Frei was the keynote speaker at BIO IP & Diagnostics Symposium (IPDx) on 29th of September 2017. During the session, the Venture Valuation CEO discussed the valuation of biotechnology companies and products and its link to IP. He gave a short introduction to risk-adjusted net present value calculations, the main value drivers and a looked at how these can drive deal terms and negotiations.

    Download the notes.

  • Valuation Workshop at RESI Conference – Boston, September 2017

    Valuation Workshop at RESI Conference – Boston, September 2017

    During the last RESI (Redefining Early Stage Investments) Conference – the event series organized by Life Science Nation, a Venture Valuation long-time partner – Dr. Patrik Fried delivered a session on life science deal and product valuations.
    The notes from the workshop are available to download here

  • Assessing the Valuation of New Ventures – MassChallengeCH, Lausanne, September 2017

    Assessing the Valuation of New Ventures – MassChallengeCH, Lausanne, September 2017

    Venture Valuation CEO, Dr. Patrik Frei is one of the experts working as mentors for MassChallengeCH, a famous startup accelerator. He helps new entrepreneurs understand the concepts and meaning of company valuation.

    Below, you can find a link to the notes from his workshop about assessing a company prior to valuation.

    Assessing the Valuation of New Ventures September 2017

  • Valuation of Life Sciences Start-up – Questions and Answers

    Valuation of Life Sciences Start-up – Questions and Answers

    Last month, CEO of Venture Valuation, Dr Patrik Frei, delivered a live webinar titled ‘Valuation of Life Sciences Start-up’ to healthcare alumni of Harvard Business School

    You can watch the webinar here.

    Due to a large number of questions from participants, not all of them could be answered during the event. In this post, we present Dr Frei’s answers to the questions.

    Dr Patrik Frei
    Dr Patrik Frei

    Should the discount rate already capture the risk?

    Patrik Frei: The discount rate captures the non-product development specific risk, so not all the risk.

    Why are the discount rates so high if they do not include scientific risk? 

    PF: If we don’t use a risk adjustment, the discount rates can be as high as 60% or more, so 20% is not so high. See Nature article here

    Why do they overlap so much for different phases?

    PF: I assume this question relates to the discount rates for the different stages – because even at a later stage a company can have a higher non-product development specific risk than an earlier stage company. Thus, there is an overlap of discount rates.

    How do you build-in the experience of the biotech team in the risk assumptions? 

    PF: We have a rating system to take into account different aspects of the management team (experience, composition, motivation, incentive structure, boards, etc.). Also see here.

    Could you provide any comments regarding medical device start-ups?

    PF: Here it depends whether the company also needs to do clinical trials, so it depends on the class of product. In general, the timeline, costs and failure rates for medical devices are lower.

    The success rate seems important to valuation. To what extent do you tend to adjust these beyond therapy area like potential changes to the market place etc.?

    PF: We always review the specific product and then make the necessary adjustments to the success rate. The published success rates are the starting point and a good guideline.

    Are there any components of this exercise that are consistently/often underestimated/overestimated? For example, development costs are often more expensive by a factor of two in retrospect.

    PF: The timeline and cost of development are often underestimated. With regards to the market, we have seen both, overestimation but also underestimation. Especially if a product is very successful, sales can be much higher than anticipated. A good example is Gleevec/Glivec that was developed for an orphan indication but had peak sales of over USD 4,6bn in a year.

    Does using the stage-I just a discount rate, and addition to the further risk adjustment by the stage double count for the risk of development?

    PF: The discount rate does not include the risk of failure in a clinical trial. Thus it’s not double counting the risk.

    There are many assumptions in valuation, clearly.  How do you build into the case the ‘short term’ value of investing in a ‘sexy’ technology that might drive ‘perception of value’ for an entity that is NOT necessarily interested in long term value creation?

    PF: When we do valuation, we also do market and deal comparable valuation. This takes into account the sentiment of the market, which can change over time.

     How do the calculations and deals differ when considering a venture capital rather than pharma?

    PF: The basic calculations are the same. However, with Venture Capital, often an “added value premium” is used for the discount rate. It serves to compensate the VC providing smart money, i.e. network, know-how. However, one could argue a pharma company does also provide such added value. With regard to deals, having a VC on board often means that the company will raise equity and develop the drug further itself, thus getting a higher value later (but also taking a higher risk). Doing a deal with a pharma company means sharing the risk and getting some upfront payment right away. A later stage deal should provide better deal-terms, but the company would have to raise more money itself to develop the product further. Who takes how much risk depends very much on the deal terms.

    Could you give some pointers on valuing a medical device company/product, in particular, the one that goes via 510k route and does not require clinical trials?

    PF: When we do a valuation of a medical device company which does not have to do any clinical trials, we use the standard DCF method. Here all the risk would be integrated into the discount rate. See Nature article here.

    Could you give a bit more explanation about the discount rate? In the case study, 21% seems like a high discount rate when combined with the low “risk” or success adjustment.

    PF: Success rates and discount rates cannot be directly compared. The success rate is the probability that one or several stages of development are successful. The discount rate calculates the present value of future cash flows, so even though both are percentages, it’s a different concept.

    Do you have any guidelines for what valuations are typically achieved at various fundraising rounds, or at least what % ownership is often given up?

    PF: This is a very difficult question. Even though some investors use this approach, we would argue that it depends very much on the company, the technology, the market, the IP and the management. Every company is different and just because they are raising series A or B does not mean they are all more or less the same value. Also, how much equity the founders give away depends very much on the same rationale. It’s easy just to take an average number for a specific series, but this approach would incentivize below average companies to raise money from a certain investor and above average companies not to take money from him. So, unfortunately, I don’t have any average numbers.

    How do you value healthcare IT companies?  Is it comparable to the valuation of a software company?

    PF: We also use a DCF, market and deal comparable and the VC method. The risk adjusted net present value does normally not work for a healthcare IT company.

    Where do VC firms tend to invest these days?  Between Phase 2 and 3 or phase 1 and 2 or pre-NDA? How do their investment strategies differ from those of pharma companies?

    PF: It depends on geography, especially for VCs. In Europe and Asia where investors are more risk averse compared with the US, investors tend to invest at a later stage (clinical phase I and II). Phase 3 and pre-NDA require a lot of investment. This most often is not suited for VC investments. In the US we have seen more investments across the development stages (pre-clinical to pre-NDA). Pharma companies also tend to invest across all development stages.

    What are the differences between how VC ‘s look at the valuation for investment vs. pharma companies for strategic investment?

    PF: VC are mainly interested in the exit, so how easy and profitable can the company be sold in the future, thus generating a return for the VC. This is related to the set-up of funds with limited lifespans of 10 to 12 years. VCs also look at how much money needs to be invested in the company until an exit, as any future capital need will dilute existing shareholders. Strategic pharma investors look for a product that fits their existing sales force and/or cover a future area of interest/growth. Most corporate venture funds are also return driven but have certain focus areas that match the pharma partner’s needs.

    Choosing a discount rate should reflect risk level; why double down on this with rNPV? It seems like we’re accounting for risk twice.

    PF: The discount rate reflects the non-product development specific risk (anything that could go wrong unrelated to the success of a clinical trial), i.e. possibility to raise money or do a deal. The risk adjustment only considers the risk of the clinical trial.

    PF: Just a comment from a medical device perspective the process described here is similar, though some valuations are highly subjective. An example might be the Canadian robotics company Titan Medical, which has raised considerable funding over the past 6-8 years while failing to achieve any significant milestones.

    How does the determination of valuation differ for venture deals (VC), rather than in M&A scenarios? What other metrics and methods should be used by a biotech?

    PF: The basics for the valuation are the same. However, an investor often does not control the whole company (minority shareholder). In an M&A the buyer takes controlling ownership, thus would pay a premium for this (lower discount rate). For biotechs, we normally use the following methods: rNPV / sum of parts; deal comparable; market comparable; VC method.

    Watch the full webinar here.





  • Dr. Patrik Frei Delivers a Webinar to Harvard Business School Alumni

    Dr. Patrik Frei Delivers a Webinar to Harvard Business School Alumni

    On 7th of June 2017, CEO of Venture Valuation, Dr Patrik Frei, delivered a live webinar titled ‘Valuation of Life Sciences Start-up’ to healthcare alumni of Harvard Business School. The online event was a part of Healthcare Roundtable, a series of interactive presentations by industry leaders organised by HBS Healthcare Alumni Association.

    Dr. Frei talked about the significance of professional, independent valuation at different stages of a company life and presented details of the most commonly used method, risk-adjusted net present value method. He shared tips on how to properly structure a licensing deal, based on a valuation, and presented a case study from his vast experience.

    The presentation was followed by an intense Q&A session, but due to a large number of participants, some of the questions could not be answered immediately. Dr. Frei replied to the remaining questions by email and on our website after the event.

    You are very welcome to watch the webinar. We hope you find it interesting and useful.

  • RESI Conference June 2017- Deal and Product Valuations Workshop

    RESI Conference June 2017- Deal and Product Valuations Workshop

    Dr. Patrik Frei, Venture Valuation CEO and a worldwide known expert in life sciences company and product valuation, delivered a workshop on the topic during he Redefining Early Stage Investments Conference in San Diego.

    The notes from the workshop are available to download here.

  • Panel at JPM January 2017 – Future of Life Sciences

    Panel at JPM January 2017 – Future of Life Sciences

    The topic if this year’s evening event at JPM in San Francisco co-organized by Economic Promotion, KPMG and Venture Valuation was Designing The Future in Life Sciences – A Discussion About (Human) Capital & Innovation.

    How will life sciences look like in – let’s say – 2030? What are sustainable and future business models for biotech companies and investors? How will the global workforce change and how can companies prepare for future talent? Which global regions and cities will be leading in innovation and why? These and other questions about how the life sciences industry is shaping the future where the topic of this exciting evening.

    One interesting aspect of the discussion was the challenges big pharma will face in the future. Having had pressure and support from Biotech companies in the development of new products, panellist discussed the possible future impact on marketing and distribution by new companies for pharma – basically the “Uberisation” of big pharmas stronghold. There will be a whole range of new start-ups with services to challenge the traditional business models of pharma companies.

    See more on the event here.

  • Valuation and HealthTech in Asia

    RESI Conference, San Francisco January 2017, 23 pages

    Valuation and HealthTech in Asia, RESI (Jan 2017)

  • How to value your startup

    RESI Conference, Boston September 2016, 36 pages

    How to value your startup