Valuation in Life Sciences
Valuation in Life Sciences
" Valuation in Life Sciences (p. 67-68)
In the following part we discuss how the theory outlined in the previous chapter is applied to valuation in life science. First we look at the input parameters related to life science valuation and then at some special aspects, i.e. discounting, volatility and peak sales prediction, before moving on to the actual valuation. We start with the valuation of standard projects and then gradually move to the more complex problems. Every section includes a case study to illustrate practically how to use the theory. The exercises in the last part of the book complement the cases.
In the following chapter the reader learns more about the data required for valuation in life sciences companies. We first discuss drug development and then medical device development. The chapter shall serve as a reference for those readers not familiar with life science. For reasons of clarity, we have not included all publicly available data, but have generated a combination the user can apply to valuation.
Drug discovery following basic research can in most cases be broken down into four phases: Target identification, target validation, lead identification, and lead optimisation. In the following we briefly describe each phase for those readers not familiar with the topic.
Target identification: Biological research studies the basic cellular processes in the healthy and pathologic state. By comparing these states, disease responsible actors are identified as possible drug targets.
These targets are mainly proteins, such as cell surface receptors. Once a target has been selected, its interacting partners, biologic, and biochemical function is examined. A disease model is then set up and studied. Cultured human cells or animals such as mice serve as model.
Target validation: In search for the suitable target, each target for a given disease is compared to others and its potential in regulating biologic processes is assessed. The most promising targets are selected for further drug development.
Hit identification: In the next step, compounds acting on the selected target and leading to the looked-for change are discovered and characterized. Usually large libraries consisting of thousands to millions of molecules are used. Compounds interacting with the target, leading to the looked-for change, are selected, if present in the library. The identified compounds are called leads.
Lead optimisation: Lead optimisation is the stage during which medicinal chemists attempt to improve primary leads to achieve the best compromise between improved activity, bioavailability and safety. Often during this same stage of development, lead prioritisation studies are conducted in living organisms (in vivo) and in cells in the test tube (in vitro) to compare various lead compounds and how they are metabolised and affect the body. Once the optimised lead is chosen, it is taken to the last stage prior to human testing, the preclinical studies."