Developing an Improved Risk-Adjusted Net Present Value Technology Valuation Model for the Biopharmaceutical Industry
The financial valuation of a drug that is still under development is required for various purposes. The risk-adjusted net present value (r-NPV) method, which recently emerged in the biotech industry, uses the development attrition rate as a discount factor to reflect risk during each development pha...
| Main Authors: | , , , , , |
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| Format: | Article |
| Language: | English |
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Elsevier
2019-07-01
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| Series: | Journal of Open Innovation: Technology, Market and Complexity |
| Subjects: | |
| Online Access: | https://www.mdpi.com/2199-8531/5/3/45 |
| _version_ | 1797423455294980096 |
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| author | Jonghak Woo Eungdo Kim Tae-Eung Sung Jongtaik Lee Kwangsoo Shin Jeonghee Lee |
| author_facet | Jonghak Woo Eungdo Kim Tae-Eung Sung Jongtaik Lee Kwangsoo Shin Jeonghee Lee |
| author_sort | Jonghak Woo |
| collection | DOAJ |
| description | The financial valuation of a drug that is still under development is required for various purposes. The risk-adjusted net present value (r-NPV) method, which recently emerged in the biotech industry, uses the development attrition rate as a discount factor to reflect risk during each development phase. The r-NPV method was developed to overcome the disadvantages of the prevailing discounted cash flow and real options methods and considers drug type, as well as the stage of development in its approach. Using this method, the current study examines technology values in the biopharmaceutical industry and matches the clinical development periods and success rates of these new drugs by analyzing datasets from ClinicalTrials.gov and MedTrack DB. It thus provides support for an empirical valuation model for experts in the field. Notably, there is limited research on the attrition rate and development period of new substance drugs and the research results are not consistently presented. In addition to new substance drugs, further research is necessary to deepen understanding of the attrition rate and development period of biologically-based drugs because of their inherent physical and developmental differences. Similarly, research on performance specifics within drug class models would enable refinement of the model. |
| first_indexed | 2024-03-09T07:47:12Z |
| format | Article |
| id | doaj.art-e5212ed720c94c66ade329771a3738c5 |
| institution | Directory Open Access Journal |
| issn | 2199-8531 |
| language | English |
| last_indexed | 2024-03-09T07:47:12Z |
| publishDate | 2019-07-01 |
| publisher | Elsevier |
| record_format | Article |
| series | Journal of Open Innovation: Technology, Market and Complexity |
| spelling | doaj.art-e5212ed720c94c66ade329771a3738c52023-12-03T02:52:49ZengElsevierJournal of Open Innovation: Technology, Market and Complexity2199-85312019-07-01534510.3390/joitmc5030045joitmc5030045Developing an Improved Risk-Adjusted Net Present Value Technology Valuation Model for the Biopharmaceutical IndustryJonghak Woo0Eungdo Kim1Tae-Eung Sung2Jongtaik Lee3Kwangsoo Shin4Jeonghee Lee5Graduate School of Health Science Business Convergence, College of Medicine, Chungbuk National University, Cheongju 28644, KoreaGraduate School of Health Science Business Convergence, College of Medicine, Chungbuk National University, Cheongju 28644, KoreaComputer and Telecommunications Engineering, Yonsei University, Seoul 26493, KoreaKorea Institute of Science and Technology Information (KISTI), Daejeon 02456, KoreaGraduate School of Health Science Business Convergence, College of Medicine, Chungbuk National University, Cheongju 28644, KoreaTechnical Valuation, Digital Science Co., Ltd., Seoul 06132, KoreaThe financial valuation of a drug that is still under development is required for various purposes. The risk-adjusted net present value (r-NPV) method, which recently emerged in the biotech industry, uses the development attrition rate as a discount factor to reflect risk during each development phase. The r-NPV method was developed to overcome the disadvantages of the prevailing discounted cash flow and real options methods and considers drug type, as well as the stage of development in its approach. Using this method, the current study examines technology values in the biopharmaceutical industry and matches the clinical development periods and success rates of these new drugs by analyzing datasets from ClinicalTrials.gov and MedTrack DB. It thus provides support for an empirical valuation model for experts in the field. Notably, there is limited research on the attrition rate and development period of new substance drugs and the research results are not consistently presented. In addition to new substance drugs, further research is necessary to deepen understanding of the attrition rate and development period of biologically-based drugs because of their inherent physical and developmental differences. Similarly, research on performance specifics within drug class models would enable refinement of the model.https://www.mdpi.com/2199-8531/5/3/45risk adjusted valuationnet present valueclinical trials development periodlikelihood of approvalpossibility of successdiscounted cash flow |
| spellingShingle | Jonghak Woo Eungdo Kim Tae-Eung Sung Jongtaik Lee Kwangsoo Shin Jeonghee Lee Developing an Improved Risk-Adjusted Net Present Value Technology Valuation Model for the Biopharmaceutical Industry Journal of Open Innovation: Technology, Market and Complexity risk adjusted valuation net present value clinical trials development period likelihood of approval possibility of success discounted cash flow |
| title | Developing an Improved Risk-Adjusted Net Present Value Technology Valuation Model for the Biopharmaceutical Industry |
| title_full | Developing an Improved Risk-Adjusted Net Present Value Technology Valuation Model for the Biopharmaceutical Industry |
| title_fullStr | Developing an Improved Risk-Adjusted Net Present Value Technology Valuation Model for the Biopharmaceutical Industry |
| title_full_unstemmed | Developing an Improved Risk-Adjusted Net Present Value Technology Valuation Model for the Biopharmaceutical Industry |
| title_short | Developing an Improved Risk-Adjusted Net Present Value Technology Valuation Model for the Biopharmaceutical Industry |
| title_sort | developing an improved risk adjusted net present value technology valuation model for the biopharmaceutical industry |
| topic | risk adjusted valuation net present value clinical trials development period likelihood of approval possibility of success discounted cash flow |
| url | https://www.mdpi.com/2199-8531/5/3/45 |
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