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Deals that make sense

Nature Biotechnology volume 18, pages 719–722 (2000)Cite this article

By valuing and structuring their deals appropriately, biotechnology companies can earn higher returns, maintain greater control of intellectual property, and strengthen their partnerships with pharmaceutical companies.

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Figure 1: Financial compensation for the contributions of each deal partner.

© Bob Crimi

References

  1. An appropriate discount rate for pharma could be, for example, a pharma-marketing-specific weighted average cost of capital (WACC) of 9%. The rationale for using 9% is as follows: Grabowski and Vernon have suggested a 12% WACC for the pharmaceutical industry in general. In essence, they arrived at this figure by taking the risk-free rate of return on a 30-year US Treasury bond, which is 6%, and adding 3% for development risk and 3% for sales (market) risk. However, since we are valuing market risk here, it would be inappropriate to include development risk. Therefore, we end up with 6% (the risk-free interest rate) plus 3% (the pharma market risk), which gives a total of 9%.]

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Authors and Affiliations

  1. Regina A. Hodits, Friedemann Janus, and Alexander Moscho are associates, and Josef M.E. Leiter is a principal at McKinsey New Venture, Prinzregentenstraße 22, Munich, Germany

    Alexander Moscho, Regina A. Hodits, Friedemann Janus & Josef M.E. Leiter

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  1. Alexander Moscho
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  2. Regina A. Hodits
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  3. Friedemann Janus
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  4. Josef M.E. Leiter
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Moscho, A., Hodits, R., Janus, F. et al. Deals that make sense. Nat Biotechnol 18, 719–722 (2000). https://doi.org/10.1038/77279

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