The Royalty Rate Report A Comprehensive Assessment of Valuation in the Pharmaceutical Sector

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Sydney Wade
5 years ago
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1 A Comprehensive Assessment of Valuation in the Pharmaceutical Sector

2 Table of Contents Introduction Three Lessons on Royalties Too Often Learned the Hard Way Royalties, What s the Big Deal? Overview of the Report Effective Royalties Value Calculation The Visualisation of Deals Chapter 1 History Royalties: In the Beginning Mining and Petroleum Royalties: Incentives and Disincentives Royalties by Industry Sector Chapter 2 Thought Leadership Deconstructing Deals Benchmarks and Effective Royalties: The Benchmarking Challenge Benchmarking Effective Royalties Developing a New Methodology Is the Biotech Industry Different from Mainstream Pharma in its Royalty Requirements? Biotech Royalty Stacks Technology Royalty Stacks Offset Clauses in Royalty Stacks The 25% Rule of Thumb: If Only It Was That Simple! What is the 25% Rule? Overt or Covert Thoughts on Royalty Revelation Chapter 3 Benchmarking and enpv Methods for Calculating Royalties Return of Research and Development Costs Setting Royalties: The Tools

3 Benchmarking Deal Benchmarking in Practice Transfer Pricing: A Hidden Distortion to Royalties Expected Net Present Value (enpv) The Basics of enpv and NPV Calculation Cash Flows Relevant Costs Real vs. Nominal Figures Opportunity Cost/Time/Value Risk Decision Tree Analysis Further Refinement of the enpv Model: Sensitivity Analysis Development Cash Burn Chapter 4 Data and Trends Disclosure of Royalties: Why the Big Secret Who Was That Masked Man? Big Pharma Global Licensing Top 15 Big Pharma Royalty Rate Disclosure Frequency Pfizer GlaxoSmithKline AstraZeneca Novartis Merck & Co. Addressing Gaps in Agreements Licensing Deals in Japan: Culture and Tax Standard Terms: Exceptions to the Rule Royalties and Deal Structures Sales Milestones: A Royalty by Any Other Name Combining Sales Milestones with Tiered Royalties Alternative Structures Tiered Royalties An Analysis of Rates Used in a Recent Pharma Deal Royalties in Early-Stage Technology Deals Participation Royalties to Fund Development Costs Creativity: There s More Than One Way to Skin a Cat

4 Upfronts and Milestones: Are There Changes Afoot? Royalty Rates by Phase and Indication Preclinical Deal Royalties Phase I Deal Royalties Phase II Deal Royalties Phase III Deal Royalties Preregistration/Registered/ Approved Deal Royalties Launched Product Deal Royalties Royalties and Generics: The Beginning of the End? Royalties and IP Valuation IP Value and Market Cap Monetising the Royalty Stream The Utility Cost of Cashing In: Jam Today or More Jam Tomorrow? The Current Economic Climate and its Effect on Royalty Rates Chapter 5 Current Thinking Royalties: A Review of Recent Literature Auditing the Pharma Royalty Market: Lies, Damned Lies, and Statistics? Licensing Executives Society 2008 Addendum Royalty Rates Chart: 2005 Mid-2009 Drug X Utility Cost: enpv and Discount Rate Calculation Royalty Monetisers : Key Deals DRI Capital Paul Capital Royalty Pharma Royalty Rate Expectations in Pharmaceutical Agreements: Data from the 2007 PharmaVentures Survey General Approach Discovery-Stage Deals Preclinical-Stage Deals Phase I-Stage Deals Phase II-Stage Deals Phase III-Stage Deals Registered Product Deals

5 Launched Product Deals Drug Delivery and Royalty Rates Reach Through Royalties Summary Glossary of Terms Figures Effective royalty calculation (scenario A) Adjusted royalty calculation (scenario B) Royalty scenario comparison Dirucatide model 1 scenarios Dirucatide model 2 scenarios Garenoxacin model scenarios Biomol-x, Phase I effective royalty model Biologics royalty rates from 2005 to mid-2009 Non-biologics royalty rates from 2005 to mid-2009 PharmaDeals v2 Agreements database search engine Pharmaceutical product decision tree Royalty disclosure rates of licensing deals from mid-1996 to 2008 Royalty disclosure rates of royalty-bearing deals from mid-1996 to mid-2009 Big pharma licensing deals in the period Disclosed royalty rates of deals involving top 15 pharma companies from mid to mid-2009 Pfizer s licensing activity in the period GlaxoSmithKline s licensing activity in the period Volibris (ambrisentan) model scenarios AstraZeneca s licensing activity in the period Novartis licensing activity in the period Merck & Co. s licensing activity in the period Pexiganan effective royalty model (scenario A) Pexiganan adjusted royalty model (scenario B) Pexiganan adjusted royalty without sales milestones model (scenario B) Promacta (eltrombopag) sales forecasts for the period Promacta (eltrombopag) royalties forecast by tier for the period Steptrin sales forecast Steptrin flat royalties

6 Steptrin escalating royalties Steptrin reducing royalties Steptrin cumulative royalties Biomol-y effective royalty model (scenario A) Biomol-y adjusted royalty model (scenario B) Upfront value trends in licensing deals Milestone value trends in licensing deals Royalty value trends in licensing deals Upfront payments and milestones as a percentage of total payments in licensing deals Deal A vs. Deal B, apparent values of upfront payments and milestones Deal A vs. Deal B, phasing of upfront payments and milestones Preclinical royalty rates by therapy area for the period 2005 to mid-2009 Phase I royalty rates by therapy area for the period 2005 to mid-2009 Phase II royalty rates by therapy area for the period 2005 to mid-2009 Phase III royalty rates by therapy area for the period 2005 to mid-2009 Preregistration/Registered/Approved royalty rates by therapy area for the period 2005 to mid-2009 Launched product royalty rates by therapy area for the period 2005 to mid-2009 Expected licensor s enpv share by phase Addendum Percentage of respondents involved in in-licensing products at different stages of development, shown by company size Royalty rates for discovery-stage products Royalty rates for preclinical products Royalty rates for Phase I products Royalty rates for Phase II products Royalty rates for Phase III products Royalty rates for registered products Royalty rates for launched products Royalty rates for drug delivery licensing deals, 1996 Q and Q Royalty rates achieved with early-stage deals (discovery to Phase II) and latestage deals (Phase III to launched products)

7 Tables Distribution of royalty rates by industry Biologics royalty rates from 2005 to mid-2009 Effective royalty range by development phase Benchmarking sources Websites useful as sources of royalty data Benchmarking our deal Refining our benchmarks Probability of success by phase of development Variables in development costs: Impact on royalties Example of a basic enpv calculation for our demodrug Licensor share for our demodrug as royalties Licensor share for our demodrug as upfront payments, milestones and royalties Statistical analysis of disclosed royalty rates from deals involving top 15 pharma companies Promacta (eltrombopag) royalty tier contributions forecast for Steptrin escalating royalty tiers Steptrin reducing royalty tiers Participation rates by development stage NPV of deals A and B Utility cost and share of enpv for drug X Utility cost and share of enpv for drug X at a lower sales forecast Risk factors for late-stage and in-market drugs Addendum Chart detailing the financial details of deals recorded in the PharmaDeals v2 Agreements database from 2005 to September 2009 Drug X utility cost calculation DRI Capital s biopharma royalty interests Paul Capital s biopharma royalty interests Typical royalty rates for new pharmaceutical products as a function of development phase

How to value your start-up Dr. Patrik Frei January 2016 San Francisco

How to value your start-up Dr. Patrik Frei January 2016 San Francisco Overview Introduction to Valuation Valuation of start-up companies Valuation of a therapeutic Product Q & A 2 Venture Valuation Mission