Valuation of a Biotechnology Firm: An application of real-options methodologies
نویسندگان
چکیده
Much of the value contained in early stages of pharmaceutical projects is in the promise of developing a blockbuster drug. This is especially apparent for firms in the biotechnology industry. Many biotech firms have significant valuations, yet do not have product revenue because their products are in early stages of development. In the past ten to fifteen years investors have bid up the stock prices of these firms, and their prices have remained high relative to their discounted cash flow valuations. This is surprising to many investors, because some authors e.g. Grabowski and Vernon (1994) suggest that pharmaceutical research has a net present value close to zero.
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