Valuation of biotechnology firms: a quantitative modelling methodology Online publication date: Tue, 11-Jul-2006
by Sanjoy Bose
International Journal of Management and Decision Making (IJMDM), Vol. 7, No. 4, 2006
Abstract: The biotechnology sector is regarded as one of the growth engines in the development of the knowledge economy. To sustain this, it is imperative that they continue to attract capital for expansion. An important aspect of raising capital is their ability to impute a fair value on intellectual-assets, which is impeded by the vexatious nature of financial valuation of intangible assets, from which these firms typically derive their value. This study explores the financial and economic issues pertaining to the valuation of new biotech firms, which are evaluated vis-a-vis the value drivers of these firms. The value drivers are tested for significance and hypotheses are formed on their financial, economic and management implications. The investigative process involves using quantitative methods, such as descriptive statistics, logit modelling and multivariate regression, to evaluate the valuation issues in the context of the challenges faced in valuing these potentially high-growth and intellectual-capital intensive firms.
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