Case Study: Valuing Strategic Partnering Decisions for a New Product

The Situation
Our client, a pharmaceutical company focused on developing, acquiring and commercializing novel therapies for treating chronic diseases, was considering a product acquisition. We were hired by a special board committee to assist them in evaluating potential partnering arrangements to support the product’s commercialization and to value the product rights for purposes of negotiating a purchase price. Due to a sensitive related-party issue between buyer and seller, the seller’s board required a Fairness Opinion supported by a credible and defensible valuation analysis.

The Solution
Potential partnering arrangements ranged broadly—from go-it-alone to a pure distribution agreement to co-marketing to out-licensing the rights—each with its own strong implications for future cash flow and risk. We quantified the value and risks of alternative partnering strategies, enabling the buyer to agree on their best commercialization path going forward. The fair value for product rights depended on critical uncertainties around FDA approval and timing, market size and share, pricing and other drivers in two key markets for the drug. Our valuation was supported by industry data, the client’s market research studies and benchmarks on R&D success rates and timing.

The Result
The client’s board reached agreement to pursue the acquisition and on a price to pay. Our results, including sensitivity analysis to key assumptions, were key to getting internal agreement and negotiating a deal with the seller. They successfully closed the deal and markets responded positively to the news.

The Duff & Phelps Difference
Industry expertise and deep experience in building credible financial projections and in strategy valuation delivered the insight and understanding our client needed in order to successfully close this transaction.