WOCP: dedicated to supporting collaborative
arrangements in the Pharma and Biotech Industry
arrangements in the Pharma and Biotech Industry
How much is your deal worth ?
Performing a Financial Analysis for the right Deal terms
Pharma deals involve enormous sums of money by any standards. A royalty of 8% on sales of $250m over 10 years represents a payment of $200m. Just a 1% additional royalty will give you $25m more ! How can you decide to agree on deal payments ?
- Is a royalty rate of 8% fair ? What not 15%, or perhaps 23% ?
- How much will the sales of your asset be per year for as long as you receive royalties ?
- How much money will it cost them to develop and sell your asset ?
- Every deal is different ! A tablet with a manufacturing cost of $0.5 per unit has a different margin from a vial of biotechnological product that may cost $500 per unit.
- A product that sell for $2 per unit has a different profitability from one that sells for $100 per unit and justify higher payments.
- What about the cost and timing of phase III ? Will it cost $50m ? $75m ? $85m? $100m ? It all has to be taken into account.
Trying to use past statistics for deals between other companies in most cases will not provide you with the correct deal structure and can lead you to either accept less, or lose the deal if you ask for too much.
WOCP offers some Deal Tools that can help you run your own calculations and decide what you think is a fair deal for you. Our Deal Tools is a financial model utilising relatively simple Excel spreadsheets to help you project your asset sales and Profit & Loss for both your side as well as the other side and get some guidance on how much your deal may be worth. If you are planning to negotiate millions, you need all the help you can get !
We will prepare and customise our Deal Tools model for your particular deal. If you would you like to buy it, please e-mail us at deal.tools@wocp.org
