The Construction And Application Of Valuation Methods For New Drugs In China

In recent years Chinese pharmaceutical market has made great progress, but Chinesepharmaceutical companies still have weak abilities in drug innovation. In spite of manyproducts, they have few influential proprietary drugs. Chinese pharmaceutical companiesneed to improve their R&D, and on the other side it is necessary to get the innovative drugsfrom other sources, for example, in-licensing. More and more local companies scout the newdrugs overseas. They are searching for potentially profitable products and at the same timethe in-licensing of novel drugs do good to Chinese people. It is not easy to master thevaluation of new drugs and for the time being the valuation methods in the mainstreaminclude cost-based valuation, market-based valuation, discounted cash flow and real option.Especially the latter two methods are applied broadly. In the thesis the theory of DCF and realoption is described in detail, and the comparison of the advantages and disadvantages of thesetwo methods are conducted. The research on a case study is presented to give an explanationof the methods. The key factors in the valuation are spotted and introduced.Licensing business in the pharmaceutical industry is also introduced. The procedure of thelicensing include several steps, i.e. portfolio planning, licensing scout, modeling andvaluation, structuring the deal, due diligence and negotiation, deal closing and alliancemanagement. The thesis is expected to help the specialists in this area in China.