Correspondence: Stephen Mayhew, Kinapse Limited, Tuition House, 27-37 St. George's Road, Wimbledon, London SW19 4EU, UK. E-mail: stephen.mayhew@kinapse.com

¹is a Manager in the Consulting Practice at Kinapse Ltd. Stephen has over 10 years' experience in life sciences organisations, focusing extensively on valuation, deal-making and asset and portfolio management within the pharmaceutical and biotechnology industries. Stephen holds a BSc with first class honours in biochemistry from the University of Liverpool, a PhD in biochemistry from the University of Leeds and an MBA with distinction from Imperial College Business School.

Received 29 September 2009; Revised 29 September 2009; Published online 3 November 2009.

Abstract

With fierce competition in the market for late stage life sciences assets, pharmaceutical companies seeking partnering strategies to bolster pipelines and drive long-term revenues are increasingly looking towards earlier stage compounds and technologies. Valuations are essential components of effective partnering transactions in the life sciences industry, however owing to the perceived uncertainty and risk associated with early stage life sciences technology, early stage valuations are a contentious area of valuation practice. Meaningful early stage valuations require new approaches that integrate complementary evaluation practices to build more widely accepted, balanced and transparent valuation outputs that facilitate productive and mutually beneficial transactions and form the basis for successful long-term partnerships. This article outlines a series of practical steps that encourage the use of encompassing approaches that blend complementary qualitative and quantitative techniques to build realistic and widely accepted early stage valuations. The methodology promotes rigorous interrogation of early stage life sciences technology to identify and characterise key value drivers, and advocates the development and simulation of robust practical scenarios to generate meaningful valuation outputs with practical relevance.