Spotlight on Biotechnology: From a Technological Breakthrough to Valuation Challenges. A Case Study on Crispr Therapeutics and Crispr/Cas 9 Revolution.

Abstract

High volatility, no predictable cash flows and technological uncertainties make BiotechHealthcare companies’ valuation a challenging task for analysts and investors. Translating clinical promises into economic value represents a rough obstacle to be attractive business, especially in measuring the potential implications that scientific breakthroughs can bring to society and the size of the financial markets’ reaction to such events. The aim of this work is to provide a deeper understanding of dynamics behind biotech companies analysis, moving from traditional valuation models to a risk-adjusted framework, including the technological and regulatory issues approval process. We provide a full immersion in a biological and clinical context that is far and beyond the common practice proper of the financial valuation field. We focus on one of the potential technological disruptors within the clinical and healthcare framework: the CRISPR/Cas 9 system. These revolutionary “molecular scissors” are capable of editing genes by cutting out/repairing disease-causing DNA segment and inserting corrected ones, representing a potential “one-shot” cure for many diseases currently unmet by existing treatments. The potential of CRISPR/Cas9 companies inevitably pours over the financial markets and, in this work, we focus our analysis on CRISPR Therapeutics, the most advanced in clinical trials and the most complete in terms of pipeline products. This represents the perfect example of no-revenues company with an incredible technology breakthrough that could become a profitable investment opportunity. The analysis conducted has been the object of a University of Pavia master’s degree thesis. The following slides are related to the final dissertation held in June 2020 and can be considered as an anticipation of a research paper soon to be published.

Keywords: Valuation, Real Options, Biotechnology, CRSPR

JEL Classification: G10, G11, C81