Spotlight on Biotechnology: valuation challenges of early-stage companies. A case study on CRISPR Therapeutics AG and Allakos, Inc.

36 Pages Posted: 31 Dec 2020

See all articles by Dennis Marco Montagna

Dennis Marco Montagna

University of Pavia - Department of Economics and Management

Emanuele Fino

University of Pavia - Department of Economics and Management

Giovanni Nocera

University of Pavia - Department of Economics and Management

Antonio Amendola

affiliation not provided to SSRN; AcomeA SGR

Date Written: December 1, 2020

Abstract

High volatility, no predictable cash flows and technological uncertainties make Biotech-Healthcare companies’ valuation a challenging task for analysts and investors. Translating clinical promises into economic value represents a rough obstacle of this 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 the dynamics behind Biotech companies’ analysis, moving from the traditional valuation models to a risk-adjusted framework, including the technological and regulatory issues related to FDA (Food and Drug Administration) and EMA (European Medicine Agency) approval process. The efforts made have required a full immersion in a biological and clinical context that is far and beyond the common practice proper of the financial valuation field.

Keywords: Equity Valuation, Biotechnology, Volatility, Return, Stock pricing, Financial modelling, Value Investing, DCF, Real Option, Black & Scholes, CRISPR Therapeutics, Allakos, CRISPR, Cas9, Monoclonal Antibodies.

JEL Classification: G10, G11, C81

Suggested Citation

Montagna, Dennis Marco and Fino, Emanuele and Nocera, Giovanni and Amendola, Antonio and Amendola, Antonio, Spotlight on Biotechnology: valuation challenges of early-stage companies. A case study on CRISPR Therapeutics AG and Allakos, Inc. (December 1, 2020). Available at SSRN: https://ssrn.com/abstract=3755675 or http://dx.doi.org/10.2139/ssrn.3755675

Dennis Marco Montagna (Contact Author)

University of Pavia - Department of Economics and Management ( email )

Corso Strada Nuova, 65
Pavia, +39 0382 984402 27100
Italy

Emanuele Fino

University of Pavia - Department of Economics and Management ( email )

Strada Nuova, 65
Pavia, 27100
Italy

Giovanni Nocera

University of Pavia - Department of Economics and Management ( email )

Strada Nuova, 65
Pavia, 27100
Italy

Antonio Amendola

affiliation not provided to SSRN

AcomeA SGR ( email )

Largo Donegani
milano, 20121
Italy

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