Karl D. Keegan’s Biotechnology Valuation Helps Navigate a Difficult Field

Biotechnology Valuation: An Introductory Guide

Biotechnology is producing quantum advances in medicine, but the specter of unforeseen consequences from treatments has brought with it a parallel growth in litigation.  Valuing biotechnology assets isn’t easy: generally accepted methods of discounted cash flows (DCF) and market comparison are sometimes difficult to apply in an industry rife with low probabilities of success, variable marketability, and patent lives shortened by the drug development and regulatory process.  Karl D. Keegan’s Biotechnology Valuation: An Introductory Guide helps consultants navigate this growing field. Lari Masten reviews.

The book Biotechnology Valuation: An Introductory Guide effectively describes the difficulties of long timeframes and high development costs in valuing biotechnology companies. Ultimately, Dr. Keegan provides the valuation practitioner with a useful array of valuation approaches.

Dr. Keegan provides the reader with the tools to determine the value of biotechnology companies from both a private and public market perspective. The author’s enthusiasm for the biotechnology industry comes through in his conversational writing style that never goes dry. The book keeps the reader’s attention as it interleafs chapters of increasing detail on either biotechnology or valuation until the two come together with a wide array of analytical tools. The book ends with chapters on biotechnology investing and how to address the highly speculative early-stage valuation.

The book exposes the reader to the biotechnology industry and provides perspective regarding the process of converting financial resources into new medicines.  The details of drug development provided include descriptions of the different clinical phases, current regulatory pathways, and the attributes that contribute to making a successful drug product. Throughout the book, relevant examples illuminate many concepts and specific applications. The book also provides an overview of the biotechnology industry in Europe, as well as a comparison of the similarities and differences between the European and the American regulatory process of getting drugs to market.

[pullquote]“Dr. Keegan provides the reader with the tools to determine the value of biotechnology companies from both a private and public market perspective.”[/pullquote]

This introductory guide will acquaint the non-biotechnology professional with the industry. The subject matter expert may skip remedial chapters, but even the most seasoned expert will find the decision tree application to discounted cash flows of medicine development very interesting. This book is useful for anyone interested in expanding his or her forensic career into the biotechnology field.

Dr. Keegan notes that, although some of the science underlying the drug development is innovative and exciting, the basic valuation models employed by the majority of the biotechnology companies are relatively straightforward.

Summary
What I really like about this book is that you do not have to read multiple books or sources to get a good foundation regarding the industry, its inner workings, or how to approach and/or understand the valuation process. As a litigation and valuation consultant, this book will give you a good background on the biotechnology industry and how your tools for valuation can be adapted and applied to biotechnology assets.  Dr. Keegan’s most helpful recommendation is using multiple techniques to triangulate a probable valuation range.  I would recommend this book for any litigation or valuation consultant interested in providing forensic services in a biotechnology case.

The Author
Karl D. Keegan holds a Ph.D in Pharmacology (Cambridge) and an MSc in Finance (London School of Business).  His career began as an academic scientist before moving into a commercial role in the pharmaceutical industry.  For the past 11 years, Dr. Keegan has been a financial analyst evaluating the biotechnology sector worldwide. Currently, Dr. Keegan is the Managing Director and Global Head of Life Sciences Equity Research at Canaccord Adams, a global investment bank that specializes in emerging and small to mid cap growth opportunities.

Product Information
Biotechnology Valuation: An Introductory Guide
By Karl D. Keegan
ISBN: 978-0-470-51178-7
Hardcover, 216 pages
Published January 14, 2009 by John Wiley & Sons Ltd., West Sussex, England
US $90

This product can be found on many websites, including www.wiley.com, www.amazon.com, and www.barnsandnoble.com.

Ms. Masten is the managing Director of Masten Valuation in Denver, Colorado. She focuses her professional time on litigation, goodwill impairment testing, business valuation, and consulting services as they apply to both private and public companies. Ms. Masten earned a Master of Science in Accounting degree from Texas Tech University, has served on NACVA’s Executive Advisory Board, and is a member of the national instructor team for NACVA. Masten can be reached at lari@mastenvaluation.com or (303) 331-4430.

This piece originally published in the March 2009 edition of National Litigation Consultants’ Review Newsletter.