Deals that make sense

Nature Biotechnology

Volumn 18, Issue 7, 2000, Pages 719-722

  Moscho, Alexander ^a   Hodits, Regina A ^a   Janus, Friedemann ^a   Leiter, Josef M E ^a  

^a McKinsey New Venture   (Germany)

Author keywords

[No Author keywords available]

Indexed keywords

BIOTECHNOLOGY; COOPERATION; DRUG INDUSTRY; DRUG MARKETING; ECONOMIC ASPECT; FINANCIAL MANAGEMENT; PATENT; PRIORITY JOURNAL; REVIEW;

BIOTECHNOLOGY; CANADA; COMMERCE; MARKETING OF HEALTH SERVICES; RESEARCH; RISK ASSESSMENT; UNITED STATES;

EID: 0033926327     PISSN: 10870156     EISSN: None     Source Type: Journal    
DOI: 10.1038/77279     Document Type: Review

References (5)

1. 2 have suggested a 12% WACC for the pharmaceutical industry in general. In essence, they arrived at this figure by taking the risk-free rate of return on a 30-year US Treasury bond, which is 6%, and adding 3% for development risk and 3% for sales (market) risk. However, since we are valuing market risk here, it would be inappropriate to include development risk. Therefore, we end up with 6% (the risk-free interest rate) plus 3% (the pharma market risk), which gives a total of 9%.]
2. Grabowski, H.G. & Vernon, J.M. A new look at the returns and risks to pharmaceutical R&D. Management Sci. 36, 804-821 (1990).
3. Harris, G. How Merck plans to cope with patent expirations. Wall Street Journal, February 9, A1 (2000).
4. Lerner, J. The control of technology alliances: an empirical analysis of the biotechnology industry. J. Ind. Econ. 46, 125-156 (1998).
5. Lerner, J & Tsai, A.I. "Financing R&D through alliances: contract structure and outcomes in biotechnology" in Proceedings of Allicense '99: Banking on innovation in the next millennium (Recombinant Capital ard Wilson, Sonsimi, Goodrich & Rosati, San Francisco, 1999).