Stand-alone project Sales estimate Development cost Success probability Launch cost Sales projection Risk-adjusted NPV Sales scenarios Uncertainty: Projection +/Upwards probability Co-development contract Our project share Milestone Royalty rate 50% 0 10% 5 30% 80 100 1
Now 100
Project valuation Investment to proceed Project value
5 1
10% 50% Partner's valuation Payment to us Investment to proceed Their value
2.5 0.5
Our valuation Payment to us Investment to proceed Our value
2.5 0.5
Varying uncertainty Total 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 1 1 1 1 1 1 1 1 1 1 1 1 1 1 we 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 -0.82 They 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.62
13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 26% 27% 28% 29% 30% 31% 32% 33% 34% 35% 36% 37% 38% 39% 40% 41% 42% 43% 44% 45% 46% 47% 48% 49% 50%
1 1 1 1 1 1 1 1 1.15 1.3 1.45 1.6 1.75 1.9 2.05 2.2 2.35 2.5 2.65 2.8 2.95 3.1 3.25 3.4 3.55 3.7 3.85 4 4.15 4.3 4.45 4.6 4.75 4.9 5.05 5.2 5.35 5.5
-0.805 -0.79 -0.775 -0.76 -0.745 -0.73 -0.715 -0.7 -0.685 -0.67 -0.655 -0.64 -0.625 -0.61 -0.595 -0.58 -0.565 -0.55 -0.535 -0.52 -0.505 -0.49 -0.475 -0.46 -0.445 -0.43 -0.415 -0.4 -0.385 -0.37 -0.355 -0.34 -0.325 -0.31 -0.295 -0.28 -0.265 -0.25
0.755 0.89 1.025 1.16 1.295 1.43 1.565 1.7 1.835 1.97 2.105 2.24 2.375 2.51 2.645 2.78 2.915 3.05 3.185 3.32 3.455 3.59 3.725 3.86 3.995 4.13 4.265 4.4 4.535 4.67 4.805 4.94 5.075 5.21 5.345 5.48 5.615 5.75
Finding fair terms Milestones --> -5 9 7.8 6.6 5.4 4.2 3
Royalty rates
2.22E-15 0% 2% 4% 6% 8% 10%
-4 8.4 7.2 6 4.8 3.6 2.4
-3 7.8 6.6 5.4 4.2 3 1.8
12% 14% 16% 18% 20% 22% 24% 26% 28%
3.54 2.88 2.22 1.56 0.9 0.24 -0.42 -1.08 3
2.94 2.28 1.62 0.96 0.3 -0.36 -1.02 -1.68 2.4
2.34 1.68 1.02 0.36 -0.3 -0.96 -1.62 -2.28 1.8
Expected NPV of deal (in $ Mio)
Time of launch Launch decision 110 90
Deal value as a function of market uncertainty
7 6 5
4
80 30 Y 10 Y
3 2 1 0 -1 -2 0% 5% 10% 15% 20% 25% Scenario deviations from projected sales
Expected value of non-shared project
Deal value for us
0 80 19 Y 1Y
4 3
Expected NPV ($ Mio)
Expected value of deal as a function of royalty rate
0 11 9
2 1 0 -1 -2
-3
-4 -5 -6 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% Royalty rate
Varying royalty rate Total 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 1 1 1 1 1 1 1 1 1 1 1 1 1 1 We 0.5 -2.5 -2.2 -1.9 -1.6 -1.3 -1 -0.7 -0.4 -0.1 0.2 0.5 0.8 -0.52 They
Total value of un-shared project
Value to partner
Sum 0.5 3.5 3.2 2.9 2.6 2.3 2 1.7 1.4 1.1 0.8 0.5 0.2 0.02
1. Good solution for 30% uncertainty level is 6 2. Want more from downstream cake, i.e. high 1 3. Further increase royalty share 1 4. Partner suggests to turn terms around: The 1 1 1 1 1 1 1 1 1 1 -0.5
13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 26% 27% 28% 29% 30% 31% 32% 33% 34% 35% 36% 37% 38% 39% 40% 41% 42% 43% 44% 45% 46% 47% 48% 49% 50%
1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1
-0.355 -0.19 -0.025 0.14 0.305 0.47 0.635 0.8 0.965 1.13 1.295 1.46 1.625 1.79 1.955 -2.5 -2.5 -2.5 -2.5 -2.5 -2.5 -2.5 -2.5 -2.5 -2.5 -2.5 -2.5 -2.5 -2.5 -2.5 -2.5 -2.5 -2.5 -2.5 -2.5 -2.5 -2.5 -2.5
-0.145 -0.31 -0.475 -0.64 -0.805 -0.97 -1.135 -1.3 -1.465 -1.63 -1.795 -1.96 -2.125 -2.29 -2.455 -2.5 -2.5 -2.5 -2.5 -2.5 -2.5 -2.5 -2.5 -2.5 -2.5 -2.5 -2.5 -2.5 -2.5 -2.5 -2.5 -2.5 -2.5 -2.5 -2.5 -2.5 -2.5 -2.5
-0.5 -0.5 -0.5 -0.5 -0.5 -0.5 -0.5 -0.5 -0.5 -0.5 -0.5 -0.5 -0.5 -0.5 -0.5 -5 -5 -5 -5 -5 -5 -5 -5 -5 -5 -5 -5 -5 -5 -5 -5 -5 -5 -5 -5 -5 -5 -5
-2 7.2 6 4.8 3.6 2.4 1.2
-1 6.6 5.4 4.2 3 1.8 0.6
0 6 4.8 3.6 2.4 1.2 2.22E-15
1 5.4 4.2 3 1.8 0.6 -0.6
2 4.8 3.6 2.4 1.2 2.22E-15 -1.2
3 4.2 3 1.8 0.6 -0.6 -1.8
4 3.6 2.4 1.2 0 -1.2 -2.4
5 3 1.8 0.6 -0.6 -1.8 -3
1.74 1.08 0.42 -0.24 -0.9 -1.56 -2.22 -2.88 1.2
1.14 0.48 -0.18 -0.84 -1.5 -2.16 -2.82 -3.48 0.6
0.54 -0.12 -0.78 -1.44 -2.1 -2.76 -3.42 -4.08 0
-0.06 -0.72 -1.38 -2.04 -2.7 -3.36 -4.02 -4.68 -0.6
-0.66 -1.32 -1.98 -2.64 -3.3 -3.96 -4.62 -5.28 -1.2
-1.26 -1.92 -2.58 -3.24 -3.9 -4.56 -5.22 -5.88 -1.8
-1.86 -2.52 -3.18 -3.84 -4.5 -5.16 -5.82 -6.48 -2.4
-2.46 -3.12 -3.78 -4.44 -5.1 -5.76 -6.42 -7.08 -3
on of market uncertainty
30% ions from projected sales
35%
40%
45%
50%
Deal value for us
Deal value for partner
a function of royalty rate
20% 22% 24% 26% 28% 30% 32% 34%
Value to us Total value of co-development deal
olution for 30% uncertainty level is 6 Mio milestone and 10% royalty more from downstream cake, i.e. higher royalties (can buy 15% royalty share for 5 Mio milestone to partner) increase royalty share suggests to turn terms around: They agree to a 35% royalty against a 10 Mio milestone payment to them upon successful development
6 2.4 1.2 0 -1.2 -2.4 -3.6
7 1.8 0.6 -0.6 -1.8 -3 -4.2
8 1.2 2.22E-15 -1.2 -2.4 -3.6 -4.8
9 0.6 -0.6 -1.8 -3 -4.2 -5.4
-3.06 -3.72 -4.38 -5.04 -5.7 -6.36 -7.02 -7.68 -3.6
-3.66 -4.32 -4.98 -5.64 -6.3 -6.96 -7.62 -8.28 -4.2
-4.26 -4.92 -5.58 -6.24 -6.9 -7.56 -8.22 -8.88 -4.8
-4.86 -5.52 -6.18 -6.84 -7.5 -8.16 -8.82 -9.48 -5.4
m upon successful development