The Biotech Model

Free tools and short notes on biotech valuation, deal structure, and the business of drug development. Built for CEOs, BD leads, and investors who want the number and the reasoning behind it.

The Biotech Model

Deal Structure Calculator

Enter a licensing structure and see who actually gets the value once development risk and time are taken into account. Add a second structure to compare two term sheets side by side. Everything runs in your browser; nothing you type is sent anywhere.

The asset

Disease area Sets probability of success by phase

Stage at signing

Peak annual net sales $ millions, worldwide

Years to reach peak after launch

Years from launch to loss of exclusivity

Discount rate Percent per year; the split is shown at the partner’s rate

Licensee operating margin at peak Percent of net sales, before royalty

Operating margin in launch year Can be negative; ramps to the peak margin over the years to peak

Development timeline, costs, probabilities, and post-exclusivity assumptions

YearsCost $M

Preclinical to IND

Phase 1

Phase 2

Phase 3

Registration

Sales after loss of exclusivity Percent of the prior year, each year

Years of sales after loss of exclusivity

Royalty after loss of exclusivity Percent of the pre-LOE rate

Licensor’s own discount rate Percent; a small biotech’s cost of capital is usually higher than its partner’s

Rate used for the split The partner’s rate is the usual convention; a blend weights the two rates by each side’s share

If the licensor launched alone: peak sales Percent of the partner’s peak; sets the licensor’s walk-away value

If the licensor launched alone: years to peak

Tier 2 royalty applies to Incremental tiers pay the higher rate only on sales above the threshold

Deal terms

Compare a second structure

$ millions

Upfront payment

Milestone at Phase 1 start

Milestone at Phase 2 start

Milestone at Phase 3 start

Milestone at filing

Milestone at approval

Sales milestone Paid once, first year annual sales reach the threshold below

Sales milestone threshold Annual net sales, $M

Royalty, tier 1 Percent of net sales

Royalty, tier 2 Percent, on annual sales above the threshold

Tier 2 threshold Annual net sales, $M

Milestones for stages already completed at signing are switched off.

Who gets the value

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The full Excel model

Need more than a quick read? The Deal Structure Workbook is the full model behind this calculator: regional sales, co-development and profit share, a full P&L for each party, what every term is worth to each side, and two structures side by side. A one-time purchase of $299.

See the Excel model

Notes

Short, occasional notes on the practical side of biotech deal-making: what AI can and can’t do in a licensing negotiation, how to run a partnering process without a banker, and how to read a pharma’s BD priorities from its 10-K.

First notes arriving soon.

The Biotech Model

Who gets the value

The full Excel model

Notes

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