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Research And Development Project Valuation And Licensing Negotiations At Phytopharm Plc, Pascale Crama, Bert De Reyck, Zeger Degraeve, Wang Chong

Zeger Degraeve

We describe a research and development project-valuation model developed for Phytopharm plc, a pharmaceutical development and functional food company based in Cambridgeshire, United Kingdom. Phytopharm uses the model to value the projects in its research and development portfolio, and in licensing negotiations with potential product development and marketing partners. We include different valuation methods, including net present value, decision analysis, and Monte Carlo simulation. We also consider the technological risks of product development, as well as the uncertainty of commercial success. In addition to determining a value for a product in development, the model proposes appropriate licensing contract structures. A …