Q: I’m a student studying for my master’s degree and I’m currently working on my master thesis at a small biotech firm. The firm has a superb technology for protein expression in E.coli but problems conveying the value of the product. I obviously want to be of use for the firm, which leads to the question(s): This novel technology could be of great value for many CMO actors involved in biopharma/protein manufacturing, so how can I best convey this value? Is it all about the numbers ($), or can I convey other sorts of value with the opportunities this technology provides? What does the firm need — what value do we need to be conveying — in order to look professional enough for a possible partnership with a CMO company?

—Kim J.

A: To answer your second question first, if the technology involves a large commitment by the potential partner, it will have to justify this to a board, a bank, or an executive committee. In short, it is all about the numbers. As Lord Kelvin once said, “To measure is to know.”

For presentation to a potential partner, focus more on quantifying the specific benefits using your technology. In other words, provide credible details that allow a potential partner to value it. This means having good evidence that backs up your company’s claims. This helps the potential partner’s due diligence and value analysis.

Each potential partner will value your technology differently given that partner’s specific circumstances. This makes it hard for you to value each case. For example, you often see supplier companies advertise high return-on-investment from the purchase of their technologies. These are usually best-case scenarios not often found by most industry participants. In one instance, a supplier valued its technology by including the savings from reducing the factory footprint at a given process step. This overstated the value to the supplier’s potential customers. Most of the potential users of the technology already had building infrastructure in place. Thus, a smaller footprint at an intermediate manufacturing process step would not directly save money for the established biotechnology manufacturers.

While you don’t need a valuation estimate for a potential partner’s presentation, you do need to value this technology for internal purposes. A valuation helps management understand its potential worth to others. You also need it to develop pricing and negotiation plans and guide internal decision making. For example, a valuation will help determine the proper allocation of resources to protect and promote this technology.

There are many ways to measure value using internal models and employing techniques such as net present value, option pricing, and return on investment. It is equally important to understand the current market for competing expression technologies. With both proprietary and generic expression platforms available in the market today, an analysis comparing the benefits and costs of your company’s expression technology with others is crucial to your valuation. In addition, an analysis comparing your company’s technology versus others will help explain the benefits of your technology to a potential partner.

One last point, try to develop a simple valuation model. Usually people want detailed models. They believe that more detail leads to greater valuation accuracy. Many times, this greater granularity does not add to a better understanding of the technology’s value. In many instances macro-trends such as assumed growth rates, cost of capital, ease of technology implementation, pricing, utilization rates, and competing technologies have a greater impact on value.

—William Downey, President, HighTech Business Decisions

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A: I would first recommend determining who are your ideal CMO targets. My understanding of protein expression in E.coli technology has variables at different stages of expression which can influence a protein’s solubility. Your comments about the firm’s technology suggest that the process has been improved. Perhaps a novel reagent or a better technique. Whatever the improvement I would recommend building a presentation that illustrates this, but also presents potential benefit. Finally, I recommend researching a meeting that will likely have your targets in attendance and look for an opportunity to present at the meeting(s). It could be even during a poster session . . . some sort of venue to showcase your technology The main goal of all this is to start a dialogue with your selected targets. What your firm perceives as valuable may be different from that of the potential customer. Talking face to face with a potential customer will always be the best way to ultimately understand what is important to them; especially when conveying value. Good Luck.

—Greg Howell, Ph.D., Director of Business Development, Fisher Clinical Services