This webinar will present a case study of an early-stage biopharmaceutical (“BioPharma”) company that requires an IRC 409A valuation in connection with the grant of nonqualified stock options to its officers. The webinar will discuss the various valuation methodologies and that the income approach, using a probability-weighted discount cash flow (PWDCF) model, is the most appropriate given the facts and circumstances. The primary focus will be on how to address and incorporate the inherent significant uncertainty into the NPV model for an early-stage BioPharma that historically has incurred negative cash flows and does not project positive cash flows for the foreseeable future. Participants should attend this webinar to learn that resources are available that provide guidance to the valuation specialist on levels of uncertainties for early-stage companies based on the stage of development.
Program Agenda
Case study fact pattern;
Valuation approaches and selection of PWDCF model;
Incorporating uncertainty into the PWDCF through the discount rate;
Data sources available for expected rates of return by venture capitalists (VC) that can be used for assessing discount rates for early-stage companies at various stages of development;
Applying the VC guidance on discount rates to subject company; and
Conclusion.
Learning Objectives
Become familiar with the valuation methods under the income approach;
Develop a PWDCF model to value an early-stage enterprise with historical and foreseeable future negative cash flows; and
Incorporate risk of uncertainty into the discount rate using rates of return required by VCs for early-stage enterprises at various stages of development.
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