Anyone investing in biotech stocks will be faced with the challenge of finding the right price for a company’s shares. Experts share their most reliable valuation methods.
In part one of this series, we looked at how a biotech investor should look into many qualitative aspects of a biotech company’s business plan to decide if it is a good investment. In this second part, we will explore some of the most popular valuation methods experts use to determine the right price for a biotech stock, and how they decide if it’s worth investing in.
Unfortunately, there is no single formula that can condense the multiple parameters influencing a biotech stock — market potential, cash burn rate, the management team, the business strategy, intellectual property, and even unpredictable events such as a global pandemic. Still, the information gathered by investors can be translated into reasonable assumptions that can then be used to get a good idea of the worth of a particular investment in a biotech stock.
“Particularly for the valuation of early-stage projects,