The GenCure Case

WACC 8.00% p.a.

Risk-free rate rf 3.00% p.a.
Market price per risk unit λ 0.250

t [years] = 0.0 1.0

Project step = Clinical trial #3 and market study FDA approval

Investments
return FCFs

20 € 75%
- €
HIGH potential 25%
40%

30% 20 € 75%
- €
25%
MEDIUM portent

2.0 €
- €

20 € 75%
- €
20% LOW potential 25%

10%

- €
Not OK, STOP

t [years] = 0.0 1.0

Project step = Clinical trial #3 and market study FDA approval

Option events
 20.00 € 75%
619.35 €
HIGH potential 25%
40%

30% 20.00 € 75%

372.77 €
25%
MEDIUM portent

2.00 €
Net RO (t=0) 315.02 €

20.00 € 75%
117.50 €
20% LOW potential 25%

10%

- €
Not OK, STOP
μ= 383.07 € μ=
σ= 226.15 € σ=
Net RO (t=0) PV0 = 317.02 € PV0 =

μ=
σ=
PV0 =

μ=
σ=
PV0 =

Answers:

Task 1.1 : See lines 8 and 9.

Task 1.2 : See lines 11 to 41.
Task 2.1 : See lines 43 to 86.

If the licensee (big phrama company) pays also the investment in the next project step, the maximum
Task 2.2 : option value = 315.02.
If the licensee (big phrama company) does NOT pay the investment in the next project step, the maxim
gross option value = 317.02.

© by Claus HIRZMANN
 1.5 2.5 3.5 4.5
Production & commercialization

800 €
420 € 420 € 420 € 420 €
Launch Sell Sell Sell

- €
Not OK, STOP

500 €
260 € 260 € 260 € 260 €
Launch Sell Sell Sell

- €
Not OK, STOP

300 €
120 € 120 € 120 € 120 €
Launch Sell Sell Sell

- €
Not OK, STOP

1.5 2.5 3.5 4.5

Production & commercialization

800.00 €
1,011.09 € PVHIGH = 1,811 €

- €

500.00 €
621.15 € PVMEDIUM = 1,121 €

- €

300.00 €
217.46 € PVLOW = 517 €

- €

758.32 €
437.82 €
639.35 € 0.25 0.03

465.86 €
268.97 €
392.77 €

163.09 €
94.16 €
137.50 €
e next project step, the maximum license price is the net

n the next project step, the maximum license price is the

 5.5

420 € Ù annual returns

Sell

260 € Ù annual returns

Sell

120 € Ù annual returns

Sell

5.5