Question

17.       Determine the risk-adjusted present value of a biotechnology company after considering the risk factors below.                                                                                                                    (2 marks)

The biotechnology company has developed a new anti-cancer drug for Cancer X.

Risk Factor	Probabilty	Present Value
Company achieving strong patent protection for the new drug in desired jurisdictions around the world.	90%	$25,000,000
Company has a more effective drug treatment than a competitor that is also developing a drug for the same Cancer X.	85%
Company achieves licensing deal with a pharmaceutical company in the first 12 months of devlopment of this potential new drug for Cancer X.	5%
FDA in the United States grants final approval for use of this drug in Cancer X patients.	10%
Phase II trials show effective treatment of the disease after use of this new drug.	70%
Marketing shows public support and acceptance of this new drug.	100%

SECTION 3:

THE QUESTIONS BELOW RELATE TO “ANTISENSE THERAPEUTICS LIMITED”, AN AUSTRALIAN BASED BIOTECHNOLOGY COMPANY:

1. What does the company “Antisense Therapeutics” do?                                                   
2. What is the current market capitalisation of Antisense Therapeutics?                         (1 mark)
3. Who is the CEO of the company?                                                                                                 (1 mark)
4. What is the current share price of Antisense Therapeutics?                                             (1 mark)
5. What was the share price of the Company at 30 June 2015?                                            (1 mark)
6. Does the Company hold intellectual property rights? If so, how many (registered or in the process of being registered)?                                                                                                         
7. Is the company also licensing intellectual property from another company? If so, name the company.                                                                                                                          
8. What is the total equity in the company for the year ended 30 June 2019?                               (1 mark)
9. What amount of cash was received from Government grants for the year ended 30 June 2019?                                                                                                                                                       (1 mark).
10. The Company has highlighted the importance of the compound ATL1102. What is ATL1102 and what disease is it being used to treat? Does the company own the IP rights to this compound?                                                                                                                                                      
11. What is the Company’s plan to move forward with the testing of this drug?           
12. Did the Company’s make a net financial profit or loss for the year ending 30 June 2019? What was the figure?                                                                                                                                  

Answer 1

Ans. A)

Risk-adjusted Present Value or commonly known as Expected net Present Value is a capital budgeting approach which calibrates for uncertainty by computing net present values under different layouts and probability-leveraging them to get the most likely NPV.

Risk-adjusted Present Value (rPV) = Ʃ (Layout NPV x p)

where;

Layout NPV = NPV under a specific scenario

p = Probability of occurrence of each scenario

Here-in case,

Risk Factor	Probability	Layout Net Present Value	(rPV) (in $)
1. Company achieving strong patent protection for the new drug in desired jurisdictions around the world. 2. Company has a more effective drug treatment than a competitor that is also developing a drug for the same Cancer X. 3. Company achieves licensing deal with a pharmaceutical company in the first 12 months of development of this potential new drug for Cancer X. 4. FDA in the United States grants final approval for use of this drug in Cancer X patients. 5. Phase II trials show effective treatment of the disease after use of this new drug. 6. Marketing shows public support and acceptance of this new drug. ∴Risk-adjusted Present Value (rPV) =	0.90 0.85 0.05 0.10 0.70 1	25,000,000 25,000,000 25,000,000 25,000,000 25,000,000 25,000,000	22500000 21250000 1250000 2500000 17500000 25,000,000 88,875,000

Section 3 Information is incomplete. KIndly upload Section 3 questions again seperately. Thank You.