Present Value of the partnership deal for 2 programs1 | Sepsis | Diabetes | Up front | 5 | 8 | Milestone | 10.8 for 10 years2 | 6.15 for 13 years2 | Royalty | 15%3*500*10%
=7.5
for 12 years4 | 10%3*4,000*12%
=48
for 12 years4 | Present Value | 102.12 | 184.10 | Probability | Occur | 75%*60%
=45% | 75%*40%
=30% | | Not occur
(Half-value deal) | 0 | 25%*95%
=23.75% |
Unit: Million USD 1. To calculate the present value, we use a discount rate of 8.22% according to the statistic of Cost of Capital by Sector as of January 2012, conducted by New York University Stern Business School. The COC of Drug Industry is 8.22%. (http://w4.stern.nyu.edu/~adamodar/New_Home_Page/datafile/wacc.htm) 2. According to FDA review, we assume sepsis program would be completed in approximately 10 years and 13 years for the diabetes. We split the milestone evenly through both time periods to discount a proper present value for milestone. 3. Based on FDA’s estimation, 2 in 13 or 14 drugs which complete phase I would survive phase III. So the sepsis is supposed to have a 15% possibility (2/13) to be commercialized and generate annual sales. Controversially, only 5% to 10% of drugs entering clinical trials were ultimately approved for marketing, which suits for diabetes condition. We employee 10% as the chance of success for diabetes. 4. Under United State patent law, for applications filed on or after June 8, 1995, the patent term is 20 years from the filing date of the earliest U.S. application to which priority is claimed (excluding provisional applications). In pharmaceutical industry, due to its long-time R&D circle, the average effective patent life is 11.5 years.
Thus, we calculate the present value of as below:
Present value=102.12*45%+184.10*(30%+23.75%) = 144.90 million USD

| Venture Capital firm | Wait six months | Angel Investors | Funding | Types | $10 million funding from single investor | No external funding | $2 million funding from many investors | | Lead Time | 3 Months | - | 6 Months | | Surviving Period | 166 Months | 11 Months | 33 Months | | Solvency | Improved | Same as before | Improved | | Grade | A | C | B | Pre-money valuation | | $15 million | If deals succeed: $25 million
If deals fail: $5~8 million | $17.5 million | | Grade | C | B | A | Interference | Control of
Management | 1. Anticipated to lay down restrictions
2. Changes to company structure & decision making process | Maintain current management system | 1.