Value‐Based Management in Biosciences Research and Development

Gill Eapen

Journal of Applied Corporate Finance, 2005, vol. 17, issue 2, 105-112

Abstract: In industries such as biosciences, the range of uncertainty and managerial flexibility make traditional financial analysis such as discounted cash flow and decision tree analysis largely irrelevant for strategic decision‐making. In place of such traditional methods, this article proposes the use of decision options analysis, a real‐options‐based methodology that holds out the promise of better investment and portfolio decisions with fewer data requirements. Moreover, decision options analysis can be implemented with software tools that allow systematic application of these techniques. This article presents case studies that outline the actual application of real options analysis in licensing transactions and portfolio management in biosciences companies.

Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:bla:jacrfn:v:17:y:2005:i:2:p:105-112

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