Valuation of Biotechnological Research: A Real Options Application for a Mexican Company

Elio Martinez-Miranda; Alejandra Cabello Rosales; Edgar Ortiz

Elio Martinez-Miranda Universidad Nacional Autónoma de México, Apartado 21-244 Coyoacan, Ciudad de Mexico
Alejandra Cabello Rosales Universidad Nacional Autónoma de México, Apartado 21-244 Coyoacan, Ciudad de Mexico
Edgar Ortiz Universidad Nacional Autónoma de México, Apartado 21-244 Coyoacan, Ciudad de Mexico

Keywords: Real Options, valuation biothec, compound options, antivenoms, Mexico

Abstract

This paper deals with the valuation of a project of Mexican Bioclon Institute, a firm producing antivenoms; this valuation comprises a R&D research portfolio of three antivenoms targeted to the US market. A compound option methodology is used. Bioclon Institute is a world leader in the production, research and development of fabotherapics; these products are manufactured using its own technology, recognized internationally; it is a large company of antivenoms globally and it is the only Mexican biotech company authorized by the US to conduct clinical trials. Real Options valuation constitutes an important analytical tool of limited use by managers and entrepreneurs in developing countries because they are not fully aware about this methodology and its benefits for strategic sequential project analysis.

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