There is also a calculation in which researchers will use to determine the number of patients needed for phase 3 clinical trials. This calculation of the proper sample size is necessary to assure adequate levels of significance and power to detect differences of clinical interest (see below).
Depending on how large the sample size of the phase 3 clinical trial, there are separate statistical analyses for each sample size. With one sample and a large sample size, a Z test is often used. With a smaller sample size of one sample, an exact binomial confidence interval is used, while a chi-squared test would test pre- and post- treatment experiments.
Phase 4 only occurs and is only applicable ...view middle of the document...
Profitability ratios are important, especially in regards to whether companies still have a patent(s) under their belt or if their product/platform is performing extremely well. High profit margins could be due to the new products a company has introduced or that its patents have not expired. These companies would have the power to command a high price in the market. However, low profit margin companies are not necessarily bad companies. Low profit margins could mean that the company is in pure research mode and could still bring their research to light and hopefully produce a platform in the market.
The return on total assets or ROA can also be a good indicator of a company that is able to utilize its assets better than the average company. This could represent that the biotechnology company is not being wasteful in its endeavors and instead are correctly utilizing its research to develop a drug or platform.
Liquidity ratios such as the current and quick ratios could represent a growing company that may have transformed itself into from purely a research company into a pharmaceutical company but they still concentrate on basic development activities. A common theme for pharmaceutical companies is to outsource many of its marketing activities. Low liquidity ratios could be directed to having a higher accounts receivables and inventories and as a result – higher working capital required for operations.
Research and Development Expenditure
Probably one of the most important financial tools to valuate biotechnology companies is the research and development expenditure numbers. Many companies spend more than 100% of its sales on R&D as they hope to acquire new products. Each of those products need to pass through the FDA’s new drug process and so all the payments and expenditures would be going towards the clinical trials.
3 Simple ways to Evaluate a Company Qualitatively http://www.nature.com/bioent/2003/030101/full/nbt0598supp_55.html
The discount dividend growth model uses a number of assumptions in order to produce an output of stock valuation. Instead of quantifying the issue, many analysts are still using qualitative characteristics in order to valuate a company. First, one should evaluate a biotechnology company’s overall strategic plan, in the context of what market its product would enter and how it would manage its entrance and its exit during the products’ growth stage. Considering the intangibles of this area, one can reflect the performance of the company over the past several years. This way, there can be an approximation on the historical average efficiency in managing the R&D effort.
The second parameter is the amount invested in R&D. As mentioned previously, the real value in R&D can significantly fluctuate, especially since it relies on the source of the investment and the timing of the investment. At the same time, earlier spending is more valuable than recent spending because it...