The life sciences and healthcare markets are large, ranging from biotechnology and pharmaceutical companies to companies making medical devices, companies providing healthcare services, and even companies providing software or knowledge management technology.
Valuing companies in each of these sectors is different. Biotech and pharmaceutical companies face some of the longest development cycles of any industry. The time required for clinical trials and regulatory approval can be as long as 10 years. On the other hand, the patent protection provided to an approved compound can provide a longer life cycle for a product than in almost any other industry too. The long periods of time involved and the difficulty in predicting the likelihood of obtaining favorable test results and/or regulatory approval create unusual valuation challenges.
Companies making medical devices or IT products for the medical market do not face all of the same testing or regulatory obstacles, but they also face issues which can make valuation difficult, such as understanding reimbursement, getting designed in, or persuading physicians to begin using the product.
