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How Do You Value Biotech Stocks?
It's often said that biotech stocks trade on binary events, such as public disclosures of clinical trial data or regulatory approvals. That's true to some extent, but there's a bit more nuance for investors to consider.
Pre-commercial drug developers don't have recurring revenue, earnings, or operating cash flow to interrogate when determining fair value, which forces Wall Street analysts and savvy investors to lean on other valuation tools. Net present value (NPV) and risk-adjusted net present value (rNPV) models can be built to account for the lack of traditional financial fundamentals and…
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