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Early-Stage Valuation in the Biotechnology Industry

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Biotechnology (or biotech) has impacted almost every aspect of human life. It has reorganized industries, drastically changed healthcare, helped to improve the environment, and led to important changes in laws and ethical norms.

Among the various biotech fields, medical biotech has been by far the most influential, beneficial, and controversial. It has generated not only superlative discoveries to improve the lifespan and quality of human life, but also the greatest amount of wealth for all the players involved, and the greatest volume of public debate.

Several important trends are shaping the future of the pharmaceutical (or pharma) and biotech industries. The biotech industry is characterized by the presence of strong clusters in all countries. The pharma and biotech industries are experiencing an outsourcing phenomenon, mainly due to a lack of in-house expertise and efficiencies. Diagnostics and therapeutics are increasingly converging, a trend that will lead to predictive and precise diagnostics and personalized and preventive medicine. The first few years of the twenty-first century have witnessed significant changes in the pharma/biotech alliance landscape. Today we are seeing the “omic”-ization of the biotech industry: most of the emerging technologies are genomics, proteomics, cellomics, and pharmacogenomics. In addition, the biotech industry faces uphill ethical issues, including excessive marketing, third-world drug availability, genetic engineering, stem cells, and cloning.

The medical biotech industry faces several challenges. First, science, the human body, and disease are, essentially, complex. Second, unlike other high-technology industries, the biotech product development cycle is very long, even after proof of concept. Biotech projects take between ten and twenty years to become successful and cost over $200–300 million before a product reaches the market. Third, delivery of most biotech products and therapies is complex and can be painful, often involving intravenous delivery. Fourth, the preceding three factors pose significant challenges for research and development (R&D) financing. In addition, there are certain outside determinants that influence the biotech industry, including regulation, demography, reimbursement climate, and big pharma companies.

Stem cell research is one of the most fascinating areas of biology, but it raises questions as rapidly as it generates new discoveries. The greatest potential application of this research is the generation of cells and tissues that can be used for cell-based therapies. A stem cell is a special kind of cell that has a unique capacity to renew itself and to give rise to specialized cell types. Through the process of differentiation, stem cells form various tissues and organs, and the combination of these differentiated materials develops into the whole human body. This class of human stem cell holds the promise of being able to repair or replace cells or tissues that are damaged or destroyed by many of our most devastating diseases.

Diabetes mellitus is a group of diseases characterized by high levels of blood glucose resulting from defects in insulin production, insulin action, or both. Diabetes mellitus is a type I diabetes—also called juvenile-onset diabetes or insulin-dependent diabetes—and develops when the body’s immune system destroys pancreatic beta cells, the only cells in the body that make the insulin that regulates blood glucose. Type II diabetes, also called adult-onset diabetes or noninsulin-dependent diabetes, may account for 90–95 percent of all diagnosed cases of diabetes. There are more than 194 million diabetics worldwide, with this number expected to exceed 333 million by 2025.

Insulin is currently the most effective drug for controlling hyperglycemia and is widely accepted as the gold standard for treating type I diabetes and even late-stage type II diabetes. However, physicians and patients are reluctant to use insulin until other less effective drugs have been attempted. This is mainly because insulin therapy is invasive and painful: patients must take insulin intravenously.

One of the most promising ways to cure diabetes is to restore the function of islet cells biologically, either through islet cell transplantation or by engineering cells to restore the insulin secreting function. Islet transplantation, a procedure that can restore insulin production in patients, is a highly promising area of research.

Based on analysis of stem cell research, diabetes market opportunities, and the development of stem cell therapies, it is possible to place a value on a company in the early (preclinical) development stage of a stem cell therapy for diabetes. Such an exercise involves valuing a company based on three different approaches—(1) the discounted cashflow model, (2) the royalty or licensing model, and (3) the comparables valuation model. Sensitivity analysis based on market, pricing, costing, R&D, and development stage can further lead to precise valuation range for a given company.

For biotechnology companies, various drivers play a critical role in company valuation, including people (management team), alliances and partnerships, intellectual property rights, R&D and technology, funding and financing, market opportunity, and therapeutic area.

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Population Aging, Child Health and Control of Infectious Diseases

The Asia Health Policy Program works with other researchers at Stanford and several countries of the Asia-Pacific to analyze prominent issues in population aging, child health, and control of infectious disease. Examples include comparative study of long-term care insurance and informal caregiving; collaborative study of health and healthcare access for children with special health needs; and a research project focusing on controlling tuberculosis and multi-drug resistant tuberculosis in Northeast Asia.

Economic Consequences of Population Aging in Asia

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Dr. Lee currently holds the Edward G. and Nancy S. Jordan Endowed Chair in Economics and is a professor in the Department of Demography at University of California - Berkeley (Berkeley). He has taught courses in economic demography, population theory, population and economic development, demographic forecasting, population aging, indirect estimation, and research design, as well as a number of pro-seminars.

Professor Lee is also the director of the Center on the Economics and Demography of Aging at Berkeley, funded by the National Institute of Aging. His current research includes including modeling and forecasting demographic time series, the evolutionary theory of life histories, population aging, Social Security, and intergenerational transfers.

He has received several honors, including Presidency of the Population Association of America, the Mindel C. Sheps Award for research in mathematical demography, the PAA Irene B. Taeuber Award for outstanding contributions in the field of demography. He is an elected member of the National Academy of Sciences, the American Association for the Advancement of Science, the American Academy of Arts and Sciences, and a Corresponding member of the British Academy. He has chaired the population and social science study section for NIH and the National Academy of Sciences Committee on Population, and served on the National Advisory Committee on Aging (NIA Council).

Professor Lee holds an MA in demography from the University of California, Berkeley, and a PhD in economics from Harvard University.

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Ronald Lee Director of the Center on the Economics and Demography of Aging Speaker University of California - Berkeley
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Jongkyu Park

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For the past 14 years, Jongkyu Park has worked on various macroeconomic policy issues of Korean economy including economic forecasts, monetary policy, inflation, budget deficit, exchange rate, savings rate, population aging, realestate bubble, Japan's economic slowdown and revival, etc. He received B.A. in Economics from Seoul National University in Korea, M.S. in Statistics from University of North Carolina at Chapel Hill and Ph. D. in Economics from Princeton University.

Japanese voters express desire for change by delivering a historic win to the opposition party in the July 29 Upper House elections.

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Japan's ruling party suffered a historic defeat Sunday. For the first time since the conservative Liberal Democratic Party (LDP) was formed in 1955, an opposition party has become the largest party in the upper house.

The powerful message delivered by Japanese voters has significant implications not only for Japan but also for the rest of the world, not least for its close ally, the United States.

The election result revives momentum in Japan toward creation of a viable two-party system, potentially ending the conservative postwar monopoly on power. Japanese voters expressed deep anxiety about the impact of economic change upon their treasured social order. They embraced the campaign of the Democratic Party (the main opposition) against growing income inequality and the failure of the state to take care of an aging population.

Equally important, the vote was a humiliating defeat for Prime Minister Shinzo Abe's agenda of giving priority to revising Japan's antiwar Constitution and allowing its military to take on a global role in support of the US. Democratic Party leader Ichiro Ozawa effectively portrayed Mr. Abe as a man out of touch with the concerns of ordinary Japanese. But he also articulated an alternative vision of Japan's international role, calling for closer ties to its Asian neighbors and sending troops overseas only under the auspices of United Nations peacekeeping missions.

Since 9/11, Japan has been among the most loyal, if not unquestioning, of US allies. It sent troops to Iraq, provided logistical support to the war in Afghanistan, and outdid the US in putting pressure on North Korea. Most recently, Abe echoed the rhetoric of the Bush administration, calling for formation of a "values-based" alliance of democracies along with India and Australia, implicitly aimed at containing a rising China. The election results will certainly slow, if not reverse, this tight synchronization.

For the business community, the vote will raise concerns that needed economic policy actions such as fiscal reforms will get stalled in a gridlocked parliament. The vote reminds politicians that the economic recovery has left an awful lot of Japanese behind, with real wages falling, youth unemployment high, and the elderly drawing down their savings to survive. Abe's feel-good rhetoric and focus on security just angered those Japanese.

There remains strong support for gradual change. Most Japanese want the country to take on a more "normal" security role, but one that will stop far short of overdrawn fears of a remilitarized Japan. And many Japanese, particularly in the younger generation, back economic reform, though not at the expense of social stability.

The most intriguing question is the future of Japan's democracy. Abe is resisting calls for his resignation, attributing the vote to a series of scandals in his Cabinet and most of all to the revelation that the government's national pension system had lost the records of some 50 million people. The election result was bad luck, Abe claimed, not a repudiation of his administration's overall policies -- a view shared by Washington policymakers.

Exit polls do confirm that voters were strongly motivated by these issues. But they also express little faith in the personal leadership of Abe, who tried to cover up the pension debacle. He suffered from an unfavorable comparison to his predecessor, Junichiro Koizumi, one of Japan's most popular postwar leaders.

But the election suggests that Mr. Koizumi's personal charisma only temporarily reversed a longer trend of drift away from the ruling conservatives, particularly by unaffiliated swing voters in Japan's cities and suburbs. Mr. Ozawa, one of Japan's most brilliant politicians, managed to both regain those voters and steal away traditional conservative backers in rural areas among farmers and pensioners worried about their future.

Ozawa, whom I have known for more than two decades, is a man of uncommon political vision. He is a former LDP stalwart who has relentlessly pursued the goal of creating a clearly defined two-party system that can create real competition. He was the architect of a split in the LDP that briefly brought the opposition to power in the early 1990s.

Over dinner last fall, Ozawa laid out to me what seemed then like an incredibly audacious plan to regain power. First to win a series of local elections, leading up to a defeat of the LDP in the upper house election, forcing in turn the dissolution of the lower house and new elections. He clearly hopes to split the LDP again and pry away its coalition partner, the New Komeito Party, as part of his strategy of realignment.

The Democratic Party has yet to demonstrate its own ability to rule, but it would be unwise to underestimate Ozawa. And it would be foolish to dismiss the desire for change delivered by Japanese voters on Sunday.

Reprinted with permission by the Christian Science Monitor.

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Karen Eggleston

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Senior Fellow at the Freeman Spogli Institute for International Studies
Center Fellow at the Center for Health Policy and the Center for Primary Care and Outcomes Research
Faculty Research Fellow of the National Bureau of Economic Research
Faculty Affiliate at the Stanford Center on China's Economy and Institutions
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Karen Eggleston is a Senior Fellow at the Freeman Spogli Institute for International Studies (FSI) at Stanford University and Director of the Stanford Asia Health Policy Program at the Shorenstein Asia-Pacific Research Center at FSI. She is also a Fellow with the Center for Innovation in Global Health at Stanford University School of Medicine, and a Faculty Research Fellow of the National Bureau of Economic Research (NBER). Her research focuses on government and market roles in the health sector and Asia health policy, especially in China, India, Japan, and Korea; healthcare productivity; and the economics of the demographic transition.

Eggleston earned her PhD in public policy from Harvard University and has MA degrees in economics and Asian studies from the University of Hawaii and a BA in Asian studies summa cum laude (valedictorian) from Dartmouth College. Eggleston studied in China for two years and was a Fulbright scholar in Korea. She served on the Strategic Technical Advisory Committee for the Asia Pacific Observatory on Health Systems and Policies and has been a consultant to the World Bank, the Asian Development Bank, and the WHO regarding health system reforms in the PRC.

Economics of Health and Aging in Asia

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Director of the Asia Health Policy Program, Shorenstein Asia-Pacific Research Center
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Faculty Fellow at the Stanford Center at Peking University, June and August of 2016
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Breakdown of Monoethnic Society in South Korea: The Influx of Foreign Laborers and the Aging of the Population

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One aspect of globalization that is receiving increasing scholarly attention is international migration, especially the transnational migration of workers. Practically every country of the world is affected in one way or another as either a sending or a receiving country. There are reportedly more than 500,000 foreigners residing in South Korea, with unskilled transnational migrant workers accounting for about a half of these.

Although the country's reliance on imported foreign labor is likely to continue unabated, the Korean government and society as a whole have been generally intolerant of foreigners living in Korea.

This paper examines various social factors, including the country's record-low fertility rate and rapid aging of its population, that all point to the continuation of labor importation. Such immigration will contribute to the making of a multiethnic Korean society.

The paper then analyzes the cultural factors that account for Koreans' low receptivity to foreigners and argues that it is the cultural ideology of ethnic homogeneity, based on the "one ancestor myth," that fuels an intense pride and stake in cultural uniqueness, linguistic homogeneity, and historical collectivity-sensibilities that government policy reinforces.

Andrew Eungi Kim is an Associate Professor in the Division of International Studies at Korea University and is currently a Visiting Professor at the University of California, Berkeley. He received his Ph. D. in sociology from the University of Toronto in 1996. His primary research interests pertain to cultural studies, sociology of religion, social change, sociology of work, and comparative sociology.

Currently, he is revising two book-length manuscripts for publication: "The Rise of Protestant Christianity in South Korea: Religious and Non-Religious Factors in Conversion" and "Understanding Korean Culture: The Persistence of Shamanistic and Confucian Values in Contemporary Korea."

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Daniel Sneider on global lessons for U.S. immigration policies

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Shorenstein APARC Pantech Fellow and San Jose Mercury News foreign affairs columnist Daniel C. Sneider compares the effects of dual-class immigration policies in Singapore with those of the United States. "Rather than guest workers," he asks, "isn't it more American to set realistic immigration quotas and enforce them fairly?"

The fierce debate on immigration ignores a crucial reality -- what is happening to the United States is only one piece, although a big one, of a much larger global picture.

That hit me a couple of weeks ago when I was in Singapore. The Southeast Asian island nation has long been hailed as an economic model, the business capital for the entire region.

But it is an economy facing demographic peril. Its small population of 4 million is shrinking, thanks to a very low fertility rate. Prosperous Singaporean couples work hard, have fewer children and worry about how to take care of their aging parents. By 2050, Singapore will have a median age of over 52, one of the oldest in the world.

Singapore's answer is to import labor. A third of its workforce are migrants, from construction workers to maids. One out of seven households employs a domestic worker -- low-paid women mostly from neighboring Philippines and Indonesia.

Singapore tries to lure "talents'' -- highly skilled and affluent migrants -- to stay permanently. But the men hauling bricks and the maids washing laundry are in a separate class of temporary guest workers, with no chance to join Singaporean society. If a maid becomes pregnant, she is shipped out within seven days. Employers have to post bonds that must be paid should their servants break the rules and try to stay, putting them in the role of migrant police.

Problems of abuse of domestic workers, including physical and sexual violence and confinement, are serious enough to have prompted a report last December by Human Rights Watch.

Singapore's dependence on migrant labor and its guest-worker policy may be at the extreme end but it's very much on the global spectrum. Labor, like capital and goods before it, is part of a global market. The movement of people across borders in search of wages and work, most of it from developing countries to developed, is growing at a phenomenal pace.

The numbers are staggering. From 1980 to 2000, the number of migrants living in the developed world more than doubled from 48 million to 110 million. Migrants make up an average 12 percent of the workforce in high-income countries. About 4 million migrants cross borders illegally every year.

The demand for labor is driven in part by a demographic disaster -- the falling birth rates of developed countries. Almost all of those countries now have fertility rates that are well below 2.1, the level at which a population replaces itself. At the very low end are Hong Kong (0.94), Korea (1.22) and Singapore in Asia (1.24), along with much of Eastern Europe.

Low fertility means shrinking workforces and aging populations. Without migration, according to a recent study, Europe's population would have declined by 4.4 million from 1995 to 2000. Immigration accounted for 75 percent of U.S. population growth during the same period.

This movement of people cannot be stopped, certainly not by hundreds of miles of fences or even by tens of thousands of border guards. It is an issue that cries out for global cooperation, for common policies that cut across national boundaries. Already, we can benefit from looking at what has worked -- and not worked -- elsewhere.

A Global Commission on International Migration, formed in 2003 by the United Nations secretary-general, has taken an initial stab. Their report, issued last winter, supports the growth of guest-worker programs.

The Senate immigration bill now up for debate includes a provision for a guest-worker program. The bill is clearly preferable to the punitive and ineffective approach of the House version. But the Singapore experience -- and previous guest-worker programs like the German import of Turks -- should prompt second thoughts about going down this road.

One problem is that the guests don't leave. The United States has its own experience with this in the bracero program to import farmworkers, and more recently with the supposedly temporary H1-B visas used so extensively by the high-tech industry here in Silicon Valley.

Most troubling to me, these programs create an underclass of migrants who are never assimilated, as happened in Germany. It sets us on the Singapore road, encouraging inhumane policing mechanisms. And it is a gilded invitation to employers to depress the wages and incomes of American workers, and not just in the dirty jobs that are supposedly so hard to fill.

The United States has been rightfully proud of a tradition that treats all immigrants as citizens in the making. Rather than guest workers, isn't it more American to set realistic immigration quotas and enforce them fairly?

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Call for proposals: Shorenstein APARC establishes new fund for comparative health care policy research

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The Walter H. Shorenstein Asia-Pacific Research Center (Shorenstein APARC) at the Freeman Spogli Institute for International Studies at Stanford University invites applications to receive funding grants for activities or programs focusing on health care policy in Asia. Shorenstein APARC welcomes research proposals on a wide range of topics from diverse disciplines, but has particular interest in international studies of demography; the effects of an aging population on social, economic, and political systems; and the causes and prevention of epidemics such as AIDS and Avian Influenza in Asian countries.

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Land Management Reform in Asia: From the National to the Sub-national

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Lin Shu-ya will discuss the Taiwanese government's reserved land policy that is aimed at aiding indigenous people to be self-sufficient and integrate into mainstream society. This policy has been the main government policy for 50 years even though Ms. Lin argues that collective management might be a better option for the indegenous communities, allowing them to collectively manage their traditional territory. Varamon Ramangkura will discuss te impact of recent WTO free-trade versus the environment disputes on industry in Thailand. Ms Ramangkura will show that pressure from the WTO on the Thai government is forcing the closure of local shrimp farms and reducing the sustainability of this industry in Thailand. Shimamura Kazuyuki will analyze the problems of the land use system in Japan. Even after recent reforms in land use, the municipalities enact undemocratic, informal and opaque local ordinances for land use. Mr. Shimamura argues that the reforms must be adopted by the local governments and made fiscally transparent, be based on the needs of the citizens and that there is a necessity to create a legal foundation for broader delegation, particularly regarding the comprehensive planning system at the municipality level.

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Lin Shu-ya Fellow Stanford Program in International Legal Studies
Varamon Ramangkura Fellow Stanford Program in International Legal Studies
Shimamura Kazuyuki Fellow Stanford Program in International Legal Studies
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