Areas of Practice
Intellectual Property VAluation
We utilize real option and Monte Carlo methodologies in our patent valuations. Both approaches allow for the modeling of multiple, probability-driven outcomes that include gating events while eliminating the need, through the use of a replicating volatility portfolio, to estimate out-of-sample risk adjustment parameters.
Our valuation clients are some of the most successful firms in the life sciences and medical technology industries, including Carl Zeiss Meditec, GE Capital, Millennium Pharmaceutical, Cytyc, and Denderon, as well as scores of discovery and development stage firms.
Transaction Pricing and Analysis
We assist early stage firms that have been approached by a buyer in evaluating a term sheet or offer letter. Similarly, to demonstrate exercise of its fiduciary duties, companies possessing significant internal transactional resources engage us to corroborate deal pricing. We do so via the issuance of a fairness opinion, or through the delivery of a more consultative work product.
We have rendered fairness opinions on a variety of domestic and cross-border transactions, including a complicated, multi-currency exchange of shares between a state-owned company in the Philippines and a U.S.-based original equipment manufacturer.
Third-party price confirmation
Pricing of equity subject to stock rights (IRC 409A). We have rendered IRC 409A-conforming valuations on behalf of portfolio companies of top-tier investors, including those of Kleiner Perkins Caulfield & Byers, Kholsa Ventures, Mayfield Fund, and DFJ Gotham. Our work product is rigorous, transparent, defensible, and cost efficient.
Stock compensation (ASC 718). The Financial Accounting Standards Board requires that companies price and expense, at fair value, stock options issued as compensation. Its recent guidance has emphasized the superiority of a tree-based valuation approach over the traditional Black-Scholes methodology. A tree is also the model of choice when pricing options of private firms and/or firms that have blackout periods or other contingent conditions to vesting. Its high degree of flexibility makes it the methodology of choice when there are a number of factors potentially impacting the economics of an option grant. Over the years, our trees and Monte Carlo simulations have withstood scrutiny by auditors as they have prepared periodic regulatory disclosures on behalf of clients.
Goodwill impairment testing (ASC 350). Since the 2001 elimination of pooling accounting, firms are required to undertake annual impairment testing with respect to acquired goodwill. Impairment testing is a two-step process. First, the fair value of the asset is calculated and compared to its carried value. If it exceeds carried value, there is no impairment. If fair value is less than carried value, the asset is impaired and the amount of such impairment is taken as a non-cash expense in the period in which it occurred. We provide a client’s internal accounting and finance team a timely and cost-efficient corroboration of testing results prior to its filing of regulatory disclosures.
Acquisition asset allocation (ASC 805). We help clients defend the assignment of value allocated to tangible and intangible assets associated with a transaction. Our expertise in valuing life science patents applies to the pricing of intangible assets, including in-process research and development, customer lists, contracts, licensing agreements, trade names and trademarks, and non-compete agreements. On the sell side, we work with clients and their tax advisors to minimize the amount of recapture realized on a sale. For a buyer, we defendibly optimize the assignment of value to identifiable tangible and non-tangible assets thus minimizing residual goodwill and the risk of future write-offs.
Value monetization consulting
We work with early stage life sciences and medical technology firms, helping them identify the highest probability-adjusted present value pathway(s) for their IP or a portfolio of assets.
Our team brings regulatory and clinical trial experience to our engagements. Understanding the complexity of gating events and navigating the process of taking a therapeutic, test, or device through discovery, preclinical studies, trials, and the submission of the NDA or PMA, is critical to success. We have assisted scientists and entrepreneurs, as well as venture-financed firms that have discoveries and inventions in clinical trials.
We provide expert analysis and testimony in life sciences and non-life sciences related litigation in the areas of asset valuation and financial industry regulatory oversight. The extensive experience of the principals of Five Prime Advisors in exercising security industry-mandated firm supervision and oversight, uniquely positions us to provide expertise in legal proceedings that require an understanding of the issues at the intersection of financial regulation, asset pricing, and firm valuation.