rNPV (Risk-Adjusted Net Present Value)

The net present value of a drug programme’s cash flows after each year’s flow has been weighted by the probability that the programme reaches that point. The standard valuation for a development-stage biotech, applied programme by programme and summed. The gap between a programme’s unrisked NPV and its rNPV is the value that is still probability, which is why a trial readout moves a share price more than any change in the discount rate.

Where rNPV (Risk-Adjusted Net Present Value) comes up

Biotech Valuation: rNPV, Launch Curves and the Sum of the PartsA company with no earnings is valued on what its pipeline would earn if it worked, weighted by the chance that it does.Read the guide — 12 min Valuation: How the Methods Fit TogetherThree methods, one question. Learning them separately is why candidates can build a DCF and still cannot say what a company is worth.Read the guide — 11 min

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Biotech rNPV valuation guide

Related Healthcare terms

Probability of Technical and Regulatory Success (PTRS)Peak Sales Loss of Exclusivity (LOE)Gross-to-Net

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