The Risk-Adjusted Net Present Value (rNPV) method is the industry standard for valuing drug candidates, biotech pipelines and medical technologies. A standard DCF uses a single high discount rate. rNPV instead weights each future cash flow by the probability that the asset successfully reaches that stage, from preclinical through Phase I, II and III to regulatory approval and launch.
When to Use rNPV
- Biotech fundraising: Series A to pre-IPO rounds, and Hong Kong 18A and similar listings
- Licensing and partnering deals: valuing upfront payments, milestones and royalties
- M&A and purchase price allocation: in-process R&D and acquired pipeline assets
- Impairment testing of capitalised development costs and acquired IPR&D
- Portfolio prioritisation: deciding which programmes to advance
How rNPV Works
- Map the development timeline: the current phase, the expected duration of each remaining phase and the approval date.
- Forecast cash flows: R&D and trial costs, then commercial revenue (patient population, pricing, peak share and ramp-up) and costs up to patent expiry.
- Apply probabilities of success: phase-transition probabilities by therapeutic area and modality, from industry benchmark studies.
- Calculate expected cash flows: cumulative probability × cash flow for each period.
- Discount at a rate reflecting market risk only, since development risk is already captured in the probabilities.
- Test sensitivity to the probabilities, peak sales, timing and pricing, and cross-check against comparable deals.
Why rNPV Is Preferred for Biotech
rNPV makes risk explicit and stage-specific. It shows clearly how value rises at each milestone, which helps founders, investors and partners agree on fair terms.
Trusted by Public and Private Companies and Multinational Corporations
Valtech Valuation is an independent valuation and transaction advisory firm with offices in Hong Kong and Singapore. Public companies, private businesses and multinational corporations rely on our valuations for financial reporting, transactions, fundraising and disputes. Our clients range from Fortune 500 companies, listed groups and US-listed firms to private equity funds, family offices and high-growth startups, across Hong Kong, Mainland China, Singapore, Southeast Asia, the Middle East and the United States.
Why Appoint Valtech Valuation for Reliable International Valuation Services
- Independent and defensible conclusions: objective, well-documented reports prepared to withstand audit, regulatory and investor scrutiny.
- ISO 9001 certified quality management: a certified quality process for consistent, reliable results.
- Proven with listed and multinational clients: experience supporting publicly listed groups, US-listed firms and Fortune 500 companies.
- International reach, local expertise: experience supporting biotech and life science startups from HKSTP and Cyberport.
- Life science expertise: PhD-qualified specialists and a proprietary biotech and healthcare transaction database.
- Multi-disciplinary qualified team: accounting, finance, risk management, surveying and business valuation professionals on every engagement.
Professional Credentials of Valtech's Team
- PhD holders
- Certified Public Accountants – CPA (HKICPA)
- Chartered Financial Analysts – CFA
- Financial Risk Managers – FRM (GARP)
- Chartered Valuation Surveyors – MRICS (Royal Institution of Chartered Surveyors)
- Accredited in Business Valuation – ABV (AICPA)
- Certified Valuation Analysts – CVA (Singapore)
- Certified Public Valuers – CPV (China Appraisal Society)
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