Valuing the launch of a new pharmaceutical product: a real option case
Andrea Gamba, A. Micalizzi, P. Pellizzari
- Università di Venezia
In a capital budgeting setting, we investigate the valuation and
the timing of the launch of a new pharmaceutical product and of its
pilot-product. We provide a model to evaluate the (real) option to
launch the pilot-product in order to create the (real) option to delay
the launch of the main product. The pilot product and the blockbuster are
driven by two different stochastic processes and the situation is
complicated by the patent expiry. Finally, by resorting to numerical
analysis, we evaluate these real options and solve the problem of
establishing the best time for the launch of both the main and the
pilot-product.