Korea Technology Finance Corporation (KOTEC) has moved to overhaul its technology evaluation system to reflect the characteristics of the pharmaceutical and biotech industries. The aim is to improve accuracy in assessing the technological capabilities of biotech corporations by preparing an evaluation model that reflects the traits of new drug development and the commercialization of biotech. KOTEC is an institution that provides guarantees to venture corporations with strong technology but insufficient collateral to support their financing.
According to the mid-sized corporations community on the 18th, Korea Technology Finance Corporation (KOTEC) recently began work to "advance the methodology for technology valuation in the pharmaceutical and biotech sector." It is focusing on improving the technology valuation model and updating core indicators to reflect the characteristics of the pharmaceutical and biotech industries. The decision stems from the view that specialized evaluation metrics are needed to capture the characteristics of a sector where long development cycles must culminate in successful commercialization to generate economic ripple effects.
In the biotech venture community, there has been criticism that the current evaluation approach, which has relied on past overseas statistics, cannot adequately reflect the industry's unique structure. The biotech industry involves prolonged clinical and research and development processes, and corporate value can fluctuate widely depending on the prospects for technology transfer and commercialization. For this reason, they argued that nonfinancial factors such as a corporation's capacity to conduct clinical trials and its bargaining power in technology transfer should carry significant weight.
Accordingly, Korea Technology Finance Corporation (KOTEC) decided to advance an updated technology valuation methodology that reflects commercialization risks and recent technology and market trends for pharmaceutical and biotech technologies. It plans to refine, in line with industry characteristics, items such as technology life, which refers to the period during which a technology can maintain competitiveness in the market and generate revenue.
It also plans to establish measures to calculate in detail the discount rate applied when converting expected future revenue into present value so that the traits of technology commercialization are reflected, as well as the royalty rates used in technology transfer and licensing negotiations.
In addition, through this effort, it will streamline the classification systems for the pharmaceutical and biotech industries and technologies, and analyze domestic and overseas technology valuation cases. It will review evaluation models from the Korea Health Industry Development Institute (KHIDI) and private evaluation agencies to check their practical applicability, and build the latest data such as success probabilities and royalty rates by clinical stage and disease group. It plans to produce the final report by the end of the year.
Inside and outside the market, there is broad agreement with the direction of the evaluation system overhaul. One official said, "The biotech industry is highly volatile, where clinical and technology transfer outcomes directly affect corporate value," adding, "if the new evaluation system can be reflected in the field, it will be an opportunity to improve evaluation accuracy."
A Korea Technology Finance Corporation (KOTEC) official noted, "By updating the methodology to reflect technology trends and industry traits, we will serve as a catalyst for nurturing biotech ventures," adding, "we plan to apply the new evaluation system in the first half of next year."