Sustainable business evaluation methods: applying real options in the biotech and med-tech industry

This study examines the projects’ evaluation instruments utilized by the Bioindustry Park, the managing company of the innovative cluster called bioPmed that is dedicated to bio and medical technologies (Italy). This biotechnological and med-tech cluster expresses the will to concentrate the know-how of the territory in a restricted area with a high concentration of structures and facilities for the development of firms. The projects of the innovative companies and start- ups are principally based on products development both in biotech (pharma and diagnostic) and in innovative medical technologies. Long development processes, regulatory requirements, potential patent issues, strong competitive environment, are main elements of such markets. Evaluation plays an important role for these companies, both to raise funds, that can be a key factor in order to develop alliances and partnerships. However, for the same market elements, the evaluation process is difficult and risky. Too many variables have to be considered in a long timeframe. Effectively, recourse to the real options’ method stimulates investment to build sequences of long multi-stage (i.e. continue or abandon the project, reduce or increase the investment). So this method can be particularly useful to identify risks with greater awareness and to select the biotech and med-tech projects that more than others can guarantee the businesses’ sustainability.