Value Assessment Of Patented Drugs Based On Binomial Model

China has witnessed thirty years of patent industry development, and has madetremendous progress. Patent awareness of each subject has been significantly improved.To accelerate the industrialization process of patents, China has gradually carried outpatent securitization pilot projects as was done in the developed countries. Patentsecuritization not only opens up new financing channels for high-tech enterprise andinnovative companies, but also greatly promotes the development of science andtechnology itself. The premise of patent securitization is assessment of the value ofsecuritized patents, the accuracy of which apparently determines whether thesecuritization succeeds or not.Biopharmaceutical industry plays a leading role in patent securitization. Drugpatents feature with strong uncertainty, irreversibility, multi-stages and competitiveness,but traditional assessment methods can not quantify these values, resulting in asignificant deviation of the assessed value and the real value. Real options method seemsto an appropriate alternative to make up for the deficiencies.Based on the discrete changes in the value of patent assets, this article builds abinary model for patent valuation, focusing on analysis of the parameters’ availabilityand suitability. Three specific instances separately standing for delay option, growthoption and abandonment option were analyzed to illustrate the whole practical process ofevaluating patented drugs. This article has proved that the binomial model can do betterin simulating the changes in the value of patents, and accurately quantify the option valuethat uncertainty gives to the patents.