With a Monte Carlo simulation, each variable is replaced with a probability distribution that incorporates the range of values, such as best, worst and most likely cases, and the probability of occurrence over that range. The company may then use this information to more accurately determine the impact of fluctuations of one variable on other variables and ultimately the final model. Benefits of the Monte Carlo simulation include an understanding of the probability of specific outcomes, an ability to pinpoint and test the driving variables within a model and flexibility for good decision making. All of these products function as add-ins to Microsoft Excel. The Monte Carlo simulation circumvents the traditional spreadsheet models where a user is forced to supply a single best-guessed value for an uncertain variable.
Biotech companies understand that deals are their bread and butter.
The design and effective management of strategic collaborations has become the most critical tool for biotech companies in their pursuit of building shareholder value. Biotech companies that engage in modeling techniques such as the Monte Carlo simulations may develop a clearer understanding of the risks inherent in their negotiations and collaborations and will therefore be more effective at negotiating deals. Satcher has a B.S. in molecular genetics, an M.S. in biotechnology and an M.B.A. from the University of Florida. His interests are in business development and finance. Rick's work experience includes technology assessment and evaluation of market potential for new biotechnologies.