Can the income approach get you in trouble for early stage pharma valuations?

The Valuation Of Drug Development Projects—Part 1” by Sangeeta Puran (Mayer Brown International) addresses valuation theory as it relates to drug discovery and research. It's the Licensing Executives Society International (LESI) article of the month.  Says Puran:

“The purpose and scenario for which a valuation exercise is undertaken, and by whom it is undertaken, ultimately explains the method used to assign a monetary value to a drug development programme. In the case of VCs assessing the investment propositions offered by early stage projects, NPV modelling is not favoured.”
Part II of the article will address analysts’ approach “ together with an analysis of the valuation issues in acquisition, licensing and partnering negotiations.” Stay tuned.