A Europe-headquartered global market leader in pharmaceutical generics and biosimilars engaged NERA as economic advisor for its transfer pricing redesign. For the generics division, we developed an innovative economic analysis for comparable uncontrolled transactions based on contractual terms agreed between unrelated parties, including margin adjustment computations to consider absolute amounts of milestone payments. Implementing the recommended revised royalty rates helped our client generate financial benefits amounting to approximately 2 percentage points on relevant sales.

For the biosimilars division, a deep dive analysis of DEMPE contributions revealed the legacy TP model did not properly consider functional joint value creation by different co-entrepreneurs in the R&D phase. We developed a profit split-based valuation approach that would allow the company to correct this deficit for greenfield and brownfield development projects. In the latter case, historic funding would be economically considered in the profit split solution as well.