Alza Corp Case Study Essay

993 Words Jan 9th, 2008 4 Pages
ALZA and Bio-Electro Systems

1. ALZA, a pharmaceutical company that has led the industry for over a decade, has been largely successful due to their unique technical innovation. Rather than specializing in discovering new drugs and treatments for medical conditions, ALZA instead focuses their pharmaceutical talents on developing new methods to deliver drugs to patients. From skin patches to time released capsules, ALZA captures their market by providing their technologies to all major pharmaceutical companies, in return charging royalties that has led the company to realize immense consecutive profits. However, drug delivery technologies are constantly evolving, which has caused more effective and efficient methods to appear at a rapid
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By utilizing much of their own financial capital, ALZA would be bearing much more risk, thereby diminishing why the company is so attractive to equity holders in the first place. ALZA is regarded as having very low risk but also is associated with a high return. If anything threatens that state, shareholders will ultimately reject it.
To lessen these risks and impacts on their balance sheet, the company could partner with a major pharmaceutical company. While it will not impact its current earnings, it could prove to have negative impacts down the road, especially if the company's partner were to take ALZA's technologies and sublicense it to others; ultimately taking away potential profits in the future.
Thus, the third option seems the most financially feasible. While it still is a risky proposal, the risk associated with the funding and development of the new drug delivery technologies is completely independent of ALZA as a company. It also provides this opportunity of a potential high return to those investors seeks a high risk/return investment, rather than the current ALZA shareholders who are very content where they are currently at.

2. Being an investor in Bio- Electro systems you would realize the regular payoffs a stock until the stock reaches a value of 23 dollars a share, at which points you assume that ALZA will buy the stock back from you. At that point your return on the stock flatlines, for

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