Essay on Purinex Case Solution

1153 Words Aug 29th, 2013 5 Pages
Executive Summary
Purinex is a drug discovery and development company based in Syracuse, New York. The company sought to commercialize therapeutic compounds based on Purine, which is useful in numerous biochemical processes and its intellectual portfolio of Purinex consists of more than 35 patents, pending and issued in the purine field. The company has a headcount of 14 and maintains a chemistry laboratory a few miles from its main office.
The company’s target is to develop products that act as activators or blockers to specific purine receptors without producing undesirable outcomes. It is on the verge of securing a partnership with a major pharmaceutical company in the next 4-12 months that could seal the fate for it to develop the
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2) What is the best way to finance the firm and also maximize the value of the firm? 3) How to evaluate the risk-and-return scenarios? 4) How worthy it is for the founders to maintain the current control on the company?
Analysis of the Financing Options
The Venture Capital firms have shown a strong inclination towards Biotechnology investments which is in favor for the companies like Purinex who are looking for their first IPO. Also, this option is fairly lucrative when it comes to the amount of funding, which is around $10 million. This fund amount is much more than the funding proposed by the angel investors and would be received in just 3 months. Also, Venture Capital option increases the value of deal by 10%; the net annual sales would increase by 10%. Sepsis: (108+5)*1.1 = $124.3 million, Diabetes: (8+80)*1.1=$96.8 million.
On the other hand, there are a lot of downsides attached if Harpaz decides to choose this. The Venture Capital firms would be looking for preferences for board appointments which could cause the management to lose control over the business decisions making. Also, there might be a demand for anti-dilution rights to prevent investors from dilution due to future issues with the stock. In addition, they would be looking to share the earnings of Purinex which could limit the company’s capability to invest heavily in the research and development of Purine based compounds. Plus these investments are aimed at getting the

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