Purinex was a drug-discovery and -development company based in Syracuse, New York, that sought to commercialize therapeutic compounds based on its purine drug-development platform. Purine was a naturally occurring molecule that played an important role in numerous biochemical processes. Purinex had developed a process for creating small molecules that acted as selected agonists (activators) or antagonists (blockers) for specific purine receptors in the cell membrane. Purinex’s goal was to develop products that evoked a receptor-specific pharmacodynamic effect without producing undesirable outcomes that could result from interactions with other receptors.
The company had 14 employees and maintained a chemistry laboratory a few miles from its main office. Purinex’s intellectual-property portfolio consisted of more than 35 patents pending or issued in the purine field. The company planned to take its new receptor-selected drugs into clinical trials to address a broad range of potential indications. In June 2004, the company with several clinically and commercially promising drugs in development had reached a turning point. Sometime in the next four to twelve months, the company stood an excellent chance of establishing a partnership with a major pharmaceutical company. That partnership would enable Purinex to develop one of its leading compounds into a drug for the treatment of the world’s deadliest and most widespread diseases. Gilad Harpaz, Purinex’s chief financial officer believed that if a partnership deal came through, the company would be in an excellent position to carry out its mission. Moreover, securing a deal was practically a prerequisite for any eventual initial public offering, which was an attractive exit strategy for many of the company’s investors. Harpaz also believed that the company could either attempt to secure financing now or wait until it struck a partnership deal. He has three options to consider for the company which he must choose either to raise a one-time round financing from a VC firm; or to simply wait in the expectation that either sepsis deal or the diabetes deal would come through; or to undertake another one-time round financing from a number of angel investors. He must have an evaluation for these three options and to determine which one is best for the company in securing additional cash needed to establish a partnership with a “Big Pharma”. II. CENTRAL PROBLEM
“THE EVALUATION OF THE THREE OPTIONS INTENDED FOR THE COMPANY’S FINANCING AS A WAY OF ESTABLISHING A PARTNERSHIP DEAL WITH MAJOR PHARMACEUTICALS”
1. To evaluate the three options provided by Gilad Harpaz and to identify the probable risks that it might give to the company. 2. To maximize company’s capital.
3. To secure a partnership deal with major pharmaceutical company. 4. To enable for the company to develop one of its leading compounds into a drug as treatment for the deadliest and most widespread diseases. IV. FACTORS AFFECTING THE PROBLEM
1. The company as a biotechnology firm.
The pharmaceutical industry had remained one of the world’s most dynamic economic sectors, with more than $530 billion in global sales. Although this industry continued to grow faster than most other segments of the economy some analysts predicted a softening growth over the next five years. Being a highly competitive industry, many large pharmaceutical firms had moved aggressively to partner with smaller firms in the biotechnology sector in order to identify the next generation drug candidates. Purinex as a biotechnology sector devoted higher percentage of its sales to research and development (R&D). According to Standard and Poor’s, R&D spending was close to 40% of the industry’s revenues. The BCG report also estimated that drug-development failures accounted for 75% of the total R&D cost. This higher R&D cost was due to the reason that the drug development and approval process was lengthy...