Statement of Problem
This study is commissioned to analyze the Purinex, Inc. financing plan, which is related to determine the best financing alternative for the company in securing additional cash needed to establish a partnership with a large-capitalization pharmaceutical firm. Gilad Harpaz, Purinex’s chief financial officer believes a partnership deal could bring the company to execute its mission, developing drugs for the treatment of sepsis and diabetes. However, the problem facing Purinex is that—while there is a chance for Purinex to secure a partner in the next four to twelve months, Purinex just has available cash to last around 11 months; furthermore, there is still a very strong chance that a different partnership would occur about one year later. In short, Purinex is now facing the challenge of the lack of capital to reach the partnership deals. According to the case, Gilad Harpaz is considering three options for Purinex to solve the problem. To help identify the feasibility and attractiveness of these financing alternatives, this study is based on the decision tree approach to evaluate the options. 2.
As described in the case, firstly, the partnership deal would entitle Purinex to receive a combination of up-front fees, milestone payments, and royalties for the treatment of either sepsis or diabetes (see Appendix 1 for the detailed information). Secondly, due to the lack of capital, there are three financing options: 1) raising a one-time round financing from a Venture Capital (VC) firm, 2) simply waiting in the expectation that either sepsis deal or the diabetes deal would come through, and 3) undertaking another one-time round financing from a number of angel investors. It is needed to note that when Purinex seeks external funding investments either from VC firm or angel investing, the investors will acquire certain equity in Purinex (see Appendix 2 for the expected ownership percentage). Nevertheless, if...
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