In this case I analyze the Purinex Inc. financing plan. I must determine what the best financial alternative is for the company in order to set up a partnership with a main pharmaceutical firm. Purinex feels as if there is a chance they could partner with a major firm within the next four to twelve months. There’s a big problem though. Purinex only has funds to last around eleven months. Purinex’s chief financial officer believes that if a partnership is met, the deal could bring the company to execute its main goal, which is to develop drugs for the diseases sepsis and diabetes. Purinex faces the challenge of having the lack of money if a partnership isn’t reached in time. In order to face this challenge Harpaz is faced with three options that could solve the problem. In the following paper I discuss the situation followed by an analysis of each of the three options “venture-capital round option”, “wait six months option”, and “angel round option.” Finally, I make my recommendation that is the “angel round option.” I decided to choose the angel round option for a couple reasons. I believe it’s the safest option among the three and gives Purinex the best opportunity to partner with a large firm before losing valuation within the company. Furthermore, there are not as many restrictions and the $2 million dollars from angel investors give the company a little more leeway. In addition, there’s a lot less risk involved by taking this approach. Situational Analysis: Purinex is a pharmaceutical company drug discovery and development company which wanted to commercialize healing compounds based on its purine drug development platform. The company consisted of 14 employees and a chemistry lab. In addition, Purinex had an intellectu... ... middle of paper ... ...he options, the angel round option seems to fit best. The angel investor deal would require 6 months to get capital injection that would be needed to sustain operations until a partnership deal is put in place. I believe this is a good option because there is a 95% chance of forming a partnership within the next two years. With this $2 million injection Purinex will be able to survive until a deal is executed. In addition, I feel like the angel round option is the best alternative because the firms valuation will be much higher than the venture capital round option. Furthermore, there isn’t as many controls or restrictions compared to the venture capital round option. I believe its better than the “wait six months option” because I feel like the “wait six months option” is too risky. Receiving just $2 million from angel investors gives Purinex a little more leeway.
Between March 1987 and March 1988, Hanlester issued a private placement memoranda offering limited partnership shares in joint venture laboratories PPCL, Placer, and Omni. Smith Kline entered a laboratory management agreement with PPCL which required PPCL to provide a Medical Director and pay a fee to Smith Kline of $15,000 or 80% of all net cash receipts, whichever is greater. During this time, Ms Hitchcock told prospective partners that the memorandum was sales material only. However, she also told prospective partners that eligibility to purchase shares the number of shares they can purchase was based on volume of business they referred to the laboratories. Also, if the partners did not refer business, they would be pressured to leave the partnership. If the partners did comply, their return on investment was guaranteed. These actions were interpreted by the courts as offers of payment to induce referrals of program related business based on volume of referrals which is
First, let us analyze General Practice Affiliates’ current financial position. The income and expenses report shows a net revenue of $230,250. The net revenue is obtained after expenses, including taxes, of the company have been subtracted from revenue (Paterson, 2014, p. 124). The balance sheet shows a $306,180 in retained earnings. Retained earnings represent stakeholders’ equity (Paterson, 2014, p. 128). Retained earnings are usually invested back in the form of inventory or debt payments (Albrecht, Stice, Stice , & Swain, 2008). General Practice Affiliates’ cash flow analysis shows that the practice invests in new equipment. However, General Practice Affiliates mainly used cash during 2012. The main source of cash from operations came from depreciation expense, which is not a reliable source of funding (Paterson, 2014, p. 130). Accounts receivable increased by $50,000, while accounts payable only increased by $10,000. In addition, cash flow analysis shows a balance sheet data that is affected by future transactions (Paterson, 2014, p. 128). General Practice Affiliates choose to stretch the time to pay suppliers instead of paying its bills. ...
2.in other case, if he thinks of starting this business as a broader venture , he needs to raise capital
If I were asked to run Ecton during this period, I would suggest they utilize option two and seek out an acquisition partner. The benefits clearly outweigh the negatives in the scenario. The immediate cash, employs, and, marketing power is what this innovative product requires to capitalize on the large sales this technology is capable of capturing. By staying independent the time lost trying to create new value streams and processes seems unnecessary if the option to avoid this while providing the optimal return on investment to the shareholders exists. Bottom line, maximize shareholder return and create an optimal environment where this budding technology can rapidly grow.
• The franchisees would have to raise approximately $750,000 of outside financing to fund the venture
We defined several criteria to determine our choice – return, risks and other quantitative and qualitative factors. Targeting a debt ratio of 40% will maximize the firm’s value. A higher earning’s per share and dividends per share will lead to a higher stock price in the future. Due to leveraging, return on equity is higher because debt is the major source of financing capital expenditures. To maintain the 40% debt ratio, no equity issues will be declared until 1985. DuPont will be financing the needed funds by debt. For 1986 onwards, minimum equity funds will be issued. It will be timed to take advantage of favorable market condition. The rest of the financing required will be acquired by issuing debt.
Since the company was slow in both innovation and growth, it was time to make a life-changing decision for the company. Atul insisted on keeping the culture of debt-free and not accepting any external capital (for the past 15 years), however, the company was not doing great during that time. The case described that TEOCO primarily focused on North America telecom carriers, because of globalization, the company needed to expand its business worldwide. Therefore, TA Associates was the right choice for TEOCO in favor of equity investment. Partnering with TA Associates will help to strengthen TEOCO’s current financial condition as well as provide a strong support for the global network of relationships, according to Calo et al. (n.d.).
In 2000, Rich Kender, Vice President of Financial Evaluation and Analysis at Merck & Company was discussing the opportunity of investing in licensing, manufacturing and marketing of Davanrik, a drug originally developed to treat depression by LAB Pharmaceuticals. LAB proposed to sell the right of all the future profit made from the successful launch of Davanrik at the cost of an initial fee, royalty payments and additional payments as the drug completed each stage of the approval process. Merck & Company's organizational goal is to constantly refresh it's company's drug development portfolio and reach as many customers as possible during the patented time. So there was not only the potential of financial gain or quantitative aspect of the offer, but also the qualitative value which will be added by getting better positioning in the risky pharmaceuticals industry.
The high-risk, cyclical nature of our business demands a strong financial base. We must retain the capital resources to meet our current commitments and make substantial investments to develop new products and new technology for the future. This objective also requires contingency planning and
Since its humble beginning as a small drugstore, Merck has placed a large amount of importance on improving the health and well-being of its customers. As drug patents expire and genetic forms of their top products become available, Merck’s strategy is to do the unexpected; instead of raising the price of their older products in favor of patent protected new drugs, Merck focuses on reducing their cost in order to better compete with their generic counterparts. Additionally, Merck’s plan for growth now encompasses a much more aggressive pursuit of new drugs in their pipeline through extensive research. Merck became the second largest health care company in the world after the merger with Schering-Plough in 2009 and has contributed great discoveries like the first cervical cancer vaccine and great resources like the Merck Manuals which are utilized as a source of information to doctors, scientists and consumers worldwide .
In “Venture Capital” alternative, a sum of $3.5 million will be traded in exchange for 750,000 shares and 50% of the board seats, which will result in a weighted average outstanding shares of 1,375,000. Net income will come to $514,500 and EPS will be 0.29.
Determine the profile of the investor for which this company may be a fit, relative to that potential investor’s investment strategy. Provide support for your rationale
Borrow long-term loans from local banks – These are a common way of financing major purchases of an organization. An advantage is that it is directly linked to an organizations operating capacity. Another advantage of long-term loans from local banks is that it enables a firm engage in large projects. Although its disadvantage is that the banks charge high interest rates.
1. Hematal's cash flow problem limits Hematal's decision on giving further credit to the boy's family or not. It has been proved in the case that the family is very poor and won't be able to pay right away and most probably won't be able to pay anymore considering also the increasing hospitalization bills. This fact is important because Hematal will already have to consider writing off of the family's debt, which further affects the company's cash position in the future when she gives additional credit. The boy needs at least 20 more vials yet, Hematal has less than 20 vials left on stock. With this fact, I have assumed that Dr. Rini's decision should be an "all or nothing" kind of decision because anything less will not make any difference in the boy's condition considering also the fact that he needed more than 40 vials during his initial surgery, thus I conclude that the boy will die if less than 20 vials were provided. Therefore, Hematal will have to order more vials from Gamma Corp. to fill the 20 vial requirement.
private equity firm with the company it buys and ensures that the company has a lasting success.