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Purinex Inc. Key Issues and Situational Analysis
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Purinex Inc. Key Issues and Situational Analysis

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  • 1. Case 30: Purinex,Inc.
    By:
    Divya Mishra
  • 2. Agenda
    Introduction of Company
    Situational Analysis & Key Issue
    Financial Options
    Recommendation & Conclusion
    2
  • 5. Introduction
    3
  • 6. Introduction
    • Purinex is a drug-discovery and development company based in Syracuse, New York
    • 7. Commercialize therapeutic platform based on its purine drug development program
    4
  • 8. Introduction
    • The company has 14 employees and a chemistry lab
    • 9. Purinex intellectual portfolio consists of more than 35 patents pending or issued in the purine field
    5
  • 10. Introduction
    • The company has a broad range of drugs under development
    • 11. Two drugs have applications for partnership deals with pharmaceutical companies for the treatment of diseases like diabetes and sepsis
    6
  • 12. Introduction
    • The drug used for the treatment of diabetes is still in preclinical testing
    • 13. The drug used for the treatment of sepsis is in phase 2 of clinical trial
    7
  • 14. Drug Development Process (10-16 years)
    Discovery
    2- 10 years
    Preclinical Testing
    Lab and animal testing
    Phase I
    20-30 healthy volunteers used to check for safety & dosage
    Phase II
    100-300 patient volunteers used to check for efficacy & side effects
    Phase III
    1000-5000 patients volunteers used to monitor reactions to long term drug use
    FDA Review/Approval
    Extensive testing for drug safety
    Post Marketing
    5%-10% drugs are approved for marketing
    8
  • 15. Situational Analysis & Key issue
    9
  • 16. Situational Analysis
    • The company has no sales or earnings
    • 17. Income from Federal Research Grant
    • 18. Cash in hand- $700,000
    • 19. Expenses - $60,000/month
    • 20. Cash level would enable the company to survive for another 11 months only
    10
  • 21. Situational Analysis
    • Company needs money to invest in Research and Development (R&D) for the development of drugs
    • 22. If the firm is capitalized ,there are better chances of securing a partnership
    11
  • 23. Situational Analysis
    Benefits of Partnership deal
    • R & D funding
    • 24. Production Facilities
    • 25. Co-promotion rights
    12
  • 26. Situational Analysis
    Drawback of Partnership deal
    • Giving up marketing rights under agreement
    13
  • 27. Situational Analysis
    Two appropriate partnership deals are:
    • Antagonist program for diabetes treatment
    • 28. Agonist program for sepsis treatment
    14
  • 29. Key Issue
    • How could the firm survive until the partnership happens?
    • 30. Which deal is better for Purinex?
    “Sepsis deal or Diabetes deal ”
    15
  • 31. Option # 1
    “Wait for 6 months”
    16
  • 32. Option # 1
    • Wait 6 months for a partnership deal either with sepsis or diabetes
    • 33. Mutually exclusive contract for treatment, either one or the other
    • 34. Company would be valued at $25 million
    17
  • 35. Option # 1
    75% chance that a partnership would occur.
    • 60% chance that within 6 months a deal for sepsis would be made
    • 36. 95% chance that after a year a deal for diabetes would be made
    If no partnership occurs within 6 months, Purinex would face financial trouble
    • Forced into a down round
    • 37. Lower the value of the firm to $5 million
    18
  • 38. Option #2
    “Venture Capital Round”
    19
  • 39. Option #2
    Venture-capital Round:
    Returns:
    • Strong interest from these companies
    • 40. $10 million
    • 41. Short waiting time(3 months)
    20
  • 42. Option #2
    Concerns of venture-capital:
    • Lose control and restrictions
    • 43. Share earnings
    21
  • 44. Option # 3
    “Angel Round”
    22
  • 45. Option # 3
    Angel Round Returns :
    • Raise $ 2million
    • 46. Provides 33 months survival
    23
  • 47. Option # 3
    Angel Round Concerns:
    • 6 months waiting period (Long)
    • 48. Some restrictions like board appointment, share earnings
    24
  • 49. Recommendation # 1
    25
  • 50. Recommendation # 1
    • How could the firm survive until the partnership happens?
    Too risky to wait for 6 months
    Just $2million from the angel round
    “Company more capitalized, implies better chances of securing the deal”
    26
  • 51. Recommendation # 2
    27
  • 52. Recommendation # 2
    • Which deal is better for Purinex? “Sepsis or Diabetes”
    Sepsis:(108+5)(1+10%)=$124.3million
    Diabetes:(8+80)(1+10%)=$96.8million
    28
  • 53. Recommendation # 2
    • Give up the right to the sepsis drug in the partnership
    • 54. It is ahead in the development process
    • 55. Can provide Purinex with quicker milestones
    • 56. Keep the right to the diabetes drug as it contains a higher revenue potential in the future
    29
  • 57. 30