Purinex Inc. Key Issues and Situational Analysis

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Purinex Inc. Key Issues and Situational Analysis

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

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