Alza Corp Case Study

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ALZA and Bio-Electro Systems 1. ALZA, a pharmaceutical company that has led the industry for over a decade, has been largely successful due to their unique technical innovation. Rather than specializing in discovering new drugs and treatments for medical conditions, ALZA instead focuses their pharmaceutical talents on developing new methods to deliver drugs to patients. From skin patches to time released capsules, ALZA captures their market by providing their technologies to all major pharmaceutical companies, in return charging royalties that has led the company to realize immense consecutive profits. However, drug delivery technologies are constantly evolving, which has caused more effective and efficient methods to appear at a rapid…show more content…
dsag Terminal Payoff Diagram of Zero-Coupon Defaultable Debt Terminal Payoff B.E.S Asset Value 23 Where the dotted lines meet are an indication of the principle amount on debt and the point of bankruptcy. 4. Bio-Electro Systems Balance Sheet At It's Current State Bio-Electro Systems Typical Firm When comparing the very similar payoff diagrams above, we realize that Bio-Electro Systems has the ability to issue debt. It shows us also that if the asset value is low, then the debt will also be paid-off low. If and only if the debt is completely paid-ff does the equity show any value. In reality, Bio-Electro systems can actually issue debt to its investors. Additionally, if the project to develop their technologies ultimately fails only Bio-Electro Systems and its associated investors bear the costs, with no influence financially on ALZA. However, there must be potential benefits for both ALZA and investors of Bio-Electro Systems. For investors, what makes the deal attractive is the warrant to call ALZA stock at $30 per share. On ALZA's side of the deal, their benefits are immense. As time passes and ALZA does not exercise its call option on Bio-Electro systems, the strike

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