Purinex

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Executive Summary 1. 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…show more content…
However, this study would consider financing from angel investors is more feasible and attractive for Purinex based on the analysis of decision tree. The decision tree shows the fact that VC firms would require 40 percent of the equity in Purinex, resulting in the situation of having less EV. Perhaps the most important factor is that there is a very strong chance—a 98.75% possibility (100% - [25% * 5%])—that a partnership deal will come through during the following two years, and thereby raising $2 million form angel investors is quite enough for Purinex to secure the partnership deal. In addition to the analysis of decision tree, there is still a qualitative consideration that has impact on structuring the decision. Indeed, with the external financing, the existing owners share composition will be changed that would trigger the control power issue and impose a significant number of restrictions on Purinex, including preferences for board appointments, antidilution rights liquidity, participation, and negative covenants. Therefore, choosing the angel option would offset this negative impact because Purinex 's ownership percentage will still be 89.74%, which is much greater than a 60% for the VC option. 3. Recommendation Fundamentally, the goal of Gilad Harpaz is to seek the best financing alternative for Purinex in securing additional funds in order to accomplish the partnership deals and maximize the value of

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