Questions for Purinex, Inc.

Case

1. What is Purinexs business? How would you describe its strategy? What do you think are
the founders goals and vision for the company?
2. What is the source of Purinexs value? What are the firms technologies, and how
successful could they be? What is the likelihood of that success?
3. What is the problem facing Purinexs CFO Gilad Harpaz? What is the urgency associated
with his concerns?
The problem Gilad Harpaz faces is being able to stay afloat until securing a partnership with
a major pharmaceutical company. It only has 11 months of cash on hand in order to survive.
Securing the partnership would allow the company to develop one of the leading compounds
into a drug for the treatment of the worlds deadliest and most widespread diseases. Purinex
Inc. only had $700,000 in cash on hand and monthly expenses of $60,000. Purinex had no
sales or earnings other than income from federal research grants, which offset about
$100,000 of the companys $160,000 in monthly expenses. Sepsis and diabetes partnerships
were uncertain in the short term therefore Harpaz considered three options for the firm. The
three options were venture-capital round, wait six months, Angel round in which all three
came with its own risks. Without a partnership or some sort of external financing Purinex
may stop developing the drugs that may bring potential annual sales. Harpaz believed that if
they waited the terms of a deal would get a lot worse.


4. How do Purinexs financing alternatives compare? How would you rank them as sources
of cash in terms of their risk and potential return for Purinex? How feasible and/or
attractive would it be to finance the firms growth with an angel round or a venture
capital (VC) round? How do you assess the option to wait?
5. How would you structure the decision among these alternatives? Are there any qualitative
considerations (pros and cons of each alternative)?
6. How would you choose to finance the firms growth? Prepare to explain the effect of
your proposal on the firms growth, strategic direction, and dilution in the founders
equity interest.