Publications
Publications
- January 2001 (Revised July 2003)
- HBS Case Collection
Pharmacyclics: Financing Research & Development
By: Malcolm P. Baker, Richard S. Ruback and Aldo Sesia
Abstract
Pharmacyclics (NASDAQ: PCYC), a pharmaceutical company that manufactures products that will improve existing therapeutic treatments for cancer, arteriosclerosis, and retinal disease, was considering a $60 million private placement in February 2000. The company had more cash than ever before, but projections of R&D and marketing expenses were also unprecedented. PCYC's most promising oncology drug, a radiation enhancer called Xcytrin, was in Phase III clinical trials--the rigorous final phase before FDA approval for commercialization. Analysts gave the drug a slightly better than 50% chance of success. This case focuses on stage financing and a simple decision-tree evaluation. Students have the opportunity to consider the impact of past staged financing decisions on the ownership structure of the firm and to evaluate the current stock market price in light of analyst forecasts of the cash flow and the probability of success for each drug. These two analyses help inform the private placement decision.
Keywords
Valuation; Cash Flow; Financing and Loans; Business Startups; Financial Strategy; Medical Devices and Supplies Industry; Pharmaceutical Industry; Health Industry
Citation
Baker, Malcolm P., Richard S. Ruback, and Aldo Sesia. "Pharmacyclics: Financing Research & Development." Harvard Business School Case 201-056, January 2001. (Revised July 2003.)
About The Authors
