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  • April 1993 (Revised October 1995)
  • Case
  • HBS Case Collection

ALZA and Bio-Electro Systems (A): Technological and Financial Innovation

By: Josh Lerner and Peter Tufano
  • Format:Print
  • | Language:English
  • | Pages:29
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Abstract

To develop the next generation of risky products, ALZA, a mature and profitable biotechnology firm specializing in drug delivery systems, must raise $40 million. Organizational constraints and competitive concerns demand that the work be done inside the firm. However, accounting considerations and concerns about shareholders' reactions to the introduction of new risks to the firm lead the CEO to consider off-balance-sheet means to finance the new venture. To finance the new venture, the firm creates a new financing vehicle: a unit consisting of callable common stock plus warrants. This case examines the CEO's decision leading up to the issue of the units and the establishment of a new research and development subsidiary.

Keywords

Risk And Uncertainty; Technological Innovation; Business Subsidiaries; Decision Choices And Conditions; Corporate Finance; Biotechnology Industry; Medical Devices And Supplies Industry

Citation

Lerner, Josh, and Peter Tufano. "ALZA and Bio-Electro Systems (A): Technological and Financial Innovation." Harvard Business School Case 293-124, April 1993. (Revised October 1995.)
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About The Authors

Josh Lerner

Entrepreneurial Management
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Peter Tufano

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More from the Authors
  • Fencing Off Silicon Valley: Cross-Border Venture Capital and Technology Spillovers By: Ufuk Akcigit, Sina T. Ates, Josh Lerner, Richard Townsend and Yulia Zhestkova
  • Venture Capital's Role in Financing Innovation: What We Know and How Much We Still Need to Learn By: Josh Lerner and Ramana Nanda
  • Two Case Studies on the Financing of Forest Conservation By: Andrew Baxter, Connor Cash, Josh Lerner and Ratnika Prasad
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