Pharmacyclics: Financing Research & Development

Case Solution

Richard S. Ruback, Malcolm P. Baker, Aldo Sesia
Harvard Business School ()

Pharmacyclics (NASDAQ: PCYC), a pharmaceutical company that makes products that will enhance existing therapeutic treatments for cancer, atherosclerosis, and retinal diseases, considered a $ 60 million private placement in February 2000. The company had more cash than ever, but the R&D and marketing spending projections were also unprecedented. PCYC’s most promising cancer drug, a radiation enhancer called Xcytrin, was in phase III clinical trials, the rigorous final phase before FDA approval. Analysts gave the drug a chance of success of just over 50%. This case focuses on phase funding and a simple decision tree assessment. Students have the opportunity to consider the impact of past tiered financing decisions on the ownership structure of the business and evaluate the current market price in light of analyst forecasts on cash flow and likelihood of success. of each medication. These two analyzes will help you decide the private location.

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