Minicase No4 RxDelivery Systems-Saved to this PC View Help Tell me what you want to do Mailings Review 1 Normal 1 No Spac.. Heading 1 Heading 2 Title Subtitle Paragraph MINI CASE: RaDELVERY SYSTEMS, ING RaDelixery Systems is an R&D venture specializing in the development and testing of new dru delivery technologies. The market for alternative drug delivery systems grew rapidly during the 1990s. Driving factors behind this growth include efforts to reduce drug side effects through site-specific delivery, the need to maintain the activity of new biopharmaceutical compounds and the extension of drug patent life. Improved drug delivery methods are expected to reduce the number of surgical interventions and the length of hospital stays, and improve patient compliance in taking prescribed drugs. A large world market for biopharmaceuticals (including peptide, protein, RNA, and DNA drugs) exists today. Sales of polymer-based drug delivery systems continue to grow rapidly Pulmonary delivery systems represent an important segment of the drug delivery market. RxDelivery Systems believes it can compete effectively in both the polymer-based and the pulmonary drug delivery areas. The venture's delivery technology is expected to utilize hydrophobic ion pairing and supercritical carbon dioxide precipitation to incorporate water soluble drug molecules into biodegradable controlled-release microspheres. The resulting microspheres will take the form of dry powders and will contain drug molecules small enough to allow for intravenous, intranasal, or pulmonary delivery. It is anticipated that this technology will be incorporated into products for controlled release applications including treatment of cancer, infectious diseases, and gene therapy RxDelivery Systems, through an agreement with its pharmaceutical parent, a major drug company, will initially operate as an independent corporation but will be merged into the parent at the end of its second year. At that time. RxDelivery Systems' entrepreneurial team will be paid a lump sum of $3,00.000 as the terminal value for the venture. Following are limited financial statement projections for the next two years for RxDelivery Systems First year revenues Second year revenues Expenses tincluding depteciation S15.00 $145.000 per year Initial time-zero (net) fixed assets $70.000 Depreciation 15% of beginning-of-year net fixed assets Minic ase No4 RxDelivery Systems . Saved to this PC Mailings Review View Help 9 Tell me what you want to do AaBbCel AaBbCel AaBbC AaBbct AaB AaBbco Paragraph Styles allow for intravenous, intranasal, or pulmonary delivery. It is anticipated that this technology will be incorporated into products for controlled release applications including treatment of cancer, infectious diseases, and gene therapy RxDelivery Systems, through an agreement with its pharmaceutical parent, a major drug company, will initially operate as an independent corporation but will be merged into the parent at the end of its second year. At that time, RxDelivery Systems entrepreneurial team will be paid a lump sum of $3,00,000 as the terminal value for the venture. Following are limited financial statement projections for the next two years for RxDelivery Systems: First year revenues Second year revenues Expenses (including depreciation) $145,000 per year Initial time-zero (net) fixed assets $70.000 Depreciation Accounts Payable (Years. I and 2) $100 Inventories (Years. I and 2) Corporate marginal tax rate Accounts Receivable (Years I and 2)S0 Accrued Expenses (Years I and 2) S500 Required Cash Debt (all years) $15,00 $18,000 15% of beginning-of-year net fixed assets So 35% So A. Construct the venture's income statements for Years 1 and i Minicase No4 RxDelivery Systems-Saved to this PC Mailings Review View Help Tell me what you want to do AaBbCeI AaBbCel AaBbC AaBbCct AaB AaBbcctD : . | . I'Normal-NoSpac Heading 1 Heading 2 Title Subtitle ! Paragraph Styles Construct the venture's balance sheets at startup and at the end of Years 1 and 2. Put initial fixed asset investments in Year 0 and initial working capital investments in Year 1 Assume the initial $70,000 is equity financed B. Construct the pseudo dividend method equity valuation cash flow including the S3,000,000 terminal payment C. D. Using a 25% discount rate for the first two years and a $3.000.000 terminal value, what is the value of the venture at its launch? Minicase No4 RxDelivery Systems-Saved to this PC View Help Tell me what you want to do Mailings Review 1 Normal 1 No Spac.. Heading 1 Heading 2 Title Subtitle Paragraph MINI CASE: RaDELVERY SYSTEMS, ING RaDelixery Systems is an R&D venture specializing in the development and testing of new dru delivery technologies. The market for alternative drug delivery systems grew rapidly during the 1990s. Driving factors behind this growth include efforts to reduce drug side effects through site-specific delivery, the need to maintain the activity of new biopharmaceutical compounds and the extension of drug patent life. Improved drug delivery methods are expected to reduce the number of surgical interventions and the length of hospital stays, and improve patient compliance in taking prescribed drugs. A large world market for biopharmaceuticals (including peptide, protein, RNA, and DNA drugs) exists today. Sales of polymer-based drug delivery systems continue to grow rapidly Pulmonary delivery systems represent an important segment of the drug delivery market. RxDelivery Systems believes it can compete effectively in both the polymer-based and the pulmonary drug delivery areas. The venture's delivery technology is expected to utilize hydrophobic ion pairing and supercritical carbon dioxide precipitation to incorporate water soluble drug molecules into biodegradable controlled-release microspheres. The resulting microspheres will take the form of dry powders and will contain drug molecules small enough to allow for intravenous, intranasal, or pulmonary delivery. It is anticipated that this technology will be incorporated into products for controlled release applications including treatment of cancer, infectious diseases, and gene therapy RxDelivery Systems, through an agreement with its pharmaceutical parent, a major drug company, will initially operate as an independent corporation but will be merged into the parent at the end of its second year. At that time. RxDelivery Systems' entrepreneurial team will be paid a lump sum of $3,00.000 as the terminal value for the venture. Following are limited financial statement projections for the next two years for RxDelivery Systems First year revenues Second year revenues Expenses tincluding depteciation S15.00 $145.000 per year Initial time-zero (net) fixed assets $70.000 Depreciation 15% of beginning-of-year net fixed assets Minic ase No4 RxDelivery Systems . Saved to this PC Mailings Review View Help 9 Tell me what you want to do AaBbCel AaBbCel AaBbC AaBbct AaB AaBbco Paragraph Styles allow for intravenous, intranasal, or pulmonary delivery. It is anticipated that this technology will be incorporated into products for controlled release applications including treatment of cancer, infectious diseases, and gene therapy RxDelivery Systems, through an agreement with its pharmaceutical parent, a major drug company, will initially operate as an independent corporation but will be merged into the parent at the end of its second year. At that time, RxDelivery Systems entrepreneurial team will be paid a lump sum of $3,00,000 as the terminal value for the venture. Following are limited financial statement projections for the next two years for RxDelivery Systems: First year revenues Second year revenues Expenses (including depreciation) $145,000 per year Initial time-zero (net) fixed assets $70.000 Depreciation Accounts Payable (Years. I and 2) $100 Inventories (Years. I and 2) Corporate marginal tax rate Accounts Receivable (Years I and 2)S0 Accrued Expenses (Years I and 2) S500 Required Cash Debt (all years) $15,00 $18,000 15% of beginning-of-year net fixed assets So 35% So A. Construct the venture's income statements for Years 1 and i Minicase No4 RxDelivery Systems-Saved to this PC Mailings Review View Help Tell me what you want to do AaBbCeI AaBbCel AaBbC AaBbCct AaB AaBbcctD : . | . I'Normal-NoSpac Heading 1 Heading 2 Title Subtitle ! Paragraph Styles Construct the venture's balance sheets at startup and at the end of Years 1 and 2. Put initial fixed asset investments in Year 0 and initial working capital investments in Year 1 Assume the initial $70,000 is equity financed B. Construct the pseudo dividend method equity valuation cash flow including the S3,000,000 terminal payment C. D. Using a 25% discount rate for the first two years and a $3.000.000 terminal value, what is the value of the venture at its launch