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and michelle chang, a doctoral student at the ...

Question: #Quick Biotech It is late in September 2010, and

Michelle Chang, a doctoral student at the Nation...
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#Quick Biotech
It is late in September 2010, and Michelle Chang, a doctoral student at the National
University of Singapore (NUS), is to meet her colleagues Henry Tan and Mike Hammer from the
Institute of Molecular Biology again in a few days to discuss the course of action to be pursued
for the establishment of Quick Biotech. Henry Tan and Mike Hammer both hold doctorates in
biology and work at NUS as senior assistants. A few months before, they patented a process for
the production of multi protein complexes, which they had already put to successful use, and
about which they had received favourable feedback. Now, the three colleagues want to set-up a
company called Quick Biotech in order to apply the new technology to a wider field.
Background
The human body is exposed to numerous external influences and internal genetic defects, which
cause the proteins in our cells to malfunction. Proteins constitute the basis of all biological
processes. If proteins no longer fulfill their function adequately owing to defects, this often results
in life-threatening illnesses, such as cancer. This is why almost all drugs have effect on proteins.
Consequently, most research and development work for drugs and therapies need protein, which
is why both academic research institutions and the pharmaceutical companies use proteins as a
basis to their research activities.
Recently, progress in fundamental research revealed the total of the proteins in a cell, which in
the case of human being amounts to more than 40,000 proteins. It became obvious that the
proteins in a cell do not work individually; rather, they combine to act as protein complexes that
are made up of numerous protein components. In addition, virtually all biological processes in
cells are executed by such protein complexes. This has crucial consequences for research; in
order to understand how proteins work, protein machines must be explored as a whole, and not
only their individual protein components.
Nonetheless, academic institutes and the pharmaceutical industry have almost exclusively
focused on individual, isolated proteins. The primary reason for this was that human protein
machines are very difficult to produce in a pure form. Although the development of modern,
recombinant methods now enables the production of individual protein components, there is still
a demand for a technology that is able to provide sufficient volumes of entire protein machine,
which form the basis of biological functions. This is also Michelle’s, Henry’s and Mike’s
experience in their research at NUS. They realize that no suitable technology for the production
of protein machines exists. This is why they developed their own technology: the MultiBac
technology.
The technology
The MultiBac technology uses a modified, yet greatly improved version of the so called
“baculovirus gene transfer vector” to produce any combination of proteins in great volumes and
of high quality. The genes of a great number of proteins, such as human ones, can be placed on
this gene transfer vector. This process can be carried out in an ordinary molecular biology
laboratory. The MultiBca gene transfer vector multiplies in cell cultures and constitutes no danger
to human beings. Therefore, no special health and safety regulations are required to work with
this system.
The gene transfer vector of the MultiBac system was developed to provide it with a unique
feature namely, that is particularly careful in the production of the desired protein machines. For
customers, this is a guarantee of the unsurpassed quality of the protein complex produced with
the MultiBac technology. In comparison with conventional processes, the simplified MultiBac
technology additionally saves a substantial amount of time for the production of the desired
protein product: it only takes weeks rather than months. Also, the technology offers the possibility
to build numerous different protein complexes from the same protein components on a modular
basis and, thus, of supplying individual solution to customers’ problems.
Laboratories of renowned research institutes already use MultiBac, which NUS has made
available as trial specimens. This shows that the technology works, is mature and has a selling
potential. The process was patented last year by NUS, and since then it was developed in the
context of employment at the university. However, the rights can be assigned to a start up, for
instance, in the form of an exclusive license.
The next steps to launch the venture
In autumn 2010, Michelle is in the final stages of her doctoral thesis, which she wants to
complete by the year. After that, she needs to work full time for the new company. In contrast,
Henry and Mike want to retain their jobs at NUS and spend less time on the company. As such,
they would not be involved in the company’s operative daily business but will assume an
advisory function. They will receive shares in the start-up but will not be on the company payroll.
One of the key roles of Henry and Mike will be to guarantee long term access to the latest
findings in scientific research. This model, whereby some of the founders remain at the
university, has already proved successful in a number of other biotechnology start ups. Research
in the field of biotechnology is very costly; both in terms of time and money, so only by retaining
close links with a research institution will the company ensure that it will always work with the
latest technologies and, thus, remain competitive.
One of the greatest challenges currently perceived by the team is to secure funding for the new
company. Although the founders are able to invest S$200, 000 of their personal savings into the
enterprise and, thus, realize a small scale start up, present plans are based on the assumption
that at least S$500 000 of external capital will be needed for the first two years.
These funds will primarily serve to finance Michelle’s position and a small team of lab assistants
in charge of producing the protein complex for the clients. The product will be sold via a network
of sales agents, and other functions, such as accounting and finance, will be outsourced to a
professional accountant.
Answer all questions.
1. Should Michelle consider debt or equity to finance QuickBiotech? Explain your answer.
(15 marks)
2. Would you consider any alternative sources or finance? Which one? Why?
(15 marks)
3. Analyse other issues to be addressed before QuickBiotech is launched.
(20 marks)

Expert Answer
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Solution - A
Debt financing
            It means when a company get an enough cash to start business through various sources
like loans, bonds and debentures etc… This financed amount repay with set of period of time and
some percentage of interest. It is mainly classified into 2

a) Short – term debt – repay within a year

b) Long – term debt – Multiyear repayment terms.

Some of the main debts financing sources are

1. Bank loans - This is the amount granted by a bank with certain percentage of interest
to a borrower on a collateral security. It allows multiyear repayment systems.

2. Bonds - It is a debt investment in which an investor loans money to an entity (typically

corporate or governmental) which borrows the funds for a defined period of time at a
variable or fixed interest rate.

3. Debentures – It is an instrument used by a company to borrow cash as capital, at a

fixed rate of interest.

Equity financing
It is a method of rising capital by issuing company shares to public and companies. It is mainly
classified into 2

1. Common stock – This type shareholders are real owners of a firm.

2. Preferred stock - This type shareholders are not real owners of a firm. They can get a
fixed dividend for a period of time.

Solution - B
Yes,

I would suggest Asset financing because they needed lots of machinery and other equipment’s
for developing their research. They needed huge amount for purchasing this equipment’s. So
would suggest asset financing for reduce their capital requirements to start a new venture.   
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