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Md Obayedul Karim Akash

Livingstone Research

February 19, 2023

Investment Options for a Pharmaceutical Company: Acquiring a New Company or Maintaining

Operations

In this case study, a pharmaceutical company has received a capital of $5 million from a

generous investor. The higher management is seeking the best investment option that will benefit

the company. The company's objectives are to maintain a working capital of $180,000 monthly

and acquire patents worth $3 million in the coming year. This paper evaluates the two available

options and recommends the best one for the company.

The first option is to invest in acquiring a newly formed company worth $5 million. The

new company has great technical assets but has not generated enough revenue to run its

operations. This option could be beneficial to the pharmaceutical company if the technical assets

of the new company are a good fit for the company's products or services. Acquiring the new

company will help the pharmaceutical company expand its product offerings and increase its

market share. However, there is a risk that the new company's technical assets may not align with

the pharmaceutical company's products or services, leading to a loss of investment.

The second option is not to invest the money and use it to keep running the company's

operations. This option may be beneficial in the short term, as the company can maintain its

working capital and continue to operate its business.

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However, it does not address the company's long-term growth and expansion goals. The

company will not be able to acquire patents, which could limit its ability to develop new

products and services, and increase its market share.

After evaluating the two available options, the best recommendation for the

pharmaceutical company is to invest in acquiring the newly formed company worth $5 million.

This option aligns with the company's long-term goals of expanding its product offerings and

increasing its market share. However, the company must conduct a thorough due diligence

process to ensure that the new company's technical assets align with its products or services.

Additionally, the company should negotiate favorable terms for the acquisition to minimize the

risk of losing the investment.

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Works Cited

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development – managing streams of innovation in highly regulated markets. 21 October

2014. Web. 19 February 2023.

K, Avinash & Pindyck,Robert S. The Options Approach to Capital Investment. London:

Routledge, 1998. Print.

Mittra, James. "Life Science Innovation and the Restructuring of the Pharmaceutical Industry:

Merger, Acquisition and Strategic Alliance Behaviour of Large Firms." Technology

Analysis & Strategic Management (2007): 279-301. Web.

Pindyck, Avinash K. Dixit and Robert S. The Options Approach to Capital Investment. June

1995. Web . 19 February 2023.