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Probabilities for each State of Nature

Big Pharma Deal- Success


Big Pharma Deal- Failure

75%
25%

Sepsis Deal
Diabetes Deal

60%
40%

Diabetes Deal Later - Success


Diabetes Deal Later - Failure

95%
5%

Remaining Cash Balance


Cash on hand
$
700,000.00
Burn Rate ( per month)
$
60,000.00
Runway (in months)
11.67

Up-fornt
Milestones
Royalty Rate
Annual Sales
Value

Undiscounted Deal Terms


Sepsis
Diabetes
$5,000,000
$8,000,000
$108,000,000
$80,000,000
10%
12%
$500,000,000
$4,000,000,000
$163,000,000
$568,000,000

Solutions
First Alternative:
Wait for Six Months

Weighted Expected Value


Deal= Failure

Probability
Value

Diabetes Deal 1 year later


Success
Failure
95%
5%
$284,000,000
$0.00

Firm Value
VC
Expected Value
Ownership
Weighted EV

Value-capital round
$8,000,000
$10,000,000
$249,800,000.00
44%
$111,022,222.22
Weighted Expected Value
Alternative A ( Wait Six Months)
Deal = Success
Probability
75%
Weighted EV
$325,000,000
Expected Value $271,505,555.56

Second Alternative
Venture - capital

Probability
Value
Venture Capital
Expected Value

Expected Value
Deal = Success
Sepsis
Diabetes
60%
40%
$179,300,000.0
$624,800,000.0
$10,000,000
$10,000,000
$347,500,000.0

Firm Value
VC

Expected Value
Alternative B (Venture-capital)
$15,000,000
$10,000,000

Probability
Expected Value
Total EV
Ownership
Wtd EV

Deal = Success
Deal = Failure
75%
25%
$347,500,000.0
$259,800,000.0
$260,625,000.0
$64,950,000.0
60%
$195,345,000.00

Third Alternative
Angel Round

Probability
Value
Venture Capital
Expected Value

Expected Value
Deal = Success
Sepsis
Diabetes
60%
40%
$163,000,000.0
$568,000,000.0
$2,000,000
$2,000,000
$323,000,000.0

Firm Value
VC

Expected Value
Alternative C (Angel round)
$17,500,000
$2,000,000

Probability
Expected Value
Total EV
Ownership
Wtd EV

Deal = Success
75%
$323,000,000.0
$242,250,000.0
90%
$277,487,179.49

Weighted Expected Value


Deal= Success
Sepsis
Probability
Value
Expected Value
Ownership
Weighted EV

60%
$163,000,000

Diabetes
40%
$568,000,000.00

$325,000,000.00
100%
$325,000,000

ected Value
Wait Six Months)
Deal = Failure
25%
$111,022,222.22

Probability
Value
Venture Capital
Expected Value

Expected Value
Deal = Failure
Diabetes Deal 1 year later
Success
Failure
95%
5%
$284,000,000.0
$0.0
$10,000,000
$10,000,000
$259,800,000.0

Probability
Value
Venture Capital
Expected Value

d Value
(Angel round)

Deal = Failure
25%
$267,800,000.0
$66,950,000.0

$277,487,179.49

Expected Value
Deal = Failure
Diabetes Deal 1 year later
Success
Failure
95%
5%
$284,000,000.0
$0.0
$2,000,000
$2,000,000
$267,800,000.0

Purinex,Inc
Decision tree Analysis
Appendix 1

Sepsis
deal= success

Probability
Wtd. EV

Probability
Value
75%
$325,000,000

A
Firm value
Wtd. Exp. Value

$25,000,000
$271,505,555.56

deal= failure
Probability
WTD EV

Diabetes
Probability
Value

25%
$111,022,222.22

Down roun

Sepsis
deal= success
Probability
Value

B
Firm Value
Ownership
Wtd. Exp. Value

Probability
Wtd. EV

75%
$347,500,000.00

deal= failure
Probability
Wtd. EV

75%
$259,800,000.00

$15,000,000
60%
$195,345,000.00

Diabetes
Probability
Value

Sepsis
deal= success
Probability
Value

C
Firm Value
Ownership
Wtd. Exp. Value

Probability
Wtd. EV

75%
$323,000,000.00
Diabetes
Probability
Value

$17,500,000
90%
$277,487,179.49
deal= failure
Probability
Wtd. EV

75%
$267,800,000.00

60%
$163,000,000
Diabetes-deal

40%
$568,000,000

Down round

VC round

VC
value

Probability
Value

95%
$284,000,000

$10,000,000
$8,000,000diabetes- no deal
Probability
Value

5%
0

60%
$179,300,000

Diabetes-deal
40%
$624,800,000
Probability
Value

95%
$284,000,000

diabetes- no deal
Probability
Value

5%
0

60%
$163,000,000

Diabetes-deal
40%
$568,000,000

Probability
Value

diabetes- no deal
Probability
Value

95%
$284,000,000

5%
0

Purinex,Inc
Decision tree Analysis
Appendix 1

Sepsis
deal= success

Probability
Wtd. EV

75%
$325,000,000

$25,000,000
$271,505,555.56

Diabetes
Probability
Value

A
Firm value
Wtd. Exp. Value

Probability
Value

deal= failure
Probability
WTD EV

25%
$111,022,222.22

Down round

Sepsis
deal= success
Probability
Value

B
Firm Value
Ownership

$15,000,000
60%

Probability
Wtd. EV

75%
$347,500,000.00

Diabetes
Probability
Value

Wtd. Exp. Value

$195,345,000.00
deal= failure
Probability
Wtd. EV

75%
$259,800,000.00
Sepsis
deal= success
Probability
Value

Probability
Wtd. EV

75%
$323,000,000.00
Diabetes

Firm Value
Ownership
Wtd. Exp. Value

$17,500,000
90%
$277,487,179.49

Probability
Value

deal= failure
Probability
Wtd. EV

75%
$267,800,000.00

Sepsis
60%
$163,000,000
Diabetes-deal
Diabetes
40%
$568,000,000

Down round

VC round

VC
value

$10,000,000
$8,000,000

Probability
Value

95%
$284,000,000

diabetes- no deal
Probability
Value

5%
0

60%
$179,300,000

Diabetes
40%
$624,800,000

Diabetes-deal

Probability

95%

Value

$284,000,000

diabetes- no deal
Sepsis

Probability
Value

5%
0

60%
$163,000,000

Diabetes-deal
Diabetes
40%
$568,000,000

Probability
Value

diabetes- no deal
Probability
Value

95%
$284,000,000

5%
0