AM Pharma Creating Value A Case Solution

Large pharmaceutical companies are now largely dependent on external innovation apart from their internal research. This shows in the research in 2016, where 68% of drugs approved by the FDA originated from small biotech companies.

2. What were the company’s strategic options mid-2014?

Being a mid-sized pharmaceutical company, AM-Pharma faced a financial limitation with completing the clinical trials. While the opportunity was huge, and the first stage had been successful, the expense of the second phase required additional capital. In the initial round, raising capital through investors had resulted in year-long delays in the clinical trial process. 

AM Pharma had the option to delay the clinical trial process until new financing was secured. This would mean further delay in bringing the drug into the market. The second option was to begin the process and continue pitching investors hoping to raise funds. The third option was to reduce the number of people involved in the clinical trial, which would be covered by AM’s current capital.

3. What exit opportunity should the company pursue?

The first exit option for AM-Pharma was to sell its portfolio to a larger pharmaceutical company. The second option was to get itself listed on the stock exchange to raise additional capital from the public to complete the final phase of the trial. However, initial investors were waiting for their return on investment, a quicker way to gain profits was a merger and acquisition exit strategy.