Avid Radiopharmaceuticals and Lighthouse Capital Partners – Case Solution

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Avid Radiopharmaceuticals and Lighthouse Capital Partners Case Answers

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As one of Cristy’s colleagues, what argument would you make against lending to Avid Radiopharmaceuticals? Why might you support doing so?

There are numerous reasons against lending to Avid Radiopharmaceuticals: although Avid has been offering innovative technology to detect certain diseases earlier, it might struggle to still serve all of them since the collapse of the financial market in late 2008. By narrowing down its product portfolio by focusing solely on Alzheimer’s, Avid will become a less attractive company than it has been before.

In addition, Lighthouse usually prefers to invest before a Series C funding, which Avid has, however, already passed. Moreover, it has almost exhausted the money raised in its Series C.

This creates another negative aspect for Lighthouse, as their preferred approach entails investing right after a company has successfully raised money to ensure a sufficient cash balance in the company that allows meeting interest and principal payments.

Avid Radiopharmaceuticals’ less-known seed-stage and VC investors – apart from Alliance Bernstein – on the one hand, represent another anomaly with Lighthouse’s usual investment approach, as Lighthouse prefers to collaborate with well-known top-tier VC firms. On the other hand, the lack of well-known investors showcases a profound risk in lending to Avid.

The overall uncertainty of whether Avid actually needs Lighthouse’s venture debt additionally constitutes a poor bargaining position for Lighthouse and a questionable successful deal outcome. If such an outcome is indeed unlikely from the beginning, Lighthouse might rather use the efforts that it would now utilize for Avid to focus on alternative investments right away.

Nevertheless, Avid still demonstrates significant strengths. The early detection of Alzheimer’s ultimately leads to better prevention and, hence, better-curing possibilities of the disease.

As previously described, its innovative technology eventually benefits many stakeholders due to considerable cost savings. Additionally, the biomarkers increase the chance that more positively tested cases are detected and treated.

As none of the above aspects are currently accomplished by competitors, it can be concluded that Avid’s value proposition is indeed unique.

Besides that, Avid, by keeping deadlines and doing so under budget, has proven to be a reliable partner, which is a vital aspect in the VC industry and, at the same time, raises the probability of Avid Radiopharmaceuticals paying the debt back without complications and in due time.

Further, it…