Immulogic Company Case

Financing sources and structure

In 1991, the board of directors of ImmuLogic considered seriously about going public and the investment bankers indicated that ImmuLogic might be able to raise as much as $80 million, based on several financing sources. Before 1991, in general, ImmuLogic had gone through three rounds of financing.

At first, Rothschild Ventures, Technology Venture Investors, Greylock Ventures purchased 1.7 million shares at $2 per share in a Convertible Preferred Stock Agreement on May 21, 1987.

One year later, the firm’s initial financing was largely gone. So on July 11, 1988, four new Venture funds made Series B agreement come into place with sales of 2,129,167 shares at $6.00 per share and total valuation at $31.4 million.

Then management shifted its attention to developing a relationship with a major pharmaceutical company. On October 4, 1989, Series C was executed with Merck as Merck purchased 1,200,000 shares at $10.00 per share and total valuation of ImmuLogic climbed to $65.3 million.

Furthermore, a potential financing strategy—and probably the most predominant one—was by going public. Through IPO, the company would be able to gather much more capitals. There are several reasons for that.

First, filings for IPOs by biotechnology firms had been increasing and ImmuLogic’s major competitor, the Cytel Corporation, was rumored to go public, which pushed ImmuLogic to go public as early as possible. Besides, by going public early, it would be seen as an attractive offering by the public market. Moreover, an IPO can provide ImmuLogic with substantial cash cushion, greatly strengthening Immulogic’s balance sheet.

However, by going public, ImmuLogic might receive lower valuation unless they wait until the firm initiated clinical trials. Apart from that, there might be deliberate underpricing from many purchasers. What is worse is that if ImmuLogic cannot sell its shares, there could follow a huge trouble for the company. Last but not least, a collaborative agreement might provide an alternative to an IPO, which could help avoid those risks mentioned above.

In sum, ImmuLogic should consider IPO with extensive care before they made any decision at that time.