Hybritech Incorporated (a)

20 Pages Posted: 21 Oct 2008

See all articles by Robert F. Bruner

Robert F. Bruner

University of Virginia - Darden School of Business

Casey Opitz

University of Virginia - Darden School of Business

Abstract

This negotiation case is meant to be used in conjunction with "Eli Lilly and Company" (F-0794); half the class works from one case and half from the other. Lilly is considering acquiring Hybritech, but the genetic-engineering company's future cash flows are difficult to predict and value. Both companies want to effect the merger, but the cases, which provide essentially the same information in all other respects, provide widely divergent projected cash flows. (The B case is F-0793.)

Excerpt

UVA-F-0792

HYBRITECH INCORPORATED (A)

In September 1985 Ted Greene, chairman and CEO of Hybritech, met with the company's investment banker at Goldman, Sachs to discuss the possible acquisition of Hybritech by Eli Lilly and Company. Hybritech and Lilly had been in and out of negotiations for about a year, and it now looked as though agreement was near; price and form of payment were the only remaining issues to be resolved.

Hybritech, specializing in monoclonal antibody (MoAb) research, was one of the leading companies in the very new field of genetic and cellular engineering. Greene thought it was in better financial condition than most of the other biotechnology firms but that its earnings potential was undervalued by the market. He felt Lilly would better appreciate the significance of Hybritech's lead in MoAb technology, which was a factor in his decision to consider Lilly as a buyer.

Greene also believed the large and strong pharmaceutical firm was an appropriate partner. As he told his investment banker, and subsequently the Hybritech shareholders,

We're in a business which is moving rapidly into the pharmaceutical field, which involves tremendous research and development expenses...and as we move more and more into the therapeutic business, we need more resources to grow.

. . .

Keywords: acquisitions, financial analysis, mergers, negotiation, security analysis, valuation

Suggested Citation

Bruner, Robert F. and Opitz, Casey, Hybritech Incorporated (a). Darden Case No. UVA-F-0792, Available at SSRN: https://ssrn.com/abstract=909058

Robert F. Bruner (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-3823 (Phone)
434-924-0714 (Fax)

HOME PAGE: http://faculty.darden.edu/brunerb/

Casey Opitz

University of Virginia - Darden School of Business

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

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