Digg It - Business

In Part 1 we introduced the two main groups of buyers of companies: Insiders and Outsiders. We then focused the discussion on Insiders – your fa

According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product

mily members, key managers, and other (or all) employees. In this article we’ll focus our attention on Outsiders.

The main advantage in selling

; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.

Examples of combination products may in

your company to an Outsider is the fact that they usually bring a significant amount of cash to the closing table. We’ll divide Outsiders into

lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.

hree groups of buyers: Individuals, Financial buyers, and Strategic buyers. In this article we’ll focus on Individual buyers.

Individuals are u

here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe

sually wealthy people looking for a change of pace. Often these buyers are refugees from corporate America looking to put their accumulated brok

d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.

Combination pro

rage savings to work doing something they enjoy. Lifestyle is a major reason why these buyers are interested in purchasing a business. But make

ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc

no mistake – these buyers are educated and will not overpay. Usually they have some industry experience in the businesses they are evaluating, a

easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi

d they will calculate their expected Return on their Investment (ROI) from buying your business. If the ROI does not exceed (by a wide margin) t

nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically

heir returns from a passive stock index fund investment, they will pass. You will encounter individual buyers in transactions less than $2 or $3

and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ

million.

Individual buyers with an impressive enough background may pair up with a high-net worth investor (or in rare cases a Private Equity f

ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi

irm). One needs to be careful when dealing with individuals, however, because they will often say that they are partnered with an investor wheth

ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.

Following aspects would a

er they are or they aren’t. One of the dangers of marketing your company to individual buyers is that it can be a waste of time unless your inte

dd to the challenges in developing combination products:

Which markets to tap where the combination products can do fairly well?
Which combination prod

mediary has a good screening process. Every interested party should submit financial statements and proof of liquidity (in the form of brokerage

cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin

or bank statements) in order for your intermediary to separate the viable buyers from the tire kickers.

Finally, be aware that individual buye

tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen

s will usually require SBA financing to purchase your company. This is good for you in that it increases the amount of cash you receive at closi

t?

As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel

ng, but you will need to make sure the deal is doable for the bank. This means there needs to be adequate cash flow to service the debt plus col

ping new procedures for reviewing their safety, efficacy and quality.

Professional from academic institutions, pharmaceutical industries, health care indust

ateral. If you are a service company with limited assets the buyer may have to put up additional personal collateral and/or you’ll have to take

y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products

back a note for a portion of the purchase price. You’ll probably have to take back a note in any circumstance, because this signals to the buyer

.

As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de

and the bank that you believe in the future prospects of the company. This further emphasizes the importance of screening your buyers - you’ll w

elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.

Companies that provide selfless information through particip

ant to make sure that you don’t sell the company to someone who is going to run it into the ground.

In Part 3 we’ll talk about Financial buyers

tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products

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Digg It - Who Will Buy Your Business - Part 2

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