Digg It - Business

If you want to get the best price, terms, and structure when you sell your business, it is critical that yo

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

u know who the potential buyers are and what they are looking for. This information will allow you make str

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

Examples of combination products may in

ategic decisions and position your company to increase its value in the eyes of prospective buyers.

In tha

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

light, let’s discuss some of the types of buyers you might encounter when you decide to sell all or part o

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

f your company. We can first divide the buyer universe into Insiders and Outsiders. It will depend on your

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

Combination pro

oals for yourself and your business as to which group you will want to sell your business to. Insiders incl

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

ude family members and employees. In order to transition your business to family in the most tax efficient

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

anner, your goal will be to minimize enterprise value and obtain the lowest defensible (should the IRS choo

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

se to question it) valuation.

A method for selling the business to employees that is gaining popularity is

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

the ESOP (Employee Stock Ownership Plan). ESOPs can be a great way for you to transition ownership to your

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

employees in an extremely tax-efficient manner. They are not for all companies, however, and I would highly

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

Following aspects would a

recommend that you enlist professional help in evaluating their viability for your company and setting up

dd to the challenges in developing combination products:

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

he plan. Compliance costs can be high, so your company should be large enough for these costs to make sense

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

(payroll should be at least $1 million annually). Also, if you the owner want to walk away with cash, the

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

ompany will need to borrow money to fund the ESOP – so there has to be collateral and cash flow available f

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

or the loan to happen. A great source for information about ESOPs is the website of The National Center for

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

Professional from academic institutions, pharmaceutical industries, health care indust

Employee Ownership: www.nceo.org.

Insider sales are generally motivated by reasons other than financial bu

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

t they often fall apart because of financial realities. Keep in mind that insiders usually don’t have a lot

.

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

of cash, so you will likely still need to depend on the business for your retirement income after the sale.

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

Companies that provide selfless information through particip

In Part 2 we’ll discuss the buyer types – Outsiders – who usually bring the most cash to the closing table

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 1

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