Advice You - Business

If you are smart, you will form a business entity for your business start up. The question, however, is how do you find investors and what do you

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

sell them in exchange for critically needed money.

For the purposes of this article, let’s assume you formed a corporation to start your business

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

Examples of combination products may in

. Let’s also assume you have friends and families interested in investing. If you don’t, there are a lot of questions about selling securities to

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

the general public, so let’s avoid that situation. Regardless, how are you going to raise money so you can carry out your business plans?

The fir

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

st step most people take to raise money is to give away equity. In the case of a corporation, this means selling shares to potential investors in

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

Combination pro

exchange for cash. While this is a logical step, it is not the best solution. In fact, it should be the last resort.

When you start a business, y

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

ou consider it to be “my” company. What many new business people don’t understand is that selling shares in a corporation is diluting ownership. H

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

who owns the shares controls the company. If you sell shares, it is no longer your company. It is the stockholder’s company and there are now mor

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

e than one.

One of the biggest mistakes made with new corporations is the dilution of ownership due to a lack of planning. Let’s assume you talk

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

to your buddy about investing in the corporation. He looks at the business plan and thinks it is a great idea and you really have your act togethe

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

r. In fact, he thinks it is great, he offers to invest $100,000 for 45 percent of the shares. You agree since he is your friend and the money can

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

Following aspects would a

really take the business a long way.

So, what is wrong with this scenario? Well, what happens in a year when the business needs another $100,000?

dd to the challenges in developing combination products:

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

Are you going to sell more equity? You barely have any! At this point, things start to get ugly. You start making statements about it being your

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

idea and doing all the work. Soon, you evolve into the full blown bitter originator. By giving away equity, you’ve lost control of “your” idea and

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

“your” business. Unless something can be worked out, your dream is dead and the business will probably be as well.

A better option for financing

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

is, well, anything else. Instead of selling equity to friends and family, try to get them to loan you money. You will be surprised how many will a

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

Professional from academic institutions, pharmaceutical industries, health care indust

gree to this. If the business goes well, you pay them back, retain total control and everyone is happy. If you can’t get loans, you can go ahead a

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

nd sell equity. When you do so, however, sell a very small amount for as much as you can get. If your buddy thinks it is such a great idea, he sho

.

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

uld be willing to kick in $100,000 for a small percentage.

When starting a business, regardless of the type, it is vital that you hold on to your

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

Companies that provide selfless information through particip

equity. Make them pry it from your dead hands before you sell it. If you don’t, you stand the very real chance of becoming disillusioned later on

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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Advice You - Selling Equity in Your Corporation

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