Advice You - Business

Remember when you were a child and your mother told you not to touch the hot stove? You couldn't really appreciate that message until you felt the pain shoot through your entire body by w

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

ay of your finger tips. Oh, now I understand. Sometimes our prospective business sellers get the same kind of message as they pursue the sale of their business to a buyer who approached

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

Examples of combination products may in

hem with an unsolicited interest to buy.

We often get an inquiry from this business owner because this is usually the only time he will sell a company. He wants advice from us and his po

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

ition is that he will hire our firm to represent him if this buyer falls through. Really the best advice we can give him is to engage our firm and let us throw this buyer into the mix of

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

potential buyers that we will uncover. His response is almost always, I just want to see how this buyer plays out. We have watched this movie that I will call the Single Buyer Syndrome,

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

Combination pro

hundred times, so let me describe how it plays out.

· The potential buyer begins an exhaustive courting and informal due diligence process without any offer or Letter of Intent.

· The

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

wner takes his eye off the ball, counting his millions prematurely and devotes less attention than usual in running his business.

· The buyer draws out the process by delaying and resche

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

uling meetings. He does not treat this process with the same focus and sense of urgency that the seller is now consumed with. Do you know why? The buyer is doing the same dance with 3 or

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

other prospective acquisitions.

· The seller has a difficult time getting the buyer to put some terms and conditions in writing. If he does, it provides a good deal of wiggle room to ad

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

ust his offer as due diligence progresses.

· The process seems to stretch on and on as more meetings get delayed and rescheduled.

· Finally, the seller gets aggravated and begins to put

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

some time limits and demands on the buyer.

· The buyer now gathers his team of accountants, attorneys, operations managers, and others to tear apart your company.

· This team finds all

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

Following aspects would a

kinds of problems that they use to justify lowering the offer and increasing the reps and warranties and increasing the amount of hold back in an escrow account. They also bring up the re

dd to the challenges in developing combination products:

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

uirement for owner financing for the first time.

· The buyer has carved a significant chunk out of his offer while using all his experts to back him up. The seller is now 6 months into t

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

e process and the buyer knows that you have a great deal of skin in the game. He is counting on the seller to just cave and weakly counter because this process has just worn him down.

·

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

f the seller relents, he likely has had his original offer reduced by 20% or more. The original offer, however, started below what the business was actually worth. If he sells under these

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

circumstances, he likely will realize 30% or more below what a fair market competitive bid situation would produce.

· The other response from the seller is to be insulted and blow up the

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

Professional from academic institutions, pharmaceutical industries, health care indust

deal, leaving his company in a weaker state than when this whole process began. The seller focused much of his own energy on this process rather than running his business.

· The buyer mo

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

es on to his next acquisition candidate with the same M.O.

Unfortunately, the story does not end here. Many owners will go through this process more than once. It can stretch on for year

.

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

because he can normally process only one buyer at a time. The only way to insure the right selling price is to throw these buyers into a formal M&A process. When you do, these buyers usu

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

Companies that provide selfless information through particip

lly drop out of the running pretty quickly because they want to find a bargain. You worked too long and too hard to suffer from Single Buyer Syndrome and sell your company for a discount

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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