Advice You - Business

If you’re at all like me (e.g. not a lawyer nor aspiring to be one), legal sounding words like “Due Diligence” go in one ear and out the other. You will, however, become intimately familiar with those dreaded words when you sell your co

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

mpany. Additionally, it makes sense to become familiar with them and incorporate them into your day to day business life – just in case you do have to sell your company when you least expect to. If something were to happen that would fo

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

Examples of combination products may in

rce a sale, you will want to have all your figurative ducks in a row.

Due diligence is one of the final steps in the process of transferring company ownership to a third party. Simply stated, it is the step in which the buyer makes sur

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

e that he is buying what he thinks he is buying. At this point in the sales process, a lot of energy has been expended by both parties and a lot of confidential information has been exchanged. Despite signed non-disclosure agreements, t

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

his information can seep into the marketplace should the deal be derailed during the due diligence process. And this is where most deals are derailed.

We recommend that our clients conduct a self-assessment due diligence prior to go

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

Combination pro

ing to market. Most buyers will be looking for similar information, so it makes sense to organize the documents providing this information in a file which you can then hand to the buyer when they ask for it. This is perhaps the best

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

way to combat the feeling of “buyer remorse” – an efficiently prepared documentation of all aspects of the company. It also makes sense to have a file like this even if you are not planning to sell your company in the foreseeable futur

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

e; just make sure that you update it at least annually.

The buyer will want to review documents in the following general areas: legal, financial, human resources, and administrative. Legal documents include all those documents e

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

xecuted when your company was organized or incorporated, corporate records, financing documents (both bank debt and leases), property leases, intellectual property, and any regulatory matters. All details related to lawsuits past and pr

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

esent should also be included. Make sure that minutes of corporate meetings are documented so you aren’t scrambling at the last minute to get them done. Finally, and most importantly, make sure that you have a corporate attorney review

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

these documents for completeness and keep them in a safe and accessible location.

Financial documents to be reviewed include detailed income statements and balance sheets describing revenues, expenses, taxes, cash, accounts rece

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

Following aspects would a

ivable (and payable), prepaid expenses, work-in-process, inventory, fixed assets, intangible assets, deferred revenue, debt, and shareholder equity. Obviously you will want your CPA involved in this process. Your financial statements sh

dd to the challenges in developing combination products:

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

ould be prepared by your accountant (preferably with notes attached) and she should be able to assist you in preparing projected financial statements. Projections should be realistic but aggressive enough to interest a potential buyer.

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

Human resources documents to be examined include: company policies, processes, and practices; group insurance; retirement plans; key employees; training policies; internal communications methods; 1099 contractors; and contracts.

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

If you have employees you should have an employee handbook listing paid holidays, policies for sick time, personal time, vacation, etc. An HR Consultant can assist you in this increasingly complex area if you don’t have the time or pat

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

ience for it.

Administrative items to be reviewed include: descriptions of real estate, insurance paperwork, travel and entertainment policies, and contracts (including customer, vendor, and maintenance). This last item is of sp

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

Professional from academic institutions, pharmaceutical industries, health care indust

ecial importance because the value of the company is impacted by the transferability of the above listed contracts. Again, have your lawyer review these documents for completeness.

The majority of deals that fall apart do so because th

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

ey failed due diligence. Some of these failures are due to misrepresentation of company facts. Some are due to the seller trying to hide company “skeletons”. These errors are almost always discovered during due diligence. Consequently,

.

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

it is always better to fix the problem before you go to market, or bring it to the attention of the buyer at the start of the sales process. Waiting for these problems to be discovered during due diligence is a tremendous waste of every

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

Companies that provide selfless information through particip

one’s time, and can render a crippling blow to the future saleability of the company. On the other hand, a smooth due diligence process verifying all the information presented to the buyer greatly improves the odds of a successful sale.

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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