Advice You - Business

Every business sooner or later will be sold or transferred to someone else. Whether that someone else is an insider (e.g., a family member or key employee) or an outsider, certain steps can be taken to ensure that the transfe

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

r achieves the goals of the business owner. This process is known as exit planning. Unfortunately, the majority of business owners do not take the proper steps to maximize the proceeds they’d receive upon the sale of their co

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

Examples of combination products may in

mpany and/or achieve their overall objectives.

Set goals for yourself

You may have put together a business plan when you started or acquired your business, but how often have you updated it? I’d recommend that you an

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

nually sit down and reevaluate your strategic plan for yourself and your business. Project the business three to five years into the future. Will you be entering new markets or introducing new products? Also, how do you see

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

yourself transitioning out of the business? Will you sell to a third party or keep the business in the family? Do you plan to retire upon exit or will you be starting a new career or buying another business?

Assemble a so

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

Combination pro

lid team

There are numerous professionals involved in successful exit planning, many of whom are probably your current advisers. Your team should include: attorney; accountant; wealth adviser; mergers and acquisition adv

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

iser/business broker; insurance professional; and any other trusted advisers. Each of these professionals brings vital skills to the table.

Watch your expenditures

Be careful where you spend your cash. Clean up your

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

ncome statement and eliminate unnecessary expenses. The most likely valuation of a profitable company involves the capitalization of a company’s cash flow; so every dollar saved on your P&L equates to two to four dollars of v

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

alue in your company. Also, make sure that you earn a good return on investment on capital expenditures. Put yourself in the potential buyer’s shoes – what about your company is valuable? Make sure the capital and time you

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

invest in the company enhances that value.

Make sure your information systems are up to date

Owners and managers should have systems in place so that information received is timely and accurate. These systems need to

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

be transferable to the buyer. While a spreadsheet of financial data may work for the owner, would a new owner be able to understand it? Bookkeeping should be performed using standard accounting software such as QuickBooks. Th

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

Following aspects would a

e same goes for any other system in the business – if the industry standard is to have certain software to handle inventory or project management, then the company should have that software in place.

Management and/or tra

dd to the challenges in developing combination products:

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

ined employees in place

A business is difficult to sell if the owner is too embedded in it. A buyer will want to be able to step into the business and take over from as close to Day 1 as possible. (Often sellers stay on

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

for a finite transition period after the sale.) Talk to members of your exit planning team regarding creative ways to create incentives for key employees to stay.

Manage the relationships with customers and suppliers

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

Your goal in selling to an outside party is to minimize the perceived risk of buying your company. A key component to this is customer diversification. If any one customer comprises greater than half of your revenue, you’re a

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

t risk of that customer leaving and inflicting a potentially mortal blow to your business. The same risk exists if any one supplier of a key material or service has too much power.

Perform pre-transaction due diligence
ping new procedures for reviewing their safety, efficacy and quality.

Professional from academic institutions, pharmaceutical industries, health care indust
>

Review with your advisers all of the items a potential buyer would want to review, including contracts, leases, equipment lists, etc. Additionally, you’ll want to ensure that you have up-to-date financial statements from t
y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products
e last three to five years available, prepared by your CPA. It may make sense to pay for more in-depth financial statements such as reviews or even audits if your company is large enough. Lastly, make sure that these items, a
.

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
s well as any potential “skeletons in the closet” are documented and presented to the buyer. Obviously, if the skeletons can be removed then do so, but definitely make sure that a buyer isn’t surprised. That could kill the de
elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.

Companies that provide selfless information through particip
al.

These are certainly not the only things you can do to ensure a smooth exit plan. Most of all, heed the advice to hire professionals to assist you. With the right help, you greatly improve the odds of achieving your goals

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 - Exit Strategies - How Business Owners Can Prepare For a Sale

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