Useful Advices - Business

How much is your company worth? How much of that worth is attributable to your performance? Is a valuation for estate, or divorce, purposes a true reflection of the business worth? These are tough questions and t

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

hey make calculating the selling price of a closely held company difficult.

Although there are three generally used methods of valuation -- industry norms (usually based upon some multiple of earnings computation),

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

Examples of combination products may in

omparable sales of public companies, and formula approaches -- no one method does a consistently good job of expressing the value of the closely held business for purposes of (the various types of) sale.

Attempting

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

to consider a purchasing decision, or structure a selling price, on factual data (when available and confirmed) is, however, a worthwhile of estimating approximate value. Collectively used, these 3 valuation methods

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

can help establish an objective range of value, which provides the basis for successful negotiations and sale.

Even with objective values, the watchword in buying a closely held business remains, Buyer Beware. The

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

Combination pro

losely held company is one of those strange animals that can alternately command pennies or fortunes. It can be, and often is, worth whatever you can get for it. What you value and how you value it, are critical to

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

the process. Some items that had been deeply discounted or handled as contingent liabilities in prior years are now viewed more as key elements in a sale – the value of key employees and contractors governed by soun

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

(and enforceable) golden handcuffs and the value of software licenses, for example.

Valuations for estate purposes, or equitable distribution (divorce), however, are seldom reflective of a true selling price. That'

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

s not their purpose. Use such values warily when considering a sale. Also, be aware that a sale in too close proximity to a key owner’s death or divorce might result in the sale being challenged if the value is sign

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

ficantly different.

In preparing to conduct a valuation, a true picture of the company's performance must be prepared. Unfortunately, the tax code is structured in such a way that there is little incentive for the

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

rivate company to show comparable profits to its publicly traded counterparts.

Thus, declared earnings often do not mean much. Before applying any model, a valuation expert will need to "recast" the financial state

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

Following aspects would a

ment, taking tax shelter considerations out of the picture and presenting new numbers based on what the company's performance would look like if run by hired managers.

In the industry norm method, the company will b

dd to the challenges in developing combination products:

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

compared with other assumedly similar companies in their industry that have sold at various multiples of (recast) earnings. That's OK if the company is truly a typical company. If the company has either proprietar

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

y products or services or market position that make them unique, the multiples approach negates that uniqueness.

The comparable sales method presents similar problems. Are the sales being compared truly comparable?

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

Few public companies have the same infrastructure as their privately held counterparts. Key to a comparable sales method working is the ability to compare "apples and apples".

There are dozens of formulas used in

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

aluation analysis. Formulas can establish ranges of values. Using both the right formulas and knowing how to interpret them for a given business can give a close indication of true value, but ratios derived from “

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

Professional from academic institutions, pharmaceutical industries, health care indust

norms” (averages) also produce a leveling effect. Confused? What is your company worth? It's worth whatever you, the seller, will accept. It's worth whatever the purchaser is willing to pay you. Reviewing objecti

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

ely prepared vales and going over them help bring a sense of reality to a transaction that can be very emotional. Using traditional valuation methods help to establish guidelines, which usually put buyer and seller i

.

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

n the same ballpark.

Selling a family or entrepreneurial, business isn't like selling a product or even a service; it's like selling a piece of yourself. If you engage the right advisors, give yourself time (usuall

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

Companies that provide selfless information through particip

1-3, or more years) to find the best buyers and are realistic about the possible outcomes, you can increase the likelihood of achieving a successful sale. And what's that really worth?

Copyright 2006 John J Reddis

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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Business coach. As a business coach I show business owners how to add value. In this article I explain how it’s the little things that add value and make you different.

Factoring of receivables is an arrangement whereby a company sells its accounts receivables to another company (banks and other institutions) that specializes in buying them and obtains the necessary financial accommodation. It is the most popular method of short-term financing in the US. Factoring offers the following advantages: relief to manufacturers and sellers from the bother of collection of book debts, saving in time and man-power required for debt collection, and last but not the least, adequate and better source of financing.

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