Useful Advices - Business

Most importers have seen their businesses grow dramatically in the past years. The drop in the cost of overseas manufacturing coupled with the insatiable appetite of US consumers f

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

or more and cheaper goods has created a bonanza for the industry. Both large and small importers have seen the size of their orders - and revenues - grow dramatically. However, 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

any business to grow successfully in this industry it must be well capitalized, or have a source of financing.

Let me give you an example. Let’s say that your company gets a very

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

large purchase order (po) from your best customer. You, of course, would go to your supplier and try to fulfill the order. However, if your supplier is unwilling to extend you term

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

, you may need to post a letter of credit or similar instrument. This is where small and mid size importing/exporting companies run into problems. If they cannot post a letter of c

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

Combination pro

edit, they will not be able to fulfill the order and will lose the business. This is also where purchase order financing can help you.

What is purchase order financing?

Pu

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

chase order funding is a tool that can help you finance orders that you cannot afford to fulfill. It allows you to take large orders from great clients and deliver them, without u

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

ing any (or little) of your own funds. PO financing lets you grow your business using other people’s money. It’s a great tool to take your business to the next level.

The basic

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

of purchase order funding

A PO financing transaction is fairly simple. Once you have or are close to having a purchase order from your customer, you approach the PO financing

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

company. The PO financing company then provides financing for the transaction, enabling you to purchase the goods from your supplier and deliver them to the customer. Once the good

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

are received and verified, the PO financing pays your supplier on your behalf. Payment to your supplier can be provided in a variety of forms, although it is commonly done using a

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

Following aspects would a

letter of credit. Once the goods have been received, you send an invoice to your client and wait for payment. Once your client pays the invoice, the transaction between the PO fun

dd to the challenges in developing combination products:

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

ing company and your company is settled. If that transaction was structured properly and if your margins were good, this transaction should have required little if any out of pocke

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

expenses from your company. This is why po financing is so powerful.

The cost of PO financing

The cost of PO financing will be based on a number of criteria, including yo

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

r experience in the industry, the complexity of the transaction and the credit worthiness of the end customer. A rule of thumb for the industry is that a transaction must have prof

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 margins of at least 20%, or better, to be affordable. That will allow you sufficient funds to cover the cost of PO funding and still realize significant profits. Cost reduction

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

Professional from academic institutions, pharmaceutical industries, health care indust

ricks

The main cost driver in purchase order financing is risk. The risk in the transaction is reduced dramatically substantially once the product is delivered and an invoice is g

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

nerated. A common trick to reduce the cost of the transaction is to factor the invoice, and use the factoring proceeds to close the purchase order financing part of the transaction

.

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

Since accounts receivable factoring is cheaper than po financing, this little trick can reduce the total cost of the transaction by a few points. To capitalize on this cost reduct

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

Companies that provide selfless information through particip

on trick, you should be sure to work with a factoring company that also does purchase order financing. That will enable you to close the purchase order funding component seamlessly

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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Useful Advices - How to Grow Your Import Business with Purchase Order Financing

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