Cases - Business

You started your business with dreams of making millions. When the time comes to sell your business, you will want to keep as many of those after tax dollars as you possibly can in exchange for your bl

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

ood, sweat and tears. Advance planning can make a big difference in the amount you pocket after the sale of your business.

Consider this. Under prevailing tax rates, Owner A sells a business for $1 million

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

Examples of combination products may in

in cash and nets $800,000 in after tax proceeds. Owner B also sells his/her business for $1 million in cash, yet only nets $500,000 (or less) in after tax proceeds. The difference in the cash y

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

ou keep has everything to do with the form of ownership and elective tax status, the nature of the transaction, and the tax structuring that you and the buyer agree upon.

One hundred percent of all businesses

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

will experience a change of ownership. In some cases, this change will be involuntary and take the form of a bankruptcy or closure. However, in the vast majority of cases, it will result in the owners recei

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

Combination pro

ing significant amounts of money as they transfer the earning power and good will of their businesses to others.

Because there is not a centralized database that tracks all forms of transfers of privately own

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

ed business ownership interests, the annual rate of transitions of ownership can only be estimated. However, from prior research on the topic and from 23 years of experience in providing representation to tho

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

se who sell their privately owned businesses, I estimate that between 6% and 7% of all privately owned businesses have ownership changes each and every year. This means that the average period of ownership is

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

approximately 13 years. The vast majority of these transitions will involve the sale and transfer of all prior ownership to new ownership.

In most cases, the owners will have spent years running their busin

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

esses on a day-to-day basis to generate both personal income and profits. Yet surprisingly few business owners have assembled the necessary plans for (a) when they elect to sell, or (b) how to be positioned t

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

maximize their after tax dollars when it comes time to transition the ownership of their businesses.

Though an exit strategy should ideally be part of an original business plan, it is never too late to becom

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

Following aspects would a

e informed about all aspects of how to unlock the hidden value of your business and convert it to cash when the time comes to sell. In the above $1 million illustrations of the sale of two different businesse

dd to the challenges in developing combination products:

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

s, the tax savings are obvious. However, what is not obvious is a true understanding of the time proven processes of getting buyers to pay you what your business is really worth. The process of profitably tr

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

ansitioning business ownership involves a series of steps that include the following:

• Understanding your personal objectives and financial needs
• Realistically determining the present value of your

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

business
• Understanding what can and will influence its future value
• Determining the best market timing to move forward
• Correctly “packaging” your business
• Developing stra

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

egies to proceed with total confidentiality
• Entering into totally confidential negotiations
• Knowing how to find the best possible buyers
• Financially qualifying buyers
• Finding a

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

Professional from academic institutions, pharmaceutical industries, health care indust

lender for your buyer so you can get cashed out
• Reaching agreement on the negotiation of details
• Preparing appropriate legal documents in a time and cost-effective manner
• Coordinating p

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

ro-rations and closing needs
• Realistically assessing your post-closing obligations, such as training or transition consulting
• Actually closing the transaction
• Knowing how to best inform

.

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

employees, customers, vendors and others after the transaction has closed

In most cases, business owners only go through the sale process once and thus cannot develop expertise through successive transac

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

Companies that provide selfless information through particip

tions. Whether you started your business with an original exit strategy or are just beginning to develop one, the concepts are not difficult to either grasp or implement, and the effort can be very profitable

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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