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When a company decides that it must raise capital, a key question that must be answered is how mu

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

ch the company is worth. For example, if the business needs $500,000 to get started and/or grow,

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

Examples of combination products may in

ow much of the equity in that company should $500,000 command? Once this question is answered, th

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

company will go out and try to find investors. When doing so, a key question often arises as to

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

whether the valuation is “pre-money” or “post-money.”

“Before the money" or “pre-money” and "aft

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

Combination pro

r the money" or “post-money” denote simple concepts. However, these simple concepts can even conf

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

se even the most sophisticated analysts at times. If a company is valued at $1 million on Day 1,

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

then 25 percent of the company is worth $250,000. However, there may be an ambiguity. Suppose the

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

company and the investor agree on two terms: (1) a $1 million valuation, and (2) a $250,000 equit

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

investment. In this case, the company may offer the investor 250 shares for $250,000. Immediatel

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

there can be a disagreement. The investor may have thought that equity in the company was worth

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

Following aspects would a

$1,000 per percentage point, in which case $250,000 gets 250 out of 1,000 shares or a 25% equity

dd to the challenges in developing combination products:

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

osition. Conversely, the company may have believed that the investor was contributing to the ente

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

prise which was already worth $1 million. Under this rationale, the $250,000 would give the inves

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

tor 250 shares out of 1,250 shares or a 20% equity position.

The critical issue was whether the

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

greed value of $1 million to be assigned to the company was prior to or after the investor's cont

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

Professional from academic institutions, pharmaceutical industries, health care indust

ibution of cash (pre-money) or post-money.

In the above case, a pre-money valuation of $1 millio

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

n and a post-money valuation of $1.25 million were equivalent. Because mixing up the terms could

.

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

ignificantly increase the cost of capital raised, companies must be sure to understand the two me

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

Companies that provide selfless information through particip

rics and agree with investors to the metric that raises them the capital at the appropriate price

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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