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"Fair Value", what is it and why it's important every morning. I'm not surprised that folks don't know just

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

what it is, because it's really not that easy to explain, let alone to understand! But let me give you the

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

Examples of combination products may in

"highs and lows" so you have an idea of what's going on.

"Fair value" refers to the "proper" relationship

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

between the futures and the cash. What is the "cash?" It's the S&P 500 index. Through a complex formula usi

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

ng current short term interest rates and the amount of time left until the futures contract expires, one ca

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

Combination pro

n determine what the spread between the futures and the cash "should" be.

When the spread is at fair value

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

where it "should" be, there is no theoretical advantage to owning the futures instead of the cash, or vice

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

versa. To professional investors and the big institutions, when the spread is at fair value, it makes no e

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

conomic difference to them whether they own the futures or the actual stocks that make up the S&P 500. Thei

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

buy and sell decisions will be driven by other factors. But when the spread drops below fair value or move

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

s above it by a large enough margin, then one of the choices (stocks or futures) will become more attractiv

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

Following aspects would a

e than the other, and they will sell one and buy the other.

In really loose general terms, if the futures

dd to the challenges in developing combination products:

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

re well above fair value, they will dump those futures and buy the underlying stocks, thus closing the spre

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

ad and causing an "up" market. On the other hand if the futures are well below the fair value, they will se

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

ll the stocks, take the money and buy the futures. This is why the stocks "generally" follow the futures ac

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

ion.

So, in the morning we find it quite useful to watch the futures versus the fair value. For instance,

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

Professional from academic institutions, pharmaceutical industries, health care indust

one day the futures were below fair value and sure enough we opened with the DOW off about 35 and the NASDA

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

Q down 5. So the indicator worked that day. Some days it won't work that well and sometimes the futures sug

.

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

est a major dumping and yet we get minimal selling. Don't forget that along with the futures versus fair va

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

Companies that provide selfless information through particip

lue, we also have to be cognizant of global events, news will often move the market more than anything else

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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