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WEIGH YOUR RISKS CAREFULLY

When you decide to embark on a commercial real estate investment program, how do you get your start? We know that there is no suc

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

h thing as 100% financing for commercial property, so where do you get your initial capital for that first purchase? One method which I have discussed before

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

Examples of combination products may in

is to use Other People’s Money as your initial “stake.” Perhaps having partners is not the path you wish to follow in your investment program. That makes 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.

other option using your own funds. Before you dip into your resources, however, consider some of the risks you face.

First, you are embarking on an investm

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

nt program about which you have little practical experience. You may have read every book on commercial real estate investing ever printed and gone to every

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

Combination pro

eminar ever produced in a hotel for a year, but you have no experience in the business. Do you really know what can go wrong? Do you realize what additional

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

reserves you might need in case things don’t go as planned?

Second, consider the source of your equity. For most people who have done some real estate inves

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, they have probably focused on residential investment properties. Residential properties usually enjoy a large number of comparables to easily estimate v

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

lue, financing programs for residential properties allow potential buyers to facilitate sales with little equity investment, and residential properties are us

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

ally less expensive, and therefore more accessible, to most people. If you are such an investor, then you probably have a pretty good pool of equity to tap.

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

But how do you access it? Sell them outright and pay your capital gains? Sell them in a 1031 Exchange? Refinance them? Each option has its advantages and

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

Following aspects would a

isadvantages.

Third, if you are like most people, your biggest chunk of equity is sitting in your home. There may be a great temptation to go get yourself a

dd to the challenges in developing combination products:

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

equity line, suck out the equity, and go buy a commercial property somewhere. Before you do, make sure to consider how the increased debt service of the equ

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

ty line will affect your finances. Can you truly afford the payments if something doesn’t work out with your commercial investment? Yes, your commercial pro

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

erty will be producing income. However, the majority of that income will be used to pay its operating expenses and paying off the loan you arranged to acquir

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

it. That doesn’t leave a lot left over for you in the initial years of the investment to pay down the equity line, which will most likely have a rate somewh

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

Professional from academic institutions, pharmaceutical industries, health care indust

re above the Prime rate (8.25% today).

The point is to consider your investment goals, your tolerance for risk, and your ability to live without the funds yo

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

are using for your commercial investment. Over time, your commercial portfolio should provide you with significant current income, a hedge against inflation

.

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

and net appreciation. You need to pay careful attention to how you structure your commercial real estate financing to minimize unforeseen risks and increase

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

Companies that provide selfless information through particip

your chances of success. In your quest to achieve your commercial investment goals you need to carefully asses the impact of the financing decisions you make

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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