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You awake in the middle of the night with a business idea that will change the world. The only problem, of course, is you need money to get the business moving. What do you do?

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

Investors and Equity

Practically every economy is built upon the backs of small businesses and entrepreneurs. Every day someone comes up with an idea that will make a great busi

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

Examples of combination products may in

ness. Every day, these same people wonder how they will come up with the cash to get the business off the ground. The classic answer is to look for investors, and this is where t

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

hings can go bad.

If you’re seeking investors for your business, you are going to need to form a business entity. Corporations and limited liability companies are the most popul

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

ar, and give you the ability to trade ownership interest in exchange for cash contributions. With a corporation, investors will buy shares in the corporation. With limited liabil

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

Combination pro

ty companies, the investors will buy membership interests. Regardless, this traditional exchange gives rise to a problem common among small business owners, to wit, giving away t

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

oo much equity.

From Joy to Misery

A common mistake made by new business owners is to give away too much equity when getting initial cash contributions. This occurs because you

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

let insecurities impact you evaluation of the business. Instead of giving away two percent of equity in exchange for $50,000, you give away ten percent. Let’s look at an example

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

.

I start a business selling digital gadgets. I prepare my business plan and realize I need $250,000 to get everything up and running. I have $50,000, but need to find the rest

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

somewhere. I form a corporation with 1,000 shares and start approaching potential investors. I offer 100 shares for $25,000. I find five investors that give me $125,000 in exchan

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

e for 500 total shares. In summary, I now have $175,000, but have given away half the equity in the business. While I am not happy about this, I am still so enthused about the bu

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

Following aspects would a

siness idea that I shrug it off.

The business gets rolling and I start selling gadgets like a madman after one year. This gives rise to a serious cash problem. I am getting orde

dd to the challenges in developing combination products:

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

rs, but can’t fill them because of cash flow problems. To make a proper go of the business, I need another $100,000.

Where am I going to get $100,000? My business is only one ye

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

ar old, so a bank won’t touch it. My investors haven’t seen penny one back, and are unwilling to put more money in. My only option is to sell another 400 shares for $100,000. For

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

tunately, I sell the shares, raise the money and stay in business. However, there is a major problem.

In raising all of this money, I have now sold off ninety percent of the equ

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

ty in the business. I am left owning 100 shares and only 10 percent of the business. This is going to severely impact my physical, emotionally and overall motivational well being

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

Professional from academic institutions, pharmaceutical industries, health care indust

. Slowly but surely, I am going to become very bitter. It was my idea and I am doing all the work! It isn’t fair that I only own 10 percent of the business!

On second thought, t

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

his impression may come on very quickly. Regardless, the business is destined to experience major problems because the primary motivating force is no longer motivated. Unfortunat

.

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

ely, many people with business ideas run into this problem.

If you are starting a business, guard your equity at all costs. Selling equity should be a last resort. Try to get lo

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

Companies that provide selfless information through particip

ans or trade profit sharing in lieu of selling equity. If you must sell equity, do so only in small percentages. You do not want to the small business person in the example above

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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