Main Subject - Business

Many people are familiar with two important financial statements, the Profit and Loss and the Balance Sheet. Fewer of them recognize the Statement of Cash Flows (also referred to a

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

s the Sources and Uses Statement). Additionally, while the physical layout of the statement has many variations, the general content is constant. It will be reviewed here. We wil

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

Examples of combination products may in

also discuss what makes up the statement, what it is used for and some limits.

The Statement of Cash Flows looks at three different cash activities: the operating, investing and f

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

nancing activities. From the activities, cash is either received (called inflows) or spent (called outflows).

Cash flows from the operating activities are those generated or spent

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

on the main business of the entity. These might be from the sale of products or services. If products are sold or services are rendered, cash will be received for the activity.

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

Combination pro

f goods are purchased for sale, or to add new inventory, then cash is spent. Additional inflows of cash are received from interest or dividend payments and collections on accounts

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. Outflows of cash, besides payments to suppliers, could be payments on accounts payable, interest payments, employee salaries and taxes. A positive result from operating activi

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

ties would result in a profit (net income). Conversely, a negative result would be a loss (net loss).

The second cash flow producing activity is from investing activities. These

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

ctivities have both positive and negative cash flows. Investing, as used on this statement, represents those activities undertaken to make additional cash for the entity. Typical

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

f these are making loans, receiving payments on previous loans and purchasing or selling of assets (e.g., buildings, equipment, land, patents, or copyrights). Again the net value o

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

inflows and outflows are contributed directly from entity activities.

The final activity is the result of generating more usable cash to be used in the business. Financing activi

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

Following aspects would a

ties relate to borrowing of money and in general are related to acquiring or returning capital. Common inflow activities are issuing new securities, bonds, mortgages, or notes. Ou

dd to the challenges in developing combination products:

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

flows result from repurchasing securities or retiring debts. Also, this category includes dividends paid to stockholders.

What does this statement tell us? It is used for many ty

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

es of analysis. It is a useful metric on the entity's ability to take advantage of new potential investments, maintain or increase the current level of operations and to replace or

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

modernize assets.

The statement does have some limitations. As a comparison tool, it is only significant when used to compare similar entities because different industries have d

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

fferent structures. Too, if the entity has large, long-term debt structures, the usefulness of the statement has limited applicability. It could, however, be used to judge whether

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

Professional from academic institutions, pharmaceutical industries, health care indust

debt commitments can be met without debt restructuring. Because this statement is historical, great care should be taken when projecting future results based on it. There is no gu

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

arantee that the results will continue in the future.

Ultimately, the cash flow statement gives us great insight into how cash is obtained and used during the statement period. In

.

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

erestingly, the statement will be found, in some form, in a stock prospectus. So, it stands along side the other two critical statements of entity position, the Profit and Loss and

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

Companies that provide selfless information through particip

the Balance Sheet. It is important when reviewing entity operations that we carefully consider this statement along with the others to get a clear picture of the cash flow position

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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