Main Subject - Business

Brand name of a product has certain value to a company. How do we value a brand and how does it affect the fair value of a common stock? There is n

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

o definite way of doing it since a brand is worth more to some than to other people.

Brand is valued in the balance sheet under 'Intangible Assets

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

Examples of combination products may in

or 'Goodwill'.. Each company values their brand differently but they all agree that brand name has certain value.

What is the best way to value a

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

brand? Nobody knows for sure. One can only give his reasoning and then value the brand accordingly. Here, I will explore the possibility of valuing

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

a brand based on asset value and based on the value of the common stock.

Let's use a familiar brand name. Coca Cola Company (KO) has one of the m

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

Combination pro

st valuable brand in the world under the Coke brand name. How much is it worth? We can go to any grocery stores to verify. Grab a bottle of Coke an

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

a bottle of generic cola. What is the price difference? We can argue that the price difference is due to the Coke brand name. Let's assume a price

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

difference of 10 cents. Let's assume that Coke sold 1 Billion bottles of Cokes each year. This implies an additional $ 100 Million due to value of

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

Coke brand. What is the fair value of a brand? Assuming a 7.5% yield (P/E of 13.4), the value of Coke brand is $ 1.34 Billion.

Please note that th

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

s is a very rough estimation of brand value . We just assume the same 10 cents product differential everywhere. Coke sells to almost every corner o

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

the world and the price differential is not always 10 cents every time. Furthermore, as you may know, if Coca Cola is not selling that much Coke t

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

Following aspects would a

his year, the value of the brand will drop and vice versa. Therefore, the value of the Coke brand will fluctuate depending on the sales of the prod

dd to the challenges in developing combination products:

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

ct. Supply disruption will result in lower sales. If there is a disruption in supply, which has nothing to do with brand value, the value of the br

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

nd will decrease as well.

Should we care about the value of a brand when investing in the stock? Yes and No. Yes, if you are valuing the company o

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

n the basis of asset value. If the value of the brand is a significant part of the balance sheet, then you should include it to value the overall n

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

t asset of the company. If a stock is traded at $ 10 per share while the net book value with the brand value included is $ 15 per share, then inves

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

Professional from academic institutions, pharmaceutical industries, health care indust

ors might profit by buying the stock at $ 10 per share.

For our version of fair value, valuing a brand name is not necessary. This is because the

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

fair value of a common stock is correlated with the profits generated by the company. What is the brand name of Enron when it cannot produce a prof

.

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

t under this scenario? Zero. In general, we should not care much about the value of a specific brand. All we are trying to do as investors is to bu

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

Companies that provide selfless information through particip

undervalued investments. We should compare the profit generated by the company with the price of the common stock, not with the value of the brand

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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