Main Subject - Finance

Off Balance Sheet Financing involves raising money in a way that it does not appear on the financial statement as loan or cash f

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

low. Some of the most widely used ways to achieve that is to go by joint ventures, leases and R&D partnerships. The lesser-used

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

Examples of combination products may in

methods are trade receivables securitization and passing tax benefits to investors.

Techniques for Off Balance Sheet Financing;

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

Off Balance Sheet Financing uses the following techniques:

1) The company forms a joint venture with a partner company. On

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

e party provides the technical know how while the other provides the funding. The smart way to structure Off Balance Sheet Finan

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

Combination pro

ing is to obtain royalties from the proceeds of the venture.
2) The company can lease equipment or other facilities for it

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

s operations; rather than buying them. The lease equipment is not considered company asset, and it can save your business from h

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

ving to buy equipment.
3) You can pass off some tax benefit to an investor in order to keep the funding off your balance sh

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

eets.
4) Trade receivables securitization is another technique of Off Balance Sheet Financing. The Special Purpose Entity

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

reated by the company purchases receivable from Originator and offer securities to investors.
5) A third party provides sy

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

nthetic Leases to the company. The third party purchases property in its name and leases it out to the company. The company is c

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

Following aspects would a

onsidered a tenant or debtor of the third party.

Disadvantages of Off Balance Sheet Financing; Off Balance Sheet Financing hav

dd to the challenges in developing combination products:

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

some disadvantages that relate to the company’s ability to function independently.

1) If your company forms a partnership

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

with another party that can provide funds, it means that you have to part with technical know how.
2) You may have to pass

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

n tax benefits to investors. This can eat into your cash flow.
3) Trade receivables securitization is not possible unless y

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

our company has a steady cash flow.
4) The Off Balance Sheet Financing Techniques have a potential for misuse, as the Enro

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

Professional from academic institutions, pharmaceutical industries, health care indust

case proved. According to critics, Off Balance Sheet Financing is a method of artificially raising return on assets and debt to

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

capital ratios.

For all its disadvantages, sometimes Off Balance Sheet Financing is the only hope for companies that need to r

.

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

ise funds and do not have many options. If you need to know more about Off Balance Sheet Financing techniques, you can consult a

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

Companies that provide selfless information through particip

financial advisor or small business consultant who will guide you with the intricacies of this valuable method of raising funds

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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