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We probably answer this question for someone a couple times every week. The problem is that they don’t have a good formula for determining the most they can pay and still make a profit

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

– so they’re scared to make any offer. Here’s what we use for single family homes:

The (MAO) Maximum Allowable Offer is calculated by first determining what the house will be worth a

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

Examples of combination products may in

fter renovation - the ARV (After Repaired Value); less the rehab dollars required; less the Buy/Sell/Hold (B/S/H) costs; less profit margins.

MAO = ARV – Rehab – B/S/H – Profit

So le

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

t’s break that down a little further. To determine the ARV, study comparable sales data. Comparable sales are those properties which sold in the last 6 months to 1 year, and within ? t

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

o 1 mile from the subject house. But other factors must be considered as well. The more characteristics between the properties that are similar, the more valid the data. Make sure that

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

Combination pro

the house itself is similar in square footage, bedrooms and baths, age, style, and architecture. Don’t worry about condition except as it will affect the amount of rehab dollars requi

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

red. Next, look at the neighborhood and the individual street. Do they look the same? Or is the comparable property on a beautiful street while the subject property is on a street ridd

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

led with empty littered lots and boarded up houses? The point is to view the potential investment as your end homeowner occupant will. If they could buy your completed investment on th

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

e bad street, or a house on the beautiful street – either for $150,000 – which would they choose? The other house of course. Which means your house is not worth the same – it must sell

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

for less to attract a buyer.

Rehab dollars differ from renovator to renovator depending whether they do the work themselves, or use cheap subs, or use an expensive general contractor

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

The scope of the work should be the same – it is whatever is required to make the investment look like the comparable houses (unless the plan is to sell well under market value). We d

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

Following aspects would a

o not attempt to obtain all of the various contractor bids when we are making offers. All the real deals would be sold before we’d ever have an offer together! Instead we’ve developed

dd to the challenges in developing combination products:

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

ranges of rehab dollars based on the overall condition of the home. Is it an exact science? No, but neither are the bids – there will always be something missed. So why not work with a

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

guide that is probably 90% accurate and allows for quick offers?

Buy/Sell/Hold costs include expenses such as appraisals, attorney fees, title search & title insurance, loan origina

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

tion fees, debt service, utilities, insurance, taxes, real estate commissions, and closing fees paid on behalf of the end buyer. Again, these costs vary depending on each investor’s in

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

dividual situation. In the Atlanta area, 15% of the ARV seems to be a good average allocation for B/S/H costs. If you are the renovator, calculate your specific B/S/H costs, then utili

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

Professional from academic institutions, pharmaceutical industries, health care indust

ze that percentage for future offers.

Profit margins are the fun part of the equation. How much do you want to make? If you’re wholesaling the property, you also want to consider how

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

much you should leave in the deal for the investor buyer to make the deal attractive.

That’s it. That’s how you calculate the most you’ll pay for a property. But that’s not what you S

.

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

HOULD pay. It is the maximum you’ll pay. It is the deal-breaker. You will not pay one penny over the MAO. Your negotiations should lead you as far below the MAO as possible. The differ

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

Companies that provide selfless information through particip

ence in amounts is additional profit in your pocket. What you SHOULD pay is the minimum price below the MAO that the seller will accept.

We call this the MIN-O.

Have a rich week,

Lo

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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