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In every source of words of wisdom, entrepreneurs are taught to write a business plan before they embark on starting their new business venture. This is good advice provided it is done correctly and based on realistic expectations.

The academic app

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

roach to writing a business plan typically includes conducting market research to determine the size of the potential market, characteristics of the competition and nature of the customer base. The entrepreneur usually gets in trouble when it comes

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

Examples of combination products may in

to using this information to determine a revenue and profitability forecast. Taking a large potential market size and calculating the penetration needed to become profitable can lead to an unrealistic conclusion. It may seem very possible, for inst

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

ance, to assume gaining 1% market share of a $100 million regional market in the first year. A first-year forecast of $1 million even looks like it would be a very conservative projection. The key question is “how?”

A much more realistic approach

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

is to work with the things the entrepreneur knows best about his venture. Determine the answers to the basic operating questions: how much advertising money does he have to spend; how many sales people he can afford to hire; how well known is the pr

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

Combination pro

oduct or service; how easy will it be to convince a customer to buy; and how often will the customer re-purchase in a year. Then do a “bottom-up” forecast of the expected revenue and expenses for the first couple of years.

• Advertising will reach

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

the eyes of how many customers?

• Each sales person can contract how many customers each week?

• How many customers would have to be contacted before a sale is made?

• After an initial sales call, how long should it take before the customer actual

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

ly places an order and pays the invoice?

• What is the average sales revenue per customer?

As an example, the start up company can only afford to hire five sales people. Each sales person can be expected to get through to 50 prospects per week for

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

50 weeks in the year. Of those prospects, 5% will be become customers within six months. The average customer can be expected to order $500 each year. Therefore, a bottom-up approach would calculate the first-year forecast as follows: 5 x 50 x 50

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

x 5% x $500 = $312,500

The main point is that a bottom-up approach will produce a much more realistic forecast than the most conservative estimate about the market share of an estimated market size. The entrepreneur and his team can argue about th

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

e advertising budget, sales calls per week, new customers added each month, increasing the order size, and so on. The bottom-up approach also forces everyone to carefully think about the strategies and the tactics that must be implemented to achieve

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

Following aspects would a

the planning goals. Certainly these statistics should be monitored and the planning model revised accordingly as more actual results are known. More importantly, positive or negative results compared to the original assumptions will dictate the ac

dd to the challenges in developing combination products:

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

tions needed and the urgency required by the team.

Unless the company is blessed with an unlimited amount of start up capital, the entrepreneur must base his business planning on cash flow for the initial years. Uncollected receivables, sales growt

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

h, market share and “paper” profits are not going to ensure the survival of the new business. Each year 7 out of 10 new businesses fail and one of the primarily reasons is poor management of cash flow. This means that the start up 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

up some possible sales if those sales would take a long time to collect, and it may also have an influence marketing strategy for the product or service. Ideally the product or service has a short sales cycle (less than a month), practically sells i

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

tself (low selling costs), payment is received on delivery (account receivables less than 30 days sales), advertising is word-of-mouth and customers re-order often. If any of these are not ideal, then the cash flow requirements will likely be higher

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

Professional from academic institutions, pharmaceutical industries, health care indust

than expected. Managing for cash flow, not sales growth and profitability, is not for the long term, but it is essential until the company has accumulated a cash reserve or can attract financial backing.

Business planning provides the initial road

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

map to the future for the new start up company, but it must be modified and revised periodically if it is to be of any real value as a management tool. Day-to-day, the entrepreneur will have to make decisions rapidly based on his knowledge, gut-feel

.

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

or intuition. There usually is not enough time to conduct research and investigate alternatives thoroughly. As Mas Kodani, a Buddhist in Los Angeles, points out, "One does not stand still looking for a path. One walks; and as one walks, a path com

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

Companies that provide selfless information through particip

es into being." The business plan is there to be used as a reference check so that those incremental decisions do not cause the business to stray too far from the original plan expectations and the bottom line results become disappointing over time.

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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