Answers - Finance

It caught my attention when I heard an analyst on a popular financial news program tell investors to

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

sell a stock because too many analysts liked the company, citing the fact that there were no sell rat

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

Examples of combination products may in

ngs.

It seemed perfectly logical to me that analysts wouldn’t be telling investors to sell 3M (MMM),

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

which has one of the most consistent positive earnings records in the history of the stock markets.

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

ut being suspicious of conflicts of interest between brokerage firms and analysts I decided to do a b

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

Combination pro

t of fact checking anyway.

While the stock did not have any sell ratings at the time of writing, the

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

re were quite a few hold ratings. Now I feel compelled to diverge here and say that the hold rating s

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

ems quite illogical to me. If a stock is good enough to hold it’s good enough to buy, and vice versa

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

if you wouldn’t want to buy it then you shouldn’t want to hold on to it either.

As it turns out, the

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

average analyst rating for 3M was only slightly and insignificantly better than the average for all s

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

ocks in the Dow Jones Industrial Average, of which the company is a component.

But what was most int

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

Following aspects would a

eresting about the ratings on Dow components was that, despite numerous and serious legal problems, A

dd to the challenges in developing combination products:

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

G (AIG) was tied with General Electric (GE) and Du Pont (DD) for the third best rating, only bested b

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

y Citigroup (C) and Microsoft (MSFT). AIG was actually more highly recommended by analysts than J.P.

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

organ Chase’s (JPM) and American Express (AXP).

This didn’t do much for my confidence in analyst rat

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

ngs.

So I dug a little deeper looking at the more statistically significant S&P 500. What I found wa

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

Professional from academic institutions, pharmaceutical industries, health care indust

s that companies in the index with the worst revenue performance did actually carry more sell ratings

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

than companies with the best performance.

At least analysts were using the sell rating, something th

.

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

ey seldom did in the past.

There was, however, a significant bias towards the neutral ‘Hold’ rating

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

Companies that provide selfless information through particip

or all stocks indicating reluctance on the part of analysts to commit to buy and sell recommendations

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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