Answers - Finance

How would you like to have fewer hassles with your next business lease while significantly trimming costs? You can. In fact, getting better lease flexibility can easily trump getting the lowest lease rate. Here is how you can get superior lease 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

lexibility while slashing overall leasing expense:

Lease Amount

First, make sure the lease allows you to include most of the equipment you intend to acquire. You will avoid negotiating another financing arrangement on the excluded equipment. Ch

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

Examples of combination products may in

ck that you can easily add more equipment to the lease as your needs change. The better lease arrangements provide for multiple lease schedules under a master lease or the ability to amend existing leases to make additions.

Payment Schedule

Get

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

ting a lease payment schedule that matches your company’s cash flow cycle is a big benefit in a lease arrangement. Many lessors are able to accommodate reasonable requests, subject to their own administrative constraints and their view of your co

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

pany’s credit standing. Monthly and quarterly payments schedules are typical arrangements. Schedules that vary payments to accommodate cash flow seasonality are less typical, but you can negotiate such an arrangement in many cases.

Interim Rent

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

Combination pro

You can slash lease costs significantly by limiting interim rent. Interim rent is the rent you pay for daily use of equipment between the equipment acceptance and lease start dates. Interim rent can balloon lease pricing by arbitrarily extending

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 term of the lease (albeit by only days). The best approach is to schedule equipment delivery and acceptance toward the end of the month, to reduce the interim period. Another strategy is to negotiate a truncated period at the end of the lease

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

such that the interim period and truncated period, together, total one monthly payment.

Upgrades

A flexible lease arrangement anticipates equipment upgrades. Usually, at the time of upgrade, the present value of rents associated with the upgrad

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

e can be combined with the present value of the remaining equipment rents to create a revised schedule.

Early Termination

Most leases do not provide for early termination. One way to achieve more flexibility is to have such a feature built into

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

the lease. An amount consisting of the present value of the remaining rents plus a termination charge no greater than 3% to 5% should compensate the lessor for an early termination in most leasing arrangements.

End of Lease Options

Does the lea

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

e you are considering have flexible end-of-lease options? Here are several options that will make your lease more user-friendly: the right to return the equipment to the lessor without undue penalty or expense; the right to purchase the equipment

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

Following aspects would a

at a fair or reduced price; and the right to continue leasing the equipment at a fair or reduced rent. Use of upper limits in fair market value purchase or rental options can greatly reduce potential costs at lease end. Beware, however. Lessors

dd to the challenges in developing combination products:

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

ay insist on fair market value floors when they agree to upper limits.

Equipment Relocation

It may become necessary to relocate the equipment to another site during the lease term. Make sure the lease provides that equipment may be relocated wi

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

thout unreasonable penalties or charges, subject to notifying the lessor. Keep in mind that equipment relocation may create extra expense for the lessor, particularly if it is to be moved to another state or to multiple locations.

End-of-Lease N

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

tice Period

Is there a sufficient notice period at the end-of-lease for you to indicate your desire to renew the lease, purchase the equipment or return the equipment? The notice period generally ranges from one to six months, with three months

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

eing typical. If you violate the notice period, the lease kicks into an automatic renewal period, usually one to six months. You should seek notice and automatic renewal periods that are short, to avoid unintended additional lease charges. If the

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

Professional from academic institutions, pharmaceutical industries, health care indust

lessor is unwilling to negotiate this provision, you can manage the situation by making sure the notice requirement is fulfilled within the allowed time.

Grace Periods

Lastly, look for flexibility in the grace periods associated with lease def

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

ults. Typically, a lease will provide little or no grace period for rental payments. You can achieve greater flexibility by asking for a five to seven day grace period. Similarly, the non-payment obligations of the standard lease usually have a 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

hort grace period, typically less than ten days. You can gain superior flexibility by asking for a fifteen or twenty day grace period for these provisions.

Getting the lease flexibility that your firm deserves may require some skillful negotiati

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

Companies that provide selfless information through particip

g, but it is worth the effort. Be prepared for some give-and-take as you look for ways to save money and avoid future hassles. You can sign the lease that is put in front of you, or you can follow these easy tips and bring back a great lease deal

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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