Answers - Finance

This past several weeks has wreaked havoc to many subprime lenders. These are defined as institution that gives out loan to individuals with less than perfect credit. As house prices soared in the early part of th

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

e decade, lenders are becoming confident and approve their loans freely. Now, as house prices cool from its 2005 high, riskier borrowers are unable to meet their mortgage payment.

Victims over the past several we

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

Examples of combination products may in

eks include: HSBC, New Century Financial Corp. (NEW), Novastar Financial Inc. (NFI) and Accredited Home Lenders Holding Co. (LEND). Aside from HSBC, shares of these companies have plunged more than 80% over the la

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 month alone! Now, that is quite a drop for these financial stocks. In the case of New Century Financial, it is in the verge of bankruptcy since it cannot pay margin call from its warehouse lenders.

That sounds

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

scary. Should you get out of financial stocks completely? Well, not quite. In theory, the best time in investing in financial stocks is when interest rates is high, like...... now ! The reason is that during perio

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

Combination pro

of high interest rate, financial's net interest margin gets squeezed and more people are defaulting on their debt. As a result, stock price remains depressed. If you expect the interest rate cycle is about to tur

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

n, then buying the stock at a depressed level will net you a decent investment return.

The federal reserve had been steadily raising interest rates since 2004 from the low of 1.00% to 5.25% in June 2006. Since th

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

en, the fed has held interest rate steady. It takes 9 to 12 months to feel the effect of an interest rate hike/cut in the economy. Therefore, the economy has felt the 5.25% interest rate effect (hence, the result

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

s many of the subprime lenders defaulting on their loan last month). Things may turn worse but since the fed had stopped raising rates eight months ago, the chance of it happening is less.

So, can interest rate g

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

o any higher? It might go higher if 1) commodity price keep rising, 2) inflation is rampaging, 3) economic growth is ramping up, the fed would have to raise rates higher. Commodity price, especially oil, has stabi

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

ized at around $ 60 and I do expect oil to drift lower ahead. Inflation had been higher but not high enough to warrant interest rate hike while economic growth has been less than stellar lately, cooling down to 2%

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

Following aspects would a

in the past two quarters from 3.0 to 3.5% growth back in 2004-2005 period. Thus, while interest rate may go yet even higher but at least, the odd is for interest rate to remains steady or lower.

Now, in the past

dd to the challenges in developing combination products:

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

cycle, when interest rate is at its peak, financials are getting pummeled. This time around, financial stocks hold steady until recently. While the drop is not significant yet, if you have extra cash, you should

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

e prepared in buying some of the solid financial companies when they are dropping. For example, the past interest rate hike campaign begins on June 30 1999 until May 16 2000, Washington Mutual (WM) dropped from $

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

25 to $ 17 per share (32% drop), Bank of America (BAC) from $ 32 to $ 24 per share (25% drop) etc. Not all banks drop that much but in one or two years afterwards, most banks register significant appreciation in s

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

ock price. This happens as interest rate drops and margin improved. By August 2001, Washington Mutual has risen to $ 40 per share (135%) while Bank of America has risen to $ 32 per share (33.3% appreciation)

For

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

Professional from academic institutions, pharmaceutical industries, health care indust

this past interest rate hike, Washington Mutual shares had actually risen to $ 46 from $ 41 per share at the beginning of interest rate hike campaign. Meanwhile Bank of America shares has risen to $ 46 from $ 42 p

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

er share. Now, due to overblown subprime market which I believe will affect other mortgage delinquency as home price continue its descent, several of these financial stocks will lose value in the future. As of now

.

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

shares of Washington Mutual had dropped from $ 46 to $ 40 (13% drop) in 30 days. Shares of Bank of America similarly has fallen from $ 54 to $ 50 (7.4% drop) in 30 days. I feel that the drop has just begun and we

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

Companies that provide selfless information through particip

might experience 20-25% drop in 2007 should things got worse in the subprime land. Please remember to invest in a solid companies instead of subprime lenders mentioned above ( New Century, Novastar Financial etc.

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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