Subjects - Finance

Warehouse receipts are a crucial element for risk mitigation, enabling a financier to lend to a borrower, who wants to finance the shipment of commodities for sale or purchase. Using warehouse receipt finance, a bank, or trader, relies on

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

goods in an independently controlled warehouse to secure financing. Usually providing (among many things) there is an off-taker and that there are other forms of recourse (the borrowers balance sheet for example) banks will lend against co

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

Examples of combination products may in

mmodities stored in a reliable warehouse and which have been properly pledged to them in a sound legislative environment. So warehouse receipts provide for a degree of physical risk mitigation and, in support of an exchange-based trading s

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

ystem, they are important for underpinning futures.

Accordingly, warehouse operators can act as key influencer's of risk management. If they are able to issue warehouse receipts, which can be used as collateral by banks, they may use this

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

as a way of encouraging deliverers of commodities to move stocks into their facilities. Warehouse operators receive goods into the warehouse and issue receipts showing the goods have been received into the store. Among other things, the re

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

Combination pro

ceipts themselves contain information about the quality and type of the commodity taken into store. The receipts are for the information of the depositor of the goods or, if he is a borrower, for his bank. However, these receipts are not n

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

egotiable documents of title, i.e. the title to the goods themselves may not transfer from one to another person via the passing of the related warehouse receipt.

Herein lies the potential for some degree of confusion. The term warehouse

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

receipt means different things to different groups of people around the planet. For example, in the United States, the term ?warehouse receipt? is used for a document evidencing storage of a commodity in a warehouse. Unlike elsewhere, it i

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

a document of title, supported by legislation; in this case the US Warehouse Receipts Act of 2000, which replaced a piece of legislation enacted in the US in 1916. By contrast, in the United Kingdom a warehouse receipt is a non-negotiable

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

instrument simply notifying that at a certain moment in time a certain amount and quality of a commodity was delivered into a warehouse. In the UK, a negotiable form is represented by a warehouse warrant of the type issued by London Metal

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

Exchange-nominated warehouses.

The main advantages of warehouse receipt financing from a risk management perspective are:

The identity of the collateral is less contestable and the intention of the borrower to pledge it is clear, av

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

Following aspects would a

oiding ownership disputes and competing claims. The collateral can be auctioned or sold promptly and at low cost if there is a loan default. A lender holding a warehouse receipt can claim against the issuer (the warehouse company) as well

dd to the challenges in developing combination products:

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

s the borrower in the event that the collateral goes missing. In a bankruptcy scenario a document of title can cut off the claims of competing creditors.

Warehouse receipts can be negotiable or non-negotiable. A non-negotiable warehouse r

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

eceipt is made out to a specific party (a person or an institution). Only this party may authorize release of goods from the warehouse. He may also transfer or assign the goods to another party, for example a bank. The warehouse company mu

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

st be so notified by the transferor before the transfer or assignment becomes effective.

The non-negotiable warehouse receipt in itself does not convey title and, if it is in the name of, for example, a trading firm, it needs to be issued

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

in the name of or transferred to the bank in order for the bank to obtain more than just a security interest. A security interest is much less attractive to a bank than if it has what is called possessory collateral, i.e. it has direct re

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

Professional from academic institutions, pharmaceutical industries, health care indust

ourse to the warehouse where the goods are stored and in the event of a default or similar, it is easy for the bank to sell the commodities in a shorter time frame.

Issuers of non-negotiable warehouse receipts include collateral managers.

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

They are becoming increasingly important, with companies like ACE, Cotecna, Control Union, Drum and SGS rolling out collateral management products to serve a growing international market. Notwithstanding the fact that most bankers, borrow

.

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

ers and warehousemen say they find collateral management ?just too expensive? their desire to use the services of collateral management companies is increasing. In the absence of totally secure physical commodity storage facilities and res

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

Companies that provide selfless information through particip

ulting from the risks in moving commodities about, banks are obliged to find other structures for protection against physical risks. The collateral management agreement, or CMA, offered by a number of global firms, offers one such solution

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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