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When it comes to investing in good companies, there has been much debate on the top-down and bottom-up approaches. Most fund management companies use the top-down appro

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

ach and recommend that investors examine the economic and industry outlooks first before deciding on which stocks to purchase.

On the other hand, investment experts lik

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

Examples of combination products may in

e Warren Buffet and Peter Lynch favor the bottom-up approach. They say that macroeconomic forecasts are actually major distractions for investors as the projections mig

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

ht turn out to be wrong. Instead, investors' efforts should be placed more on detecting the quality of earnings and asset value of the company.

Both approaches have th

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

ir strengths and weaknesses, but they share a common goal, which is identifying good fundamental companies to invest in.

With the top-down approach, investors study the

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

Combination pro

economic trends and then determine the industries and companies that are likely to benefit the most from them. Say, for instance, the reduction in prices of imported p

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

aper will contribute to lower operating costs for media companies and increase their earnings. Investors will then search for more efficient and cheaply priced media co

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

panies. On the other hand, negative events like high interest and inflation rates or currency depreciation, can affect a country's economy and definitely cause stock pr

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

ices to tumble.

Top-down investors will first look at the entire forest instead of specific trees and try to identify the main market theme ahead of the market in gener

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

al. They believe that picking individual companies comes second because if the economic conditions are not right for the industry that a company operates in, it will be

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

difficult for the company to generate profits, regardless of how efficient it is. However, such investors may sometimes miss good companies that are still performing we

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

Following aspects would a

ll, even in a depressed sector.

Conversely, bottom-up investors conduct extensive research on individual companies. As long as the company's future prospects look stro

dd to the challenges in developing combination products:

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

ng, the economic, market or industry cycles are of no concern. In fact, the downturn in the stock market may provide investors with a good margin of safety to buy stock

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

s at depressed levels and ride them up to big gains.

So, bottom-up managers will buy stocks even though the macroeconomic and industry outlooks look uncertain. When th

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

industry may be out of favor and most investors are ignoring the true earnings of companies, bottom-up managers can detect good and well-managed ones selling at prices

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

that are far lower than the intrinsic value.

However, to top-down managers, bottom-up managers may be attempting to catch a 'falling knife' (a stock whose price has fal

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

Professional from academic institutions, pharmaceutical industries, health care indust

len tremendously in a short period of time) in a down market. Unless bottom-up managers have plenty of bullets to average down on their purchase prices, they may run ou

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

of cash if the stock prices continue to lower. Moreover, they may sometimes fail to see the wood for the trees; they may identify certain companies but miss the overal

.

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

l industry trend.

The top-down and bottom-up approaches are two distinct and fundamentally very different approaches to investing. Investors can combine the top-down a

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

Companies that provide selfless information through particip

nd bottom-up approaches by applying top-down analysis on asset allocation decisions while using a bottom-up approach to select the individual securities in the portfolio

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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