Accelerated approval is an approval pathway regulated by the Food and Drug Administration (FDA) that allows an early approval of treatment or drugs that are used in the treatment of severe or life-threatening indications and fulfill an unmet medical need.
Accelerated approvals by the FDA depend on the assessment of surrogate endpoints as a clinical benefit measure to the patients. Therapies or treatments meeting the standards for traditional approval are not applicable for getting an accelerated approval.
FDA grants accelerated approval in situations when an indication course is prolonged and clinical benefit measurement would require substantial time. For example, therapies used for treating specific tumors or HIV, where an impact on the growth of a tumor or viral load can be identified promptly, but the effect on survival is long-term because of the typical course of the disease.
There is one more scenario in which accelerated approval is applied, that is for acute disorders. For which an extensive study would be required to demonstrate clinical benefit because the occurrence is rare, although a surrogate endpoint can be utilized in much lesser duration. Hence, this leads to a faster study.
Accelerated approval is a part of the drug development process, making a drug available as soon as possible. The other three approaches are- priority review, breakthrough therapy designation and fast track designation.
There are some risks associated with the accelerated approval process. These risks explain why the approval is restricted to the treatments showing an effect on an endpoint that is expected to predict clinical advantage and that meet the below-mentioned requirements-
For drugs that have granted accelerated approval, post-marketing confirmatory trials have been necessary for verifying and describing the expected effect on irreversible morbidity or mortality (IMM) or other clinical advantages.
Potentially, accelerated approval is also useful in acute indications where the intended clinical benefit can be shown only in a large scale study because the clinical outcome that would need to be assessed for demonstrating clinical benefit occurs rarely.
For instance, accelerated approval could be for the treatment of an acute disorder where an effect related to the surrogate endpoint can be demonstrated in a few patients. However, a large scale analysis would be required to indicate the impact on clinical findings, like survival.
Therapies or treatments granted accelerated approval should meet similar effectiveness as well as safety standards as treatments undertaking traditional approval.
Moreover, this decision is a judgement call based on the biological plausibility as well as clinical data indicating that relationship.
Additionally, the company that is applying for an accelerated approval should meet the subsequent requirements-
A company preparing for obtaining accelerated approval should begin conversations with the review department of the FDA during the process of development and offer information that supports the use of the selected surrogate endpoint along with the intended confirmatory experiments.
According to the FDA, the two categories of endpoints are applicable as a basis for accelerated approval are-
A clinical endpoint precisely measures the therapeutic effect of a treatment, an effect on in what way a patient feels, functions, or survives.
According to the FDA, drugs or treatments granted accelerated approval should fulfill similar statutory standards for safety as well as effectiveness as for granted traditional approval.
For effectiveness, the standard is significant proof based on satisfactory as well as properly-controlled clinical examinations.
For safety, the standard is getting adequate information for the determination of the safety of the drug for use under prescribed conditions, suggested or recommended in the proposed labeling. In accelerated approval, the Food and Drug Administration can depend on particular evidence, like the effect of a treatment or drug on a surrogate endpoint, as a basis for granting the approval.
Moreover, the application for accelerated approval should also comprise supporting documents for an intermediate clinical endpoint or a proposed surrogate endpoint that it is relatively likely to foresee the intended clinical advantage of treatment.
There are some risks associated with the accelerated approval; the main risks include the following-
The FDA has the authority to withdraw accelerated approval for the subsequent reasons-
The FDA could withdraw drug approval if the clinical trials do not validate the clinical benefit or do not demonstrate any sufficient clinical benefit for justification of any risk associated with the drug.
There is no specified timeline for FDA response for Accelerated Approval.
What is accounts payable? Accounts Payable (AP) is an obligation that an individual or a company has to fulfill for purchasing goods and services bought from their suppliers and vendors. AP refers to the amount that is not paid upfront and can be paid back in a short period of time. Hence, a good or a service purchased on credit to be paid in a short period will fall under AP. For individuals, AP may include the bill paid after availing services such as television network, electricity, internet connection, or telephone. Most of the time, the bill is generated after the designated billing period, depending upon the amount of consumption. The customers have to pay this obligation within a stipulated time to avoid default. What is accounts payable from a Company’s point of View? AP is the amount of money a company is liable to pay to its suppliers or vendors and clear dues for purchases of goods and services purchased from its suppliers or vendors. AP is required to be repaid in a short period, depending on the relationship with suppliers. It is essentially a kind of short-term debt, which is necessary to honour to prevent default. As the current liabilities of the company, AP is required to be settled over the next twelve months. It is presented in the balance sheet as the account payable balance. For example, Entity A buys goods from Entity B for US$400,000.00 on Credit. Entity A has to pay back this amount within 60 days. Entity A will record US$400,000.00 as AP while Entity B will record the same amount as Account receivable. AP is also a part of the cash flow statement. The change in the total AP over a period is shown in the cash flow statement, hence it is part of the company’s working capital. It is widely used in analysing the cash flow of the business and cash flow trends over a period. AP may also depict the bargaining power of the company with its vendor and suppliers. A vendor or supplier may give the customer a longer credit period to settle the cash compared to other customers. The customer here is the company, which will incur AP after buying goods on credit from the vendor. There could be many reasons why the vendor is providing a more extended credit period to the firm such as long-term relationship, bargaining power of the firm, strategic needs of the vendor, the scale of goods or services. By maintaining a more extended repayment period to supplier and shorter cash realisation period from the customer, the company would be able to improve the working capital cycle and need funds to support the business-as-usual. However, prudent working capital management calls for not overtly stretching the payable days as it might lead to dissatisfaction of supplier. Also, investors tend to closely watch the payable days cycle to determine the financial health of the business. When the financial conditions of a firm deteriorate, the management tends to delay the payment to their suppliers. Why accounts payable is an important part of Balance sheet and Cash Flow Statement? As inferred from the previous paragraphs, AP is part of the current liabilities of the balance sheet. This is an obligatory debt that has to be paid back within a time frame so that the company does not default. AP primarily consists of payments to be made to suppliers. If AP keeps on increasing over a period of time, it can be said that the company is purchasing goods or services on credit more, instead of paying up front. If AP decreases, it means the company is reducing its previous debts more than it is buying goods on credit. Managing AP is essential to have a stable cash flow. In a cash flow statement prepared through an indirect method, the net difference in AP is shown under cash flow from operating activities. The business entity can use AP to create the desired variation in the cash flow to some extent. For example, to increase cash reserves, management can increase the duration of paying back the credit taken for a certain period, thus affecting the net difference in AP. What Is the Role of Accounts Payable Department? Every company has an accounts payable department and the size and structure depend upon how big or small the enterprise is. The AP department is formed based on the estimated number of suppliers, vendors, and service providers the company is expected to interact with; the amount of payment volume that would be processed in a given period of time; and the nature of reports that a management will require. For example, a tiny firm with a low volume of purchase transactions may require a simple or a basic accounts payable process. However, a medium or a large enterprise may have a accounts payable department that may require a set of practices to be followed before paying back the credit. What is the Accounts Payable Process? Guidelines or a process is important as it provides transparency and smoothness in facilitating the volume of transactions in any time period. The process involves: Bill receipt: when goods were bought, a bill records the quantity of goods received and the amount that needs to be paid to the vendors. Assessing the bill details: to ensure that the bill or invoice copy includes the name of the vendor, authorization, date of the purchase made and to verify the requirements regarding the purchase order. Updating book of records after the bill is collected: Ledger accounts need to be revised on the basis of bills received. The department makes an expense entry after taking approval from management. Timely payment processing: the department takes care of all payments that need to be processed on or before their due date as mentioned on a bill. The department prepares and verifies all the required documents. All details entered on the cheque along with bank account details of the vendor, payment vouchers, the purchase order, and the original bill and purchase order are scrutinized. The department also takes care of the safety of the company’s cash and assets and prevents: reimbursing a fake invoice reimbursing an incorrect invoice making double payment of the same vendor invoice Apart from making supplier payments, AP departments also takes care of travel expenses, making internal payments, maintaining records of vendor payments, and reducing costs Business Travel Expenses: Bigger entities or firms whose business nature requires all personnel to travel, have their AP department manage their travel costs. The AP department manages the personnel’s travel by making advance payments to travel companies including airlines and car rentals and making hotel reservations. An account payable department may also deals with requests and fund distribution to cover travel costs. After business travel, AP may also be responsible for settling funds supplied versus actual funds spent. Internal Payments: The Accounts Payable department takes care of internal reimbursement payments distribution, controlling and petty cash controlling and administering, and controlling sales tax exemption certificates distribution. Internal reimbursement payments include receipts or both substantiate reimbursement requests. Petty cash controlling and administering includes petty expenses such as out-of-pocket office supplies or miscellaneous postage, company meeting lunch. Sales tax exemption certificates comprise AP department handling sales tax exemption certificates supply to managers to make sure qualifying business purchases excludes sales tax expense. Maintaining Records of Vendor Payments: Accounts Payable maintains information of vendor contact, terms of payment and information of Internal Revenue Service W-9 either manually or on a computer database. The AP department lets management know through reports on how much the business owes at present. Other Functions: The accounts payable department is also responsible to lessen costs by identifying cost structures and creating strategies to reduce the spending of business money. For example, minimising cost by making payment of the invoice within a discount period. The AP department also acts as a direct point of contact between an entity and the vendor. How to Calculate Accounts Payable in Financial Modelling Financial modelling enables calculating the average number of days a company takes to make bill payments. AP days can be calculated using the following formula: AP value can be calculated using the following formula: What is accounts payable turnover ratio? AP turnover ratio shows the capability of a firm to pay cash to its customer after credit purchases. It is counted as an essential ratio to analyse the cash management attribute of the firm and its relationship with vendors or suppliers. It is calculated by dividing purchases by average AP. Purchases by the company are calculated as the sum of the cost of sales and net inventory in a given period: Now let’s understand this with the help of an example. Let us suppose, Cost of sales of Company XYZ for the period was $60,000, and XYZ began with inventories worth $21000 and ended at $15000. AP at the beginning was $20000, and $15000 at the end. Now the purchases will be $66000 (60000+21000-15000). The average AP will be $17500. Therefore, the AP turnover ratio will be 3.77x. Dividing the number of weeks in a year by the AP turnover ratio will give the number of weeks the company takes on average to settle its payables. In this case, it will be around 13.8 weeks (52/3.77). What is the difference between Accounts Payable vs. Trade Payables? Though the phrases "accounts payable" and "trade payables" are used interchangeably, the phrases have slight differences. Trade payables is the cash that a company is obligated to pay to its vendors for goods and supplies which are part of the inventory. Accounts payable include all of the short-term debts or obligations of a company.
What is depreciation? Depreciation is an accounting method used to allocate the cost of a tangible asset to the books of accounts over the useful life of the asset. It is essentially the accounting for wear and tear on the asset over its useful life. Depreciation also refers to the value of the asset that has been used over time. Assets of a firm that are used for over a one-year period largely include physical assets. Although firms incur expense while purchasing these assets, the expenses are not charged in the income statement. Such assets are recorded in the balance sheet of the firm and are expensed on the income statement as depreciation expense over time during the life of the asset. The tax authorities also decide the useful life of assets because overstating depreciation expense can lower tax liability. Now assets come in two variety: tangible assets and intangible assets. As the name suggests tangible, the tangible assets can be touched, such as equipment, machinery, computers, vehicles etc. Depreciation is used to expense the tangible assets of a firm. Intangible assets cannot be touched and include assets like licenses, copyrights, patents, brand names, logos etc. Amortisation of assets is an accounting method similar to depreciation used to expense intangible assets. Long-term assets are the source of generating revenue for firms over a long period of time, therefore the cost of acquiring tangible long-term assets is not expensed fully at the time of purchases and is expensed over the life of the asset. As the asset is used over periods, the carrying value of an asset in the balance sheet is reduced over time. Carrying value of an asset is the original cost minus accumulated depreciation on the asset over time. Since the cost of acquiring the long-term tangible asset is not expensed fully at the time of purchase and is expensed over its useful life, the depreciation expense is a non-cash charge because actual cash outgo was incurred at the time of purchase. But depreciation expense reduces the reported earnings of the company as it is charged on the income statement of the firm. Since the expenses are deducted from the revenue of the firm, the tax liability of the firm is also reduced. What are the methods of depreciation? Straight-line method The straight-line method is the most common method of depreciating an asset over its life. Under this method, the recurring depreciating amount of the asset remains constant and is not changed over the life of the asset. For example, a firm buys a machine for $10000 with a salvage value of $2000, and the useful life of the asset is ten years. The depreciable value of the asset will be $8000, which is the cost of machine minus salvage value. Now the firm will depreciate the $8000 each year at a rate of $800 per year. The per-year depreciation charge of $800 is the depreciable value of the asset divided by the useful life of the asset (8000/10). Double declining balance depreciation method It is an accelerated type of depreciation method. Under this method, the depreciation expense in higher in the beginning years and gradually reduces over the life of an asset. It also reflects that assets are more valuable in the early years of production compared to later years. In this method, the subsequent depreciation charges after the initial charge are calculated using the ending balance of the asset in the last period. Ending balance of the asset is the original cost of the asset less accumulated depreciation. Also, the depreciation factor in this method is twice of the straight-line method. Depreciation expense = (100%/Useful life of asset) x 2 Why is depreciation due diligence important? Depreciation can be used to manipulate the financials of the company. Overstating and understating depreciation charges directly impacts the profit of the company. When a firm is charging less depreciation than required, it would directly increase the profits of the firm. When depreciation expense is lesser than the actual expense, the income statement will record lower amount of expenses, therefore the deductions from revenue will lesser and profits will increase. Investors also assess whether the useful life of asset used in calculating the depreciation of firm is appropriate or not. The companies should use an appropriate useful life of the asset. When the useful life of the asset is increased, the depreciation charges will spread across an increased number of years. As a result, the depreciation expenses during the life of an asset would be understated since the actual life of an asset is less than recorded. Investors prefer checking the number of years used as the useful life of an asset. Sometimes firms may choose to change the method of depreciation. Although it could be appropriate when actual business conditions don’t match the method adopted, there remains a possibility that the decision to change the method could be driven by the motive to manipulate depreciation expenses. Companies may seek to keep the assets in the balance sheet even though the asset is of no use. This will help the company to keep incurring depreciation expense on the income statement and reduce the tax liability of the business. When the value of assets of the company has appreciated in light of the market environment, the balance sheet value of the asset will also increase. When the balance sheet value of an asset is increased, the depreciation charges should also increase. Therefore, appreciation in the value of an asset should also increase depreciation expense for the company.
What is Immunization? Immunization is the process of developing immunity or resistance in an individual against an infectious disease by administering a potent vaccine. Vaccines stimulate an individual’s immune system to protect the individual against subsequent disease or infection. Moreover, immunization is an established way to control and eliminate infectious diseases that could be life-threatening. According to the World Health Organization (WHO), immunization is estimated to prevent between 2 to 3 million fatalities every year. The process is commonly recognized as the most successful and cost-effective health interventions, with established strategies making it available to even the most hard-to-reach population as well as susceptible people. World Immunization Week takes place every year during the last week of April from 24 to 30 April. Immunization Week is a worldwide public health campaign for increasing consciousness and rates of immunization against vaccine-preventable infections across the world. Immunization helps to protect millions of lives each year. How Does Vaccination Work? Vaccines are used for immunization of people against infectious diseases causing illness, serious disability or even death. In the human body, vaccines develop a defense mechanism against the disease. Thus, a vaccinated person for a specific condition is unlikely to get affected by the same disease again. Vaccines comprise of a similar virus or germ that is responsible for the infection. However, the virus in the vaccine has been inactivated, killed, or weakened so that it does not make people sick. Some vaccines contain only a portion of the virus. When a person gets immunized, the body is misled into thinking that it has been infected and the immune system makes antibodies to kill the viruses. These antibodies remain in the body of a vaccinated person for a prolonged period and remember to fight the virus and hence prevent the infection. If the virus from the disease enters the immunized person’s body in the future, the antibodies kill the virus before the person can become sick. Most of the individuals are completely protected against the infection after immunization. However, in a few cases, there are risks that people who are immunized could still get the infection because they are only partially protected from the vaccine. However, this is a rare condition and is only common in individuals with several medical conditions affecting the immune system. Vaccination is the best approach to prevent the spread of infectious diseases with no medical treatment. Like drugs, vaccines also undergo different stages of clinical trials before receiving an approval for commercialization from the respective regulatory authorities. Vaccine candidates are initially given to healthy volunteers to ensure the candidate is safe to use. What is Herd Immunity? Immunization protects the infections and aids in preventing the spread of certain diseases in the larger population. When more individuals in a community are immunized, fewer people get sick because the virus has a fewer number of people to infect, and if someone does not have the infection, they cannot spread it further. Some people cannot get immunized, so ensuring that maximum people in a community are fully vaccinated will help protect the whole community, including those that cannot be vaccinated. This is known as herd immunity. When no one is immunized, contagious diseases can spread in the community rapidly. However, when some people are immunized, the disease can affect a smaller group of people, those who are not protected. But, when most of the community gets immunized, very few community members will get the infection because of herd immunity. To achieve herd or community immunity against any infection, a community must have between 74-95% of the people immunized, depending upon the severity of the infection. The individuals that might be vulnerable to diseases are known as susceptible, for instance, people with impaired or weak immune systems. These individuals might not be able to get vaccinations or may not build immunity even after having been vaccinated. In this case, the only protection against specific infections is for others to get vaccinated, so the diseases are less common. To know whether herd immunity can help combat the ongoing COVID-19 pandemic, click here. What are the Benefits of Immunization? Immunization is the most simple and effective way of protecting people and community from any contagious disease. Immunization works by activating the immune system of the body to fight against specific diseases. If a vaccinated individual comes in contact with the viruses causing these diseases, their immune system is capable of responding more effectively. A glance at the benefits of immunization- Immunization either prevents the disease from developing or reduces its severity. Immunization prevents people and community from getting infections for which there are no medical treatments. These infections can trigger serious complications and even mortality. If exposure to an infection occurs in a community, there is little to no risk of an epidemic if the individuals in the community have been immunized. Immunization can help to protect vulnerable or susceptive individuals from any contagious disease. Difference between Immunization and Vaccination Most of the times, both the terms immunization and vaccination are used interchangeably. However, their meanings are not precisely the same. In vaccination, a potential vaccine is administered to the individual. Immunization is how the body reacts after the vaccine is administered. A vaccine stimulates the immune system of the body so that it can recognize the infection and protect the vaccinated person from future diseases. After the immunization process, a person becomes immune to the viruses causing that infection.
Lenders use qualifying ratios in the underwriting approval procedure for loans. Banks make use of qualifying ratios to identify whether the borrower is eligible for a mortgage or not.