A Biologics License Application (BLA) is submitted to the Food and Drug Administration (FDA) to get permission to distribute a biologic drug or product in the US. A BLA can be submitted by an applicant responsible for the efficacy and safety of the biological product.
A BLA is regulated under 21 CFR 600-680 and generally applies to vaccines and other allergenic drug products, blood products, including cellular and genetic therapies.
The Center for Biologics Evaluation and Research (CBER) regulates products under several regulatory authorities, including the Food Drug and Cosmetic Act and the Public Health Service Act. It also includes the BLA process, a request to permit introducing a biologic product into interstate commerce.
For BLA submission, the applicants must submit Form FDA 356h to CBER (Centre for Biologics Evaluation and Research). CBER is accountable for the regulation of biologics.
Form FDA 356h is an application required to be submitted to place biologics, new drug, or antibiotics in the market. CBER accepts both papers and e-submissions.
A BLA is submitted by any legal entity or person involved in the manufacturing of the investigational biologics or an applicant for a license who is ready to take the responsibility for compliance with the establishment and product standards.
The following information is required for BLA submission with Form 356h:
After the application submission to the FDA, the regulatory authority evaluates whether the application is complete or not. The FDA also conducts an initial review of the standard operating procedures (SOP) and the data submitted.
If required, the FDA can raise a request to the biologic product’s manufacturer for some additional information regarding any aspect.
The electronic submission of BLA involves the submission of the application in electronic format to the Center for Biologics Evaluation and Research. The CBER will update and modify the guidance documents on electronic submissions regularly to indicate the evolving technology. For every electronic submission, applicants need to submit a comprehensive table of contents comprising three or four levels of detail, with the proper bookmarks and hypertext links.
While the purpose of BLAs and NDAs is the same - to gain approval for marketing a product in the US, there is a minor difference in their application content and submission requirements.
Regarding approval criteria, NDAs must fulfil the below-mentioned criteria:
Source: Copyright © 2021 Kalkine Media Pty Ltd (Data source: FDA)
Similarly, contents for a BLA should establish the safety and potency of a biological drug. BLA content must demonstrate purity, particularly to imply that the final product does not contain any extraneous material.
However, in the case of BLA, once the application is approved, the Sponsor is granted a license for the biological drug; this licensing process is not a part of the NDA.
A new drug application (NDA) is used for drugs subject to the FDC Act’s drug approval requirements, while a BLA is required for the licensing of biological products subject to licensure under the PHS Act.
Because of the manufacturing and characterising complexity of a biologic drug, the PHS Act highlights the importance of appropriate manufacturing control. The Act offers a system for all aspects of manufacturing.
NDAs and BLAs are the two types of applications submitted to market a new medicinal product in the US. While both are submitted to obtain FDA’s drug approval, they differ in terms of approval criteria, specific regulations, and product categories.
Clinical trials for any drug or biologics are developmental studies conducted to assess their safety and efficacy. Patients enrol in clinical trials to gain access to investigational therapies and support in the evaluation of investigational therapy.
Getting a drug or biologics with the expanded access program may be an option for patients who cannot enrol in clinical trials. Since the 1970s, the FDA has allowed expanded access to experimental drugs and biological products.
Expanded access can provide seriously ill patients with access to investigational therapy when they do not have any other option. This access has permitted several patients having cancer, HIV/AIDS, and other indications to get promising treatments when there is no approved alternative therapy.
Notably, if there are emergency conditions requiring the patient to be treated before submission of a written application, the regulatory agency can allow the treatment to continue without a written submission, provided all the criteria for the application are met.
What is EBITDA? Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA) is a widely used financial metric in evaluating cash flows and profitability of a business. Market participants closely track EBITDA and apply it in decision making extensively. Although conventional investors like Charlie Munger had raised concerns over the use of EBITDA, it is very popular in markets, and M&A transactions are mostly priced on EBITDA-based valuation like EV/EBITDA (x). EBITDA is not recognised by IFRS and GAAP but is used extensively in the Corporate Finance world. It is now a mainstream financial metric that companies look to target. EBITDA depicts operational cash generation capacity of a firm in a given period. It acts as an alternative to financial metrics like revenue, profit or earnings per share. EBITDA allows to evaluate a business operationally and outcomes of operating decisions. Non-operating items are excluded to arrive at EBITDA. EBITDA excludes the impact of capital structure or debt/equity, and non-cash expenses like depreciation and amortisation. A particular criticism of EBITDA has been the inappropriate outlook of capital intensive businesses, which incur large depreciation expenses. Business with large assets incurs substantial costs related to repair and maintenance, which are not captured in EBITDA because depreciation expenses are accounted to calculate EBITDA. Meanwhile, EBITDA can paint an appropriate picture for asset-light business with lower capital intensity. While revenue, profit and earning per share remain sought-after headline generators for corporates, EBITDA has also found its growing application in the corporate finance world and is now a mainstream metric to evaluate a business financially. Perhaps the growth of asset-light business models has also added to the use of EBITDA. Its debt-agnostic approach to evaluate businesses has given reasons to investors, especially for high growth firms during capital expenditure cycles. But EBITDA has been present for close to four decades now. In the 1980s, the growth in corporate takeovers through leverage buyout transaction was on a boom. EBITDA grew popular to value heavy industries like broadcasting, telecommunication, utilities. John Malone is credited for coining this term. He was working at TCI- a cable TV provider. Since EBITDA has remained an important metric to determine purchase price multiples and is highly used in M&A transactions. EBITDA’s application in large businesses with capital intensive assets that are written down over a long period has been a source of concern for many investors. Although EBITDA is an effective metric to evaluate the profitability of a firm, it does not reflect actual cash flow picture of a firm during a period. Also, it does not account for capital expenditures of the firm, which are crucial in successfully running a business. EBITDA does not give a fair cash flow position because it leaves out crucial items like working capital, debt and interest repayments, fixed expenses, capital expenditure. At the outset, there can be times when EBITDA may overstate performance, value and ability to repay debt. How to calculate EBITDA? NPAT: Net Profit after tax is the amount reported by a firm in the given period. It is present on the income statement of the firm and is used in the calculation of earnings per share of an entity. To calculate EBITDA, interest expense, tax, depreciation and amortisation are added to NPAT. Interest Expense: Firms can employ debt in their capital structure, and interest expense is funds paid to lenders as interest costs on principal debt. Most companies have different financing structure, and excluding interest payments enable comparing firms on operating grounds through EBITDA. Tax: Firms also pay income tax on profits. Excluding taxes gives a fair picture of the operating performance of the business since tax vary across jurisdictions, and sometimes according to size of business as well. Depreciation: Depreciation is the non-cash expense to account for the steady reduction in value of tangible assets. Firms can incur depreciation expense on machinery, vehicles, office assets, equipment etc. Amortisation: Amortisation is the non-cash expense to account for the reduction in the value of intangible assets like patents, copyrights, export license, import license etc. Operating Profit: Operating profit is the core profit of a firm generated out of operations. It includes cash and non-cash expenses of a firm, excluding income tax and interest expenses. Operating Profit is also called Earnings Before Interest and Tax (EBIT). Read: EBIT vs EBITDA What is TTM EBITDA and NTM EBITDA? Trailing Twelve Months (TTM) or Last Twelve Months (LTM) EBITDA represents the EBITDA of the past twelve months of the firm. It allows to review the last operation performance of the business. Whereas NTM EBITDA represents 12-month forward forecast EBITDA of the firm. NTM EBITDA is also one-year forward EBITDA. Market participants are provided with consensus analysts’ estimates for a firm, which also include NTM EBITDA, NTM EPS, NTM Net Income or NPAT. What is EBITDA margin? EBITDA margin is the percentage proportion of a firm EBITDA against total revenue. It indicates the operational profitability of the firm and cash flows to some extent. If a firm has a higher margin, it means the level of EBITDA against revenue is higher. It is widely used in comparing similar companies and enable to evaluate businesses relatively. If a firm has a total revenue of $1 million and EBITDA is $800k, the EBITDA margin is 80%. What is adjusted EBITDA? Adjusted EBITDA is calculated to provide a fair view business after adding back non-cash items, one-time expenses, unrealised gains and losses, share-based payments, goodwill impairments, asset write-downs etc.
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.
In 2013, the television host of CNBC's Mad Money, Mr Jim Cramer addressed few stocks as “totally dominant in their markets”. He was referring to tech titans and named them FAANG stocks (where the extra “A” was added 5 years later, in 2017). ALSO READ: Investment in Technology Stocks - A Beginner's Guide What Are FAANG Stocks? “FAANG” is perhaps one of the most popular abbreviation of the business world. The acronym illustrates stocks of the famous five US-based technology corporations- first being social media giant Facebook Inc., followed by software and hardware developer Apple Inc., the e-commerce magnate Amazon.com Inc., and the streaming service provider Netflix Inc., along with the last FAANG member, internet ace Alphabet Inc. (formerly recognised as Google). Originally, the acronym was FANG (with an “A” for Amazon.). In 2017, investors included Apple in the group, turning the acronym into FAANG. There is an interesting fact here- The original four FANG stocks were pure internet-based companies, but the later inclusion of Apple, that is a consumer hardware manufacturer, made FAANG stocks a broader group of giant technology stocks. Widely renowned among consumers, unique in their products and services, these stocks are of few of the largest companies in the world. They trade on the NASDAQ Exchange and are included in the S&P 500 Index, making up approximately 15 per cent of the index. Market experts believe that since these stocks have a large influence on the index, they tend to have a substantial effect on the performance of the S&P 500, in general. GOOD READ: FAANGs Defining Resilience Amid Market Downtrends Why Are FAANG Stocks Popular? FAANG companies exhibit several competitive advantages that make them attractive long-term investments. Consider this- Facebook rules social networking, Amazon is the one-stop destination to buy goods online in today’s digital world; Apple’s iPhones are one of the most used and well-renowned gadgets globally; Netflix is considered to be a leader of online streaming; whereas Google is the search engine used comprehensively almost every day, everywhere. These disruptive companies benefit from what is known as the network effect (indirect value goods and services gain as more people use them). Facebook’s products are valuable to new users because of its vast other active users. Amazon’s Prime service brings millions of shoppers to its marketplace every day, making its seller services more attractive to third-party merchants. Millions of Netflix viewers provide feedback for the kind of content the company should invest in. Lock-in effect of the Apple ecosystem creates substantial switching costs for iOS users. FAANG companies have intangible assets. This opens doors to the possibility of producing higher levels of profitability than rival companies. Consider this- Facebook, Amazon, and Google have troves of user data to pursue advertisements. Netflix offers original content, exclusive licenses that make its content library unique. Apple, on the other hand, is one of the few technology companies that makes hardware as well as software for its devices. FAANG players contribute to radical lifestyle change. One obvious reason for the popularity of these market darlings is that each FAANG company has been known to transform not just their own industries and the markets, but also how we all live in the current contemporary lifestyles. What is the significance of FAANG Constituents? As the heavy weighting of FAANG stocks in indexes like the S&P 500 gives them an outsized impact on the broader stock market, it seems worthwhile for investors to learn a bit about them. How is Investing Community Exposed to FAANG Stocks? FAANG stocks have historically outperformed the S&P 500 index. Over the last decade, this famous group accounted for a large portion of the market’s gains and American economy growth. This seems obvious given that FAANG companies have a hoard of competitive advantages making them seem like lucrative long-term investments. Offering perhaps the hottest technology trends, FAANG stocks demonstrate strong sales and earnings growth. Each FAANG company is listed on the NASDAQ, so purchasing their shares is a straightforward process for most investors. The easiest path could possibly be via online brokerage account with companies that offer this service. At this point, it should be noted that FAANG stocks aren’t cheap. For instance, for most of 2019, one share of Google sold for well over USD 1,000 and Amazon traded above USD 1,500. However, a wise investor knows that past results do not guarantee future success. Sinusoidal equity market trends deserve closer attention to a lot of other aspects before making any investment decision. Therefore, investing in FAANG stocks should be vigilantly based on one’s research of fundamental and technical aspects and risk appetite. GOOD READ: Investing Tips: 4 Reasons Big Techs can always stay your best pal Are There Any Risks Associated to Investing in FAANG Stocks? Market experts believe that there are no sure plays in the investing world. Simply put, there is a risk in every aspect of investing. Though favourable market conditions and investor enthusiasm for technology seems to be here for good, global uncertainties always should be considered. Overly bullish expectations coupled with certain political pressures and economic worries may hinder these big techs’ growth. Some experts opine that as these companies continue to mature amid mounting worldwide risks, it may get increasingly difficult for them to maintain their rapid growth pace. Legal Regulatory, market and operational risks of these FAANG players need to be considered before taking any exposure to FAANG stocks. Amazon and Google have often come under regulatory examination for potential anti-competitive business practices. Facebook and Google have faced criticism for lack of data privacy and security. On the other hand, Netflix has encountered new competitors in streaming video and as few reports suggest, a huge debt load linked with content production. Valuations of FAANG players should be well justified viz-a-viz earnings guidance of these players, before taking any investment exposure. Are There Global Peers to FAANG Stocks? Just like FAANG stocks, there are several groups of companies that can be looked upon as peers to the tech group. Let us cast an eye on similar groups- The Australian variant, WAAAX stocks comprises WiseTech Global Limited (ASX:WTC), Appen Limited (ASX:APX), Altium Limited (ASX:ALU), Afterpay Limited (ASX:APT) and Xero Limited (ASX:XRO). GAFAM is an acronym for the five most popular US. tech stocks: Google, Apple, Facebook, Amazon, and Microsoft. BATX is the abbreviation for the four popular technology stocks from China: Baidu, Alibaba, Tencent and Xiaomi. TAND, which comprise of Tesla, Activision, Nvidia and Disney are often looked up as future giants of tech. TANJ stocks in Hong Kong comprise Tencent, Alibaba, NetEase and JD.com. The Canadian big tech club DOCKS constitutes Descartes Systems, Open Text, Constellation Software, Kinaxis and Shopify. Do You Know These Interesting Facts About FAANG Stocks? The FAANG group has been a stock market superstar on both short and long-term basis. These stocks have more or less consistently delivered above-average sales and profit growth and maintained juicy margins. Let us look at a few interesting facts about these tech titans- In August 2018, FAANG stocks were responsible for nearly 40 per cent of the S&P 500’s gain from the lows reached in February 2018. Over the past decade, FAANG stocks have grown faster than the overall S&P 500 or the more technology-focused NASDAQ. There is no exchange traded fund dedicated solely to FAANG stocks. Since the market bottom in March of 2009, the worst performing FAANG stock, Apple, has returned over double that of the index average. Amid the COVID-19 market downturn FAANG companies were one of the biggest beneficiaries as the “stay-at-home” economy led to an acceleration in their trajectories as people’s lives shifted online. Rather than resting on their achievements and dominant market position, FAANG companies choose to use their cash on hand to make investments in cloud computing, AI and other technologies that they believe may lead to continued revenue growth.
What is an oligopoly? Industries evolve over time and pass through several competition patterns. Competition in an industry is the effect of behaviour of firms. Fiscal policies also have an influence on the competition with industries. Policy intervention is implemented through a competition commission/regulator. Oligopoly is a term used to define an industry, a specific market, or a company. It is a market dominated by a few players and can have many small players. This type of competition in a market is known as oligopolistic competition. A few enterprises dominate the market, often selling similar goods and services. Since only a few firms dominate an oligopoly market, competition is muted from smaller payers. Firms in oligopoly gain significant market power, thus preventing other small players from flourishing or entering the market. Firms often replicate the behaviour of each other, and also recognise that action will likely provoke a similar response from other firms. In this way, firms also understand interdependence among each other in the oligopoly market. What are the characteristics of an oligopoly? Entry Barriers It is an important source of oligopoly. Barriers to entry make it difficult for firms to enter the market. It essentially refers to hindrances and restrictions an aspiring firm faces when entering new markets. Some markets have high barriers to entry, like an oligopoly, while some have very low barriers. Firms can have barriers in the form of licences, patents, intellectual property, or established economies of scale. Oligopoly could also exist in professions, which require licensing and specific educational qualifications. Since there are a few firms in oligopolistic competition with significant market share, oligopolies must realise economies of scale, which is an important barrier to entry. With economies of scale, firms realise cost benefits over competing and small players. Further, barriers could be in the form of the capability of firms with respect to developing intellectual property, patents, access to complex technology and capital. Government policies could be a source of barriers, especially when licenses for operating in a market are granted to a limited number of players. In many economies, entry barriers have given birth to oligopolies in many markets and industries. In the past 50 years, the increasing level of globalisation has also intensified competition across the industries. Price leadership Firms in an oligopoly market are also dependent on each other, and this interdependency is also defined as an oligopoly. The competition remains so intense that changes in price level and output are replicated by firms in the market. Collusion is a term used in competition and occurs when two competing firms join hands. This could result in restrictive trade practices, voluntary cut in volumes and price hikes. It remains illegal across most of the economies, and competition commissions keep a check on such practices. Price leadership may lead to tacit collusion in an oligopoly market, but it could be difficult to identify. The leader firms choose the prices, and other firms follow by raising or lowering prices to match. When other firms respond to price changes, it does not necessarily mean tacit collusion. Competition laws direct to firms to not explicitly communicate prices, therefore making it illegal. In an oligopoly, firms may agree tacitly and respond to the price or output changes by the price leader. Product differentiation Product differentiation is a procedure of developing goods or services that are distinguished from others available in the market. It is a source of higher demand for the product from the target market and includes differentiating products from substitutes as well as their own products. Although the differentiation may be small from a producer’s perspective, the buyers in the target market could have different perceptions for available products. This distinguishing feature may allow the producer firm to charge a premium price. Differences in goods and services can exist through differences in quality, functional features or designs, sales promotion activity, or availability. The motive of achieving product differentiation is to develop a position, which customers perceive as unique. As a result, the goods or services offered with differentiation have the ability to lower competition. A growing level of differentiation leads to fewer comparison and competition. In an oligopoly, firms make standardised products or differentiated products with similar attributes such as toothpaste, steel pipes, copper, gold. A firm in an oligopoly market is not necessarily needed to achieve product differentiation. However, when a firm successfully implements product differentiation strategy, it allows to gain further market power and dominate some parts of the industry. Increasing returns to scale In an oligopoly market, firms should have a significant market power, which would deter other firms from entering the market. Increasing returns to scale is a stage of business in which the rate of increase in output is higher than the rate of increase in input. Put another way, when a firm is operating at increasing returns to scale, doubling the input levels would result in more than doubling output levels. This simply implies that larger firms have lower average costs compared to smaller firms. In this way, larger firms can benefit from efficiency gains at a higher level of production. Oligopolies and monopolies typically exist in industries where increasing returns to scale are achieved at higher output levels. When a new firm seeks to enter the oligopoly market, the market penetration would be smaller, and it would have high average costs of production. It is because most of the market share is dominated by a few firms operating large outputs, thus more cost-efficient production. What are the disadvantages of oligopoly? Since there are few firms dominating a market, the choice with consumers is relatively less. By tacitly responding to each other’s move, a firm may act as a cartel, and reduce outputs to raise prices. Competition lacks in an oligopoly market, and firms could make consumer decision making a complex process. When consumers are manipulated at a large scale, there could be a loss of economic welfare. Since there are high levels of barriers to entry, aspiring firms may not enter markets, thus lower competition and lower consumer benefits.