An Opportunity Assessment - nuage- · PDF fileThe patented technology centres on a unique...

©NuAge Vision Ltd 2015

An Opportunity Assessment

A report prepared by NuAge Vision for

Authors Dr Nick Pay

Dr Pete Hotten

Date May 2015


Contents Introduction ............................................................................................................................................ 3

Methodology ........................................................................................................................................... 4

Executive Summary ................................................................................................................................. 5

1 Market ............................................................................................................................................. 6

Customers ........................................................................................................................................... 6

MEMs Technology ............................................................................................................................... 6

Neurology Device Market ................................................................................................................. 10

Pharmaceutical Science Applications ............................................................................................... 12

Competitors ...................................................................................................................................... 15

2 Intellectual Property ..................................................................................................................... 16

Current patent filings protecting the ..................................................................... 16

Freedom to operate Analysis ............................................................................................................ 17

Description of analyses and results .................................................................................................. 17

3 People ........................................................................................................................................... 22

people ....................................................................................................................................... 22

Skill Sets required:............................................................................................................................. 23

4 Technology .................................................................................................................................... 24

Technology Cycles ............................................................................................................................. 24

Technical Feasibility .......................................................................................................................... 26

Manufacturability ............................................................................................................................. 27

Durability ........................................................................................................................................... 27

Regulatory ......................................................................................................................................... 27

5 Business Models ............................................................................................................................ 28

The Value Network ........................................................................................................................... 28

Proposed Business Model ................................................................................................................. 30

6 Conclusions ................................................................................................................................... 31

Appendix 1 ............................................................................................................................................ 32

Appendix 2 ............................................................................................................................................ 33


Introduction The objective of this document is to provide an “opportunity assessment” for the and

associated microfluidic technology and systems (together the technology package) as developed by

nd as described in the patent application filed by

It should be stressed that this is not a business plan per se though much

of the information contained herein would be consistent with that usually expected in a full business

plan. The assessment is aimed at answering two main questions:

1. Does the technology have commercial potential?

2. If it does what is the best commercialisation route?

The team wishing to exploit the technology package are keen to do so via a spin-out from The

putative spin-out has been given the name Throughout this report the

technology package will be referred to as the SWS technology.

The patented technology centres on a unique variant of the class of pumps known as peristaltic

pumps that offers many benefits over currently used pumping systems (such as those based on

syringe pumps and other forms of peristaltic pumps) in a wide range of applications. A strong

feature of the technology is its ability to create and manipulate extremely small sample

droplets (i.e. on the nano-litre scal . This feature, nano-litre scale operation, offers many benefits

over current systems especially in the healthcare field where small sample volumes are preferable.

For example, in neuro-trauma care samples extracted from the brain must be as small a volume as

possible. Current systems are limited to handling micro-litre samples at best which gives

technology at least a 1,000 fold advantage in terms of frequency at which samples can be taken and

tested. This leads to improved patients outcomes, including better survival rates.

The technology has the following strengths:

It lends itself to many applications where manipulation of small samples is required, for

instance in drug development or certain environmental studies.

A near real-time continuous monitoring capability resulting from the high frequency of

sample testing, and

The pump architecture is elegantly small, enabling miniaturization of currently bulky and

complex equipment.

The combination of these factors gives technology a sustainable competitive edge over current

systems and for this reason we believe that the technology has a significant commercial opportunity.

1 technology can also be applied at the micro-litre and larger scale


Methodology NuAge Vision used stage 1 of its opportunity assessment model (OAM: as illustrated in Fig 1) to analysis the

potential for technology. The 4 four ‘factor’ areas that comprise stage 1 of the OAM represent the inner

circle of the complete OAM which is illustrated in Appendix 1.

Fig 1 Factors taken into account in stage 1 of the NuAge Vision Opportunity Assessment

model

Market

Customers/Collaborators

Share swap / Creation

Size and Growth

Current Position

IP

FtO

Expiry

Novelty

Technology

“Me too” vs Revolutionary

Technical Feasibility

Manufacturability

Durability & Evidence * Regulatory

People

Champions

Belief

Team Technology Concept


Executive Summary The table below summarises the main findings from the Opportunity Assessment work completed by

NuAge Vision.

Summary Recommendation

MARKET Significant market opportunities exist for technology to exploit. In particular the microdialysis market for neuro trauma applications is identified as the initial entry point for exploiting the technology.

Enter neurology device market

IP With a significant longevity associated with the patents and the ability to freely operate, commands a strong position to exploit a value creation strategy.

Strong Position

Expand if possible

TECHNOLOGY Examination of the technology leads us to believe that the technology is an enhanced equivalence, the definition of which is that does the same job as technologies do today but does it in a superior way and which is unlikely to be followed. In the research environment we have seen much evidence that the technology provides significant benefits over current technologies but are lacking any evidence that these benefits can translate into a commercial environment with its inherent regulations, restrictions and durability. Proof that the technology can provide similar benefits in the commercial environment will be a top priority for Interactions with expert design consultants indicate that such an envisaged device is perfectly manufacturable.

Build Pipeline

Optimize technology

Instigate QA/QC proceedures

PEOPLE The current University team lacks the commercial acumen to fully exploit the technology via a dedicated new company. This is a major weakness at the moment though relatively easy to address.

Strengthen Commercial skill set

BUSINESS MODEL

It will be necessary to prove the value of the technology in order to maximise commercial return. Therefore investment into a company that researches, designs and manufactures (has manufactured) the initial products and then places these into a key market is essential. The company should grow through line extensions of its product range and through a comprehensive licensing activity.

Create company to manufacture (have manufactured) products

Create proactive licensing activity


1 Market

Highlights

Customers

customers are wide ranging as will be described but in the first instance 2 groups

appears to be well suited for this technology:

Neurological Devices (neuro-intensive or neuro-trauma care)

o Chosen because of the small samples required and speed of sampling

Pharmaceutical Sciences (Drug development)

o Chosen because of the adjacency of the market segment to the above.

MEMs Technology

The products technology enables falls within the general description of MEMS (Micro Electro

Mechanical Systems) the market for which is around £12 Bn (2014) according to Research

Group and comprises of many different segments (Fig. 2)

The market for technology is potentially huge and covers many diverse applications, e.g.

from healthcare, to food processing, veterinary and environmental purposes in addition to

major markets relating to research and product development use. We believe given the

strengths of the technology and the team involved that two market segments are

immediately accessible viz. neuro-trauma care (neurology devices) and drug development

(pharmaceutical applications) with addressable markets for SWS technology being estimated at

$200 M and $400 M respectively.


Fig 2: Research Group 2011 (MEMs Market)

The whole MEMS market is growing fast (CAGR% >10%) and is dominated, currently, by the motor,

telephony and ITC industry. However most commentators see that MEMS technology will play an

increasingly important role in medical electronics (this covers in-vitro/in-vivo diagnostic procedures

and pharmaceutical applications). Indeed these sub-segments of microfluidics market are currently

growing at >15% CAGR and in 2015 is estimated to be close to $4 BN in total in size.

Three distinct sub-segments of the MEMS market that are particularly relevant to the

technology are;

• Microdispensers

• IVD Microfluidics

• Research Microfluidics

Market data on these sub-segments is shown in figures 3a and 3b.


Fig 3a

Fig 3b

Data on three distinct market segments relevant to technology

(Source In-house research, GenomicsVisions)


Another way to look at these data is by device applications and this can be illustrated below

:

Fig 4. Market data by device application within the microsystem device field

(Source )

Thus the market size is Ca $835 M for medical devices and home care devices (those devices which

are used “at home” such as continuous glucose monitoring devices). Of this around 25% is spent on

devices for neurological conditions ($210 M).


Neurology Device Market

Estimated target market size $210 M

A continuing trend seen by almost all nations is the increasing healthcare spend on neurological

conditions requiring treatment. In the UK this spending has outstripped all other therapeutic areas

and grown by 174% from 2003 to 2011 and now accounts for over £11 Bn of the annual healthcare

spend in total (including staffing, pharmaceuticals etc). estimates that the Neurological

device market is around $2.3 Bn in the US with the US accounting for roughly 55% of the total spend,

giving a worldwide market of about $4 Bn.

There is a major initiative call for new drugs, surgical procedures and investigative techniques to

slow down the spiralling costs. (Data: Thinking ahead: The case for a Strategic Clinical Network for

Neurology June 2012 by the neurological society of UK). These trends are mirrored across western

society as the population ages and neurological ailments become more prevalent.

Another check on the market potemtial in this area is to look at healthcare spending in various

disease and therapeutic areas. The worldwide spending on healthcare amounts to $7 T or around

$1000 per person. Around 6% of healthcare spending is on purchasing medical devices.2 This

equates to $420 Bn. This enormous amount of money covers all disease areas and functions within

the healthcare system across all countries whether developed or not. It is estimated that around

75% (WHO) of the $7 T is accounted for by the developed world which is declining as a ratio. Thus

around $31.5 Bn is spent on medical devices in the developed world. As 58% of this spending is for

devices such as medical sutures etc. this gives a value for the spend on equipment/devices and

instrumentation of around $13.3 Bn. Of this 62% is for instruments costing over $20 k, around 13%

of the total for instruments costing less than $20 k and 26% for other equipment. This market, in

general, grows modestly at around 3% p.a. and hence the market for instruments and equipment in

2014 is estimated at $14 Bn. This is in excellent agreement with Harvard Bioscience market analysis,

a company that owns Harvard Apparatus a leading supplier of products in the market SWS

technology addresses.

Spending on disease area suggests 4% of the healthcare spend is for neurological procedures thus

we estimate the market size for microdialysis systems for neurology at $560 M with a target market

of around $212 M.

This represents around 5% of the whole $4 Bn neurology spend on various equipment and devices.

This area shows strong growth as a segment >15% with exceptional EBITA returns expected

according to outstripping many of the medical technology sectors (see Fig 5).

2 Data sources: Medical Device expenditure as % of Health Expenditure: UK figures derived from an article

published by www.medicaldevice-network.com, US valuation is based on estimates prepared by Gerald Donahoe and Guy King, and the BRIC Market valuations were published by Espicom.


Fig 5 2014 IVD Medical Technology US Market Data

(source: )


Pharmaceutical Science Applications

Estimated Target Market Size $400 M.

Development of new drugs is a very costly and time demanding science with a high risk of drug

failure in the late clinical phases or during commercialization of the drug. The cost of developing new

chemical entities is also increasing, with some estimates now exceeding $800 M. Therefore, there is

a need to improve efficiency in drug development and try to reduce costs (at least control them) by

means of identifying highly likely candidates sooner and with more confidence. Selection in the early

phases of drug development, especially during preclinical research is required and even a small

improvement could have a considerable impact, in light of the fact that preventing 5% of phase III

failures could reduce costs by as much as 7% which is significant.

An insight into the drug discovery, development and trialling process is given below in Table M1.

Importantly for technology it is established that microdialysis techniques are preferred

methods for use in certain stages of the overall process; the characteristics of the technology

are particularly well matched to the requirements pertaining to drug discovery and pre-clinical

testing.

From table M1 it can be seen that throughput is an issue for these applications. Where applications

do exist the potential of microdialysis is very promising. For example in the discovery phase “in-

vitro” protein binding is important and microdialysis is an extremely applicable tool. Examples of the

role of in drug development of centrally acting drugs are illustrated below (Table M2).

Micropumps (and thus microdialysis) covers many aspect of the drug discovery value chain and can

be used in just about all aspects of the major techniques used for Drug Discovery. It is estimated by

Research that approx. $1 Bn of the total market adopt MEMs technology and 40% would be

Micropumps and/or Microdispensers amounting to an accessible market of ca. $400 M.

A further insight into the drug discovery market is given by Fig. 6 that provides an analysis of

techniques that are used.


Phase of Drug

Development

Main Objectives Attrition Rate

(Number of Compounds

Tested)

Number of Experimental

Subjects

Duration (years)

Costs ($ M)

Applicability of

Microdialysis

Drug Discovery

Design of compounds with optimal in vitro pharmacokinetic and pharmacodynamic properties

>10,000 2-3 >300 Currently not utilized due to low throughput of microdialysis sampling

Preclinical Demonstration of pharmacological activity in experimental animal models of disease Accrual of toxicology data to support initial dosing in humans. Identification of lead candidates

50 2000 1-1.5 +++++

Phase I Assess dosing interval Assess pharmacokinetic and pharmacodynamic characteristics

10 20-80 0.5-1 >500 +++

Phase II Demonstration of effi cacy in the intended population Optimal use in target population

6.8 100-300 1-2 Currently not utilized due to low throughput of microdialysis sampling

Phase III Demonstration of safety and efficacy for clinical use

>3.5 1000-3000 2-3 Currently not utilized due to low throughput of microdialysis sampling

TABLE M1: From: APPLICATIONS OF MICRODIALYSIS IN PHARMACEUTICAL; Edited by TUNG-HU TSAI National Yang-Ming University Taipei, Taiwan. Wiley 2011.


Therapeutic Group Utility of Microdialysis Sampling

Antiepileptic drugs Estimation of hippocampal bioavailability

Assessment of compromise of efflux transporters in brain distribution

Assessment of neurochemical effects

Evaluation of PK – PD models by the study of the relationship between antiepileptic brain concentrations and their effect on neurotransmitter turnover and electroencephalogram

Antiparkinsonian drugs

Assessment of effects of new chemical entities on striatal dopamine levels

Antidepressive drugs Estimation of the effects of lead compounds on serotonin turnover on prefrontal cortex

Anxiolytic drugs Evaluation of effects of new chemical entities on GABAergic neurotransmission at the amygdala

Opioid analgesic drugs

Assessment of PK – PD modeling by the study of the relationship between brain concentrations of lead compounds and their antinoceptic effect

Neuroprotective agents

Estimation of the effects of lead compounds on glutamate brain extracellular concentrations

TABLE M2: From: APPLICATIONS OF MICRODIALYSIS IN PHARMACEUTICAL; Edited by TUNG-HU TSAI National Yang-Ming University Taipei, Taiwan. Wiley 2011.

Fig 6 Drug Discovery Market 2012

(based on and In house analysis)


Competitors

The brief competitor analysis reported here is limited to suppliers to the life science sector of

pumps. To the extent of the accessible web information on the pump products and associated

technology none of the companies identified to date have any pumps that use a similar architecture

to the pump technology.

There are many companies that provide pump products and technology for life science purposes and

a smaller number, although still significant, that have products specifically designed for microdialysis

applications. To this extent there is well established competition.

However the capability of the technology for creating small highly efficient pumps that provide

exquisite flow control for a number of fluidic channels simultaneously and the capability of creating

and manipulating nano litre scale droplets appears to be better than any other competitor product

yet identified. Therefore it is concluded that the technology should capture significant market

share in those application areas that particularly benefit from these features. As highlighted above

examples of such markets being neuro trauma related microdialysis and drug discovery / pre-clinical

drug testing.

Table C1 below gives an insight into some of the companies that will compete in these markets; the

list is far from complete as there are many other potential competitors.

Table C1 Example companies that compete with technology with respect to

pump and microdialysis products

Company Primary business area

Medical devices and industrial solutions for liquid delivery

Supplier of HPLC, GC and related products; including pumps

Supplier of innovative fluid control systems

Global medical device company; strong research capability

Medical device and research company specialising in microdialysis products

Develops clinical microdialysis solutions for clinical research and general intensive care

Instrument supplier to life science researchers

Supply of biomedical research equipment


2 Intellectual Property

Highlights

Current patent filings protecting the SWS technology

have filed two patent applications that cover specific aspects of the technology;

1.

2.

This Opportunity Assessment report is only concerned with the technology disclosed in

as this is the core technology, i.e. the pump architecture, which underpins the commercial

potential of The second patent filing is an example of an application area where the pump

technology can be utilised. This application area, scientific instrumentation for electrophoresis, has

not been forensically analysed to provide an estimate of its potential commercial value for

Figure P1 shows the main features of the pump technology architecture. In brief it comprises of

a central rotating spindle that has peripheral outer fins, which can be discrete or continuous (as

shown in Fig. P1) that interact with fluid bearing channels (e.g. tubing) in such a way to create

controlled flow rates and droplet formation

As would be expected from the comments in the Competition section there are many patent

documents that describe a wide variety of pumps, specific system architectures for

microdialysis applications and a number of pump and other forms of technology for creating

sample droplets within flow channels. However, none of the patent documents identified to

date contain a description that covers the specific pump architecture that is the core of

technology.


Fig P1 Schematic of one variant of the pump technology architecture

Freedom to operate Analysis

A combination of approaches was used to identify the existence of patent documents that could be

relevant to, i.e. dominate, the echnology.

To the extent of the searches completed to date there is no evidence that there is any existing prior

art in the patent literature that describes the type of pump architecture developed by

Therefore it would appear that has freedom to operate.

Description of analyses and results

A series of publicly available web-based data bases and the proprietary PatSnap patent analytics tool

were used to search the patent literature to discover if there are any existing patents that are

relevant to the echnology.

A number of approaches were used to identify patents, e.g. searching by (a) company name and (b)

use of key words.


Table P1 Key word searches

Search No.

Key words No. of patents identified

1

2

3

4

5

6

The search results were analysed to (a) identify the organisations most active in filing patents, and

(b) an insight into the technology and claim sets of patents.

The initial search indicated that there are many commercial companies as well as a number of

universities and research organisations that are actively developing and patenting new pump

technologies. However in the majority of commercial cases the company’s main business was not

pumping technology per se (see Table C1 above and Table P2 below) but application areas where

pump technology played an ancillary role. Patents filed by these companies did not seem to disclose

any fundamentally new form of pump but tended to focus on specific aspects of system

improvements that used ‘traditional’ syringe and peristaltic pumps, e.g. methods for calibrating flow

rate and analyte concentration. The exception to this, in search 1, was the most prolific patent filing

organisation, as identified by the search terms used, which was Advanced Liquid Logic. This

company, now acquired by Illumina, developed a completely new system based on electro-wetting

technology.


Table P2 Commercial organisations with the greatest level of patenting activity

Search No.

Company Primary business activity

1 Electro-wetting technology

Drud discovery; focus CNS and pain

Drug delivery systems

Biotechnology, genomics

Pharmaceuticals focussed on brain disease

Patent troll

Manufacture of drug intermediates

Pump technologies for enteral feeding, diabetes etc.

Diabetes focus

2 to 51 Non-invasive neuro stimulation

Therapies for rare and un-met needs

Neuro drug development

Analytical method development

Major consumer product company

Global; printer & printing systems among main business

Global; imaging technologies

Global; food and environment business

62 Technology and product developer

Notes to Table I2

1. Many of the companies identified in search 1 appeared in subsequent searches therefore

only previously unmentioned companies identified in searches 2 to 5 are mentioned

2. came up as a major contributor to patents associated with the search

terms used and therefore a specific search was made on patents where is an

assignee.

The results from this search suggested the following;

1. There is a high number of patent documents that relate to but

no prior art that maps directly onto the echnology or pump design

2. There are many companies that are looking to integrate ever better pump technology into

their main commercial areas of interest, e.g. diabetes control

3. There are some alternative technologies that can be used to create a droplet fluidic system

that in turn can be used to provide a powerful analytic system


Related to these three observations the following initial conclusions are drawn:

1. has freedom to operate with respect to use of its novel pump

architecture BUT it may be the case that use of a pump within systems

designed to mimic certain characteristics that have been patented by others could be

dominated.

Claim 1

2.

3.


3 People

Summary

people

It is recognized by NuAge Vision that the people side of the equation may be premature; however,

we have been working with the virtual company and we believe that for the technology to

succeed commercially some serious thought must be made to the format, skill sets and capabilities

of the current individuals. This is in no way a criticism merely a statement of the change required

going from academia to industry.

The team of researchers led by are extremely confident of the technology’s ability to

provide significant benefits in the area of patient care.

who is a highly respected researcher in the field of MEMS and microfluidics is passionate and

engaging though it would be difficult to see him in the role of However by leading his team in

the University and providing expert technical advice (in the role of consultant) would be a

hugely valuable member of the team.

a final year PhD student with has deep knowledge of

technology. It would be unwise in our opinion to expose to the commercial environment

immediately as his strengths lie in the R&D side of a business. With coaching and experience it would

not be unreasonable to see lead the R&D effort in the company.

In order to capture the true value of the technology we consider that a pure licensing

approach to be dangerous. Not only does lose control of the use of the technology but

many potential licensees will require hard physical evidence of the technology working.

Therefore we recommend a commercial operation to exploit the Neurology segment and this

will require a team with considerable commercial corporate governance skills.


first year into a post-doctorate position within team. Although not

commercially experienced his grasp of the commercial aspect (given no previous experience) is

impressive, however lacks the experience at this time to provide commercial acumen to the

company and is best focussed on an R&D function.

The conclusion is therefore that will quickly need to identify permanent hirings or interim

people to run the corporate side of the company, such as commercial activities, investor networking,

manufacturing etc.

Skill Sets required:

Skill Definition

Critical Thinking Using logic and reasoning to identify the strengths and weaknesses of alternative commercial and technical solutions, conclusions or approaches to problems.

Complex Problem Solving Identifying complex problems and reviewing related information to develop and evaluate options and implement solutions for the commercial benefit of the company

Judgment and Decision-Making Considering the relative costs and benefits of potential actions to choose the most appropriate ones.

Active Listening Giving full attention to what other people are saying, taking time to understand the points being made, asking questions as appropriate and not interrupting

Operations and Systems Analysis Determining how a system or operation should work and how changes in conditions, operations and environments will affect outcomes. Understanding the needs and product requirements of a particular design.

Monitoring Monitoring and assessing performance of yourself, other individuals or organizations to make improvement or take corrective action

Commercial Knowledge of principles and methods for showing, promoting and selling products or services. Includes marketing strategy and tactics, product demonstration, sales techniques and sales control systems to extract maximum value from offering


4 Technology

Summary

In this assessment document we offer no detailed description of the technology as this is very

adequately covered elsewhere and known already. However using the NuAge Vision Circle criteria:

• Technology • Equivalence vs Enhanced Equivalence vs Revolutionary vs Disruptive

• Technical Feasibility

• Manufacturability

• Durability

Technology Cycles

Pumping technologies have existed for many years and thus in this respect the technology is

simply an improvement of those technologies rather than revolutionary or disruptive technology.

The features, however, lend themselves to providing significant benefits over existing methods

and technologies. The inherent technology does not change any paradigms in that (for instance)

neuro-trauma care will still be performed in the same way as before but adoption of the

technology/product would provide the user and ultimately the patient with a significant benefit.

Whilst it could be argued that the technology is “revolutionary” in reality it does not really

provide the user with any “unexpected benefits”. The features of technology which are

enhancing the benefits are addressing already identified but, as yet, not met needs.

The technology can be considered as an enhanced equivalence or evolutionary innovation.

In this we mean that the technology is a major step forward in the performance of “pumping

technology” for the range of applications mentioned. This is a good commercial position as it

means that markets exist and little, if any, ‘customer’ education is required and the focus can be

on demonstrating the considerable benefit offered by

As the technology is not revolutionary and/or disruptive the feasibility of manufacturing devices

around the core technology seems relatively straightforward in that it appears no major

technical challenges are apparent.

Given, however, the market applications for which the technology is likely to find early

acceptance and adoption, care must be taken to understand the regulatory compliances that

will be required. We recommend that this is addressed early on in whatever market entry

strategy is adopted.


Technology Cycle Definition Assesmemt

Equivalence or sustaining innovation

Usually referred to as “me too” product which simply performs the same function as products and/or technologies which currently exist and are being sold. These technology do not affect existing markets and will compete on a price basis. Many companies who already compete in a certain market will be interested in this type as it can improve critical mass of products or be used as a “loss leader” to improve sales of other products

Enhanced Equivalence or evolutionary innovation

Sometimes known as the “better mousetrap” in that the technology’s features and, therefore, benefits offer significant improvements and advantages over products/technologies which are currently being sold. These innovations generally differentiate themselves and improve a product in a way that was expected. Line extension strategies rely on this to produce the next generation of products that current exist and help maintain market share and position

Revolutionary These are products/technologies which are novel in that the technologies/products do not exist and would replace or substitute currently available technologies/products and provide some benefits not currently met. There is some degree of unexpectedness but not enough to significantly affect the market. Again differentiation is the key and in some niche market significant positions can be maintained. Companies interested in these types usually wish to enter a market which they do not currently compete in or wish to create a new market. A good example of this would be PCR technology for which a new market (genomic analysis) has be grown

Disruptive Technology

Type 1: Type 1 disruptive technology is an innovation which creates a new market and value network by providing a novel way to do something and eventually disrupts the existing market by substituting or displacing existing technology. The key difference between disruptive technology and revolutionary technology is that disruptive technology shifts the paradigm in a way that was not expected whereas revolutionary technology does not shift a paradigm it merely enhances it. Type II: Type II technologies disrupt current processes of providing solutions to an existing market in a way not expected. For instance a new manufacturing method which significant shift the cost base and allows a competitor to significant compete on price whilst maintain maintaining acceptable margins could create significant sustainable advantage. This may well be unexpected and moves the market quickly into significant growth cycles.


Evolutionary Innovations lend themselves to licensing opportunities as markets already exist and,

therefore, players exist. Any existing company supplying products will have a line extension

development strategy and thus be interested in any innovation which may provide a competitive

advantage. We score this 8/10

Technical Feasibility

Technical Feasibility is a measure of whether an “idea” (possibly described in a patent) can actually

be made into a device or assay or system as envisaged by the inventor. It is not always apparent as

to whether or not this is the case. Just because an idea is described and protected by a patent it may

be so difficult or costly to engineer that any product or product family based on the idea will not be

financially viable. Typically this measured against a Net Present Value calculation i.e. can the product

support costly development and manufacture through a price which return acceptable margins.

A simple matrix would be the device to illustrate this

Fig 7 Technical Feasibility Matrix after “The Smart Organization” – Matheson and Matheson,

Harvard Business School, 1998


The concept here is to map and determine the risk of any technology. Thus if a product based on a

patented and protected technology with freedom to operate in a relatively large and growing

market is “easy to do” and can be forecasted to produce an acceptable NPV then it would be

classified as a very valuable asset and called a “Pearl”. Likewise if such a product as described is

“difficult to do” then it is defined as an Oyster and will require nurturing, monitoring and investment

though the anticipated rewards on success outweigh the investment. Similarly if a product is easy to

do but return moderate even low NPVs then it produces a ready income stream and can be

considered a foundation (bread and butter) of the company.

This matrix is useful in defining product portfolios, line extension and R&D focus.

Using the financials model produced for by NuAge Vision (see appendix 1) we can conclude,

given a discount rate of 10%, that the scenario produces a healthy positive NPV. The technical

feasibility of the project appears to lie in the ‘easy-to-do’ category as much of the engineering and

performance has been established. Therefore we can quite safely categorize the technology as

a “Pearl”.

Manufacturability

Having now received two visits from expert product designers who have extensive experience and

know how in this area, we can conclude that there appears no barriers (other than financial

investment for design/tooling etc) to successfully manufacturing pumps and related systems based

on the echnology.

Durability

Currently there is no comprehensive study data to support technology’s claim that it will work

in a commercial environment. To this end it will be a mistake to suppose that a pure license play will

not require significant effort and expense on the part of Indeed it is known from experience

that the burden to prove the technology in a range of applications will fall on to collect and

generate the support data and physical evidence. This can be circumvented by establishing the

technology in a key area where the proof that the technology works can be generated. Once this is

done then suitors of a license for the technology are happier to prove that the technology

works for their application themselves. By creating its own product(s) and establishing a position in a

certain market segment will avoid the licensing efforts from being a technology push strategy and

move it to a market pull strategy.

Regulatory

The regulatory requirements for the will be governed by the target markets. The features and

therefore the benefits are likely to be highly prized in the Neuro Trauma market (Brain trauma)

where sample sizes, analysis frequency and miniaturization are all sought after and is able to

deliver on these features. Given that this market is the primary target then it is likely that there will

be heavy regulatory requirements. However on discussion with expert design engineers with

experience of this field it is unlikely the envisaged device will be subjected to the most rigorous


compliances as the devices itself in non-invasive (the invasive part of the whole microdialysis system

that the product will be a part of is the microdialysis probe which will not be sold by

. However demonstration of equivalence (to existing technology) will be necessary and it is

likely that either a medical device class 1 or 2 regulatory approval will be needed, at this time it is

not clear which.

Further work is recommended to ascertain the exact requirements.

5 Business Models

Highlights

Several different models could be applied to commercialize the technology.

The key aspect not entirely covered in this report which impinges on the choice of business models is

the Value Network. Others such as the finance, technology, market and people are addressed.

The Value Network

We define this as the configuration of actors who together will create value for the company and

customers.

Use of Capital Assets

Human Capital

The commercial team needs to be identified – see above.

Strategic Capital

wish to commercialize the technology for two key reasons

1. To improve patient outcome in the case of neurology device and ultimately to save lives

2. To create a secure financial position for the founders and shareholders

As the IP position appears to be relatively strong it is likely that competition will try to

block entry through aggressive pricing and position the use of the already in-place support

infrastructure as a major benefit to customers that cannot be matched in the short term by

intends to compete in the neurology and drug development markets exploiting their

improved features as key benefits for customers. However will be following the

In order to capture the true value of the technology we consider that a pure licensing

approach to be dangerous. Not only does lose control of the use of the technology but

many potential licensees will require hard physical evidence of the technology working.

Therefore we recommend a commercial operation to exploit the Neurology segment and this

will require a considerable upgrade in the commercial skill set and well and corporate

governance skills.


marketplace rather than creating it and therefore must expect to see competitive

reaction which needs preparation in formulating the correct strategic responses.

Structure Capital

Unless decide to manufacture themselves (either directly or via a contract

manufacturer) then no economies of scale can be attained and therefore the model would

rely entirely on a licensing play income.

With a strong IP position in a crowded landscape should exploit their protectable

position by creating a strong position in a key market segment to prove the technology

works and aggressively license the technology to partners operating in adjacent market

spaces not targeted by

Relational Capital

As a new company cannot rely on group of established partners to help create value

through licensing/OEM etc. will, therefore, need to pay particular attention to the

people skills they need to acquire to create these networks (e.g. servicing / distribution etc.)

It will be important that looks to line extensions to create a pipeline of

products/devices etc.. It will be critical that is proactive in introducing new innovations

to establish a leading position and avoid the “one product” company trap.

are advised to seriously analysis and consider the options with regard to its channel

strategy using distribution networks already in place to avoid escalating infra-structure

costs.

Value Delivery

Strong marketing expertise will be required to communicate to target audience the

benefits of their technology. As the device is likely to be delivered into a very slow moving

and conservative market (e.g. NHS) we recommend that the business development skill set

include NHS experience

Exploitation of existing exiting channels will be critical and assist with entering complex

markets as above

Key to success will be proof/evidence that the technology works in a commercial

environment and trialling of the technology in a clinical environment early on is highly

recommended.

We suggest that, whilst premium pricing can be argued, that price their offering

competitively in order to gain momentum in the market.

Value Capture

The IP position gives a degree of sustainability; however, the company must be vigilant

as (we expect) its success will force competition to react and should expect similar type

of systems to enter the market within a year. In order to block this might consider the

“intel inside” approach and make its technology available to competitors whilst working on

next generation improvement to fuel a pipeline of innovation. This approach will enable

to enter new markets without diluting its core efforts.


Proposed Business Model

Given the analysis above we would recommend the following business model based on 3 horizons of

strategic growth

Horizon 1

Create a company to manufacture products based on technology

Establish Core Functionality and Infrastructure

Identify key partner for outsourcing activities

Enter the market in clinical research and establish dialogue with key opinion leaders

Seek licensing opportunities

Horizon 2

Develop the business through licensing and build pipeline

Enhance the in-house capabilities and competencies

Regulatory aspect and quality system established

Enter routine clinical R&D

Intensify licensing activities

Horizon 3

Look for economies of scale

Supply direct to improve margins

Roll out line extensions

Expand into new markets

Continue to aggressively license technology

Horizon 1

Horizon 2

• Supply of ‘consumable’ pump and assay cartridges for a range of applications

• Growth through product development and possibly product acquisition

Business model

Establish Core FunctionsOutsource where necessary

Market Entry into Clinical Research (KOLs)

High VolumeDirect Supply

Extensive product rangeClinical & home market

Business DevelopmentIncreased in-house capability

Routine clinical & R&D

Horizon 3

Valu

e


6 Conclusions

After extensively working on understanding the core technology and current

team our conclusions and recommendations are as follows:

1. Significant opportunity for commercial success in exploiting the echnology exists.

2. The business model to be ultimately adopted should be very carefully considered. Because

of the factors articulated in this report we recommend:

o Creating a new company dedicated t echnology

o The company, should initially focus on design and manufacture (or have

manufactured) its initial product(s) for the neuro trauma market and then proceed

to design product(s) for the drug development market.

3. Because of the applicability of technology in many markets a licensing strategy should

be actively structured and implemented; this will increase the awareness and demand for

technology based products. Care needs to be taken to ensure does not destroy its

own ability to enter into key markets in the future as a consequence of licensing activity.

4. Given that is to be established immediate effort is required to create the appropriate

commercial team.


Appendix 1

SouthWest

Assumptions Price £

Av Number of Cons

packages per system

life

System

Price in

Use £

XN System Neurosurgery apps 250.00 20 850.00

XN System Drug Development RUO 500.00 35 1200.00

Consumable package AUSP/ Neuro 30.00

Consumable package AUSP/DD 20.00

Margin Targets 85.00%

NIC + Pensions etc multiplier = 28%

INCOME Yr 1 Yr2 Yr3

Systems Sales Units Neuro 0 200 1200

Systems Sales Units DD 0 100 800

Sales 0 290000 1980000

Licensing Activity (assume no cost) 10000 150000 200000

Total Revenue from all activities 10000 440000 2180000

Assumed margin on system sales 85.00% 0 246500 1683000

Margin from all income (licensing =100%) 10000 396500 1883000

COSTS

Premises 60000 80000 100000

Design and Approval 150000 0 0

Warehousing # Salary 10000 # Salary 10000 # Salary 10000

People CEO 1 55000 35200 1 56375 72160 1 57784.38 73964

R&D 2 42000 107520 2 43050 110208 4 44126.25 225926.4

ENG + SVC +ProjMgr 0 35000 0 1 35875 45920 4 36771.88 188272

BD 0 40000 0 1 41000 52480 3 42025 161376

Admin 1 25000 16000 1 25625 32800 2 26265.63 67240

Marketing Expense 10000 40000 50000

Service Cost 0 50000 50000

Total Expense 388720 493568 926778.4

EBITA -378720 -97068 956221.6

Need for cash Innovate UK demand -378720 -475788 480433.6


Appendix 2 Nuage Vision opportunity assessment model

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