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Transcript of Midterm Business Plan
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F L E X i b l e
i n s U L I N, L L CTM
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xecutive Summary
bjectives
ackground & Trends
ompany
roduct
pportunity
hreats
rowth Plan
ssumptions
come Statement
arketing Strategy
Table of Contents
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Vision:to empower diabetics
o continue their pursuof an active lifestyle.
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Executive summaryAs of 2011, there were 25.8 million people diagnosed with diabetes and 1.9 million Americans
are added to this number each year.One of the largest components of diabetic therapy is
exercise, but the pursuit of an active lifestyle can be difficult due to conventional glucosemanagement. Flexulin is the innovative solution to this problem.
Flexulin is the first lightweight patch that, unlike traditional pumps, administers both insulin
and glucose to maintain blood-glucose homeostasis. This product is primarily targeted towards
diabetics who desire to be more active. Flexulin is a revolutionary way to manage diabetes,
taking into account the physiological demands of athletic training and competition. Active
diabetics must be conscious of their blood glucose levels and aware of how quickly they can
change during physical activity, but with Flexulin they no longer have these concerns.
This device is both wireless and flexible, keeping active individuals in mind. It adheres to the
individuals body without introducing noticeable bulk. The design allows diabetics to move
freely without any worry of discomfort. Flexulin continuously collects and transmits data to an
app to provide the users with information about their blood glucose history.
The revenue from the insulin pump market is expected to grow 9% each year, providing
Flexulin with an opportunity to capture 5% of the market share. The company expects to be
profitable in year 2016, only the second full year of sales. The loss of capital incurred in the firstthree years of operations is expected to be fully recaptured by year 2018.
Given the large market size and the ingenuity of the product, Flexulin has been approached by
multiple insulin pump manufacturers and distributors. Most notable of these offers is from
Medtronic, a giant in the industry. Moving forward, Flexulin intends to negotiate an agreement
with Medtronic in regards to the distribution and marketing of the product.
Flexulin is seeking an investment in order to create a prototype and launch this product. Withthe use of cutting-edge technology, Flexulins team is redefining diabetes management.
Sincerely,
Julian Richter
Chief Executive Officer
FlexulinTM
Julian R.M. Richter
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Background
TYPE I
Type 2 diabetes occurs
when a persons glucose
levels rise higher than
normal and the body
can no longer use insulinproperly.
TYPE IIDIABETES DIABETES
Individuals no longer have
the ability to produce insulin
on their own and require
insulin therapy. Insulin
deficiency can occur at any
age and is the main type of
diabetes found in children
and adolescents.
25.8 MILLION AMERICAN
HAVE DIABETES
1.9 Million
diagnosedeach year
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Insulin PumpsCurrent insulin pumps are convenient in some respects and
burden in another.
The convenience is that the person does not have t
constantly test his or her blood glucose levels and can b
ensured that his or her insulin levels will remain fairly constant
On the other hand, pumps can be inconvenient because thperson must always be hooked up to it. The computer portio
of the device can be bulky and a burden when the perso
does not have pockets.
Insulet Corporation has tried to address this problem with
wireless pod that sticks to the skin and is managed with
separate handheld monitor.
1998
2010
Users of insulin therapy
70,000
300,000
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Current issues1.Painful when bumped into
2.Bulky and noticeable ; causes a person to be self-conscious
3.Can get caught on chairs and desks
4.Complicated for children to use
5.Can easily be removed, fall off, etc with lots of
activity6.Not fully waterproof
7.Multiple devices to manage diabetes
8.Constant manual regulation of pump
9.Failure to recognize different kinds of sugars in
bloodstream
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CompanyChief Executive Officer
Chief Operations Officer
Chief Technology Officer
Chief Marketing Officer
Chief Finance Officer
Julian Richter graduated from the Business University of Vienna with a
degree in Finance and Entrepreneurship. He worked at Volksbank
Raiffaisenbank Rosenheim Bank as a financial consultant and then was
involved in the start-up Hellofresh on the supply chain and sales side.
Lizzie Farquhar, after receiving her BBA in Marketing at the College of
William & Mary, began her career at APT Test & Learn as a marketing analyst.
She then moved to Johnson & Johnson to be an assistant product manager.
When Julia approached Lizzie with a proposal to create a revolutionary device
that would change the way active diabetics live, she could not turn it down.
Meghana Indurti worked at Leo Burnett with various Health insurance
accounts and eventually became Account Executive. She holds an
MBA in brand management from Stanford and has been a Marketing
Manager at Tylenol for the past five years.
Jake Marshall received his BBA and Masters in Accounting at the College of
William & Mary. Following graduation, he began working at Ernst & Young LLP.
Following years of service in public accounting, Jake welcomed the opportunity
to work for a company invested in improving the lives of diabetics.
Julia Swalchick graduated from Virginia Tech with a degree in Computer
Engineering. She was a former technology consultant for Accucheck. She
contributed to the creation of the first CGM device that allowed for
continuous blood-glucose monitoring.
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Board of AdvisorsRick Spatz
Spatz began his 30-year career in advertising with Leo Burnett Company,
moving to internationally acclaimed D'Arcy, Masius, and Benton &
Bowles for a 21-year run in management that included several overseas
assignments. He led strategic and advertising development for agency
clients that included Procter & Gamble, Mars Inc., Nestle, Roche,
Cadbury, Heinz, Union Carbide, and Chi Chi's Mexican Restaurants.
Richard AshCurrently a professor at the College of William & Mary, Ash had previously
founded Dilon Technologies, Inc., a medical device company. He has also
contributed to the success of several venture capital firms, most notably
Mentech Advisors, Inc. and Mentor Technology Ventures, LLC.
Dean KamenKamen has extensive experience in the creation of new technologies, mostnotably the Segway. While an undergraduate, he developed the first portable
infusion device, which delivers drug treatments that once required round-the-
clock hospital care. Through his DEKA Research and Development, which he
co-founded in 1982, he developed a portable dialysis machine, a vascular
stent, and the iBOT -- a motorized wheelchair that climbs stairs.
Dr. Mohan PeterMohan was a Cardiothoracic surgeon having trained and worked at the Clevelan
Clinic in Cleveland, Ohio and the Mayo Clinic in Rochester, Minnesota. His pa
titles include Assistant Professor of Surgery at the Dartmouth Medical School
New Hampshire; Chief of Cardiothoracic Surgery at York Hospital, Yo
Pennsylvania; and Founder and Principal Cardiothoracic surgeon at Mer
Medical Center in Oshkosh, Wisconsin. He has served as a visiting surgeon
both Rockhampton, Australia and on the island of Grand Cayman.
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PRODUCT: HRemove cap and fill Flexulin pouch with insulin and glucose
-Cap covers internal needles
-Use of complementary syringes
-Inject through fill ports located on base of pouch1
2
Three devices offered: 100 units, 200 units, 300 units
Adhere pouch to skin
Recommended adhesion sites:
The pouch is designed for compatibility with U-100 rapid-acting insulin (100
units of insulin per milliliter of fluid). The following U-100 rapid-acting insulin
analogues have been tested and found to be safe for use in the Patch:
NovoRapid, Humalog, or Apidra
3Latch Flexulin device to pouch
4Click OK to initiate insulin release-Auto insertion of both Teflon cannulas at 45 degree angle (depth of 6.5mm 13 or
17mm)
-Auto insertion of glucose sensor
-Omnipod- 6.5mm cannula depth, 60 degree insertion angle
It is proven that manual record keeping techniques, such as a food and exercise diary, still
represent the gold standard. Patients starting insulin pump therapy should be encouraged, at
a minimum, to record blood glucose levels, boluses and basal rate adjustments. A food diaryis also useful for assessing carbohydrate consumption and overall nutritional intake. If the
food diary can be correlated to glucose levels, it can enable the patient and his or her
healthcare team to detect and address behaviors and/or physiological phenomena impairing
tight glucose control. Given that the entire customer base will not have a smart phone, a
complimentary portable device will be included that emulates the app. This device can also
be used by those who hold an app int the event of an emergency.
The Pump
The App
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OW IT WORKS-Recommended injection sites: top
of thigh, stomach, outer arm, butt,
sides of lower back
-Flexible Teflon cannula with thin
plastic tubing (lasts 72 hours- 3
days)
-Gradually releases the established
basal rate injections, program the
bolus doses to cover meals
Features:-Flexible, able to mold to your figure
-Different sizes for different users- hold various amouts of insulin and glucose
-detachable insulin pouch, glucose cartridge and adhesive patch (consistent device)-stores and injects both insulin and glucose
-reads blood glucose levels
-recognizes and reacts to patterns and trends of blood glucose levels based on users histor
-transmits all data to phone app via the cloud
-fully waterproof
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FLEXULIN
I
FE
G H
B
C
A
D
Glucose Storage
-$615.00-$499.99 per 10 sets
-Roughly 290 readings per day
A tiny electrode called a glucose
sensor is inserted under the skin to
measure glucose levels in tissue fluid.
It is connected to a transmitter that
sends the information via wireless
radio frequency to a monitoring and
display device. The device can detect
and notify you if your glucose is reacha high or low limit.
C
CGMI
Patch
$195.00 per 10 sets (approx. 1
month)
n a study of 25 volunteers, a
ubcutaneous dose of 1 mg
lucagon resulted in a mean peaklucose concentration of 136 mg/
L 30 minutes after injection
Figure B). No difference in
maximum blood glucose
oncentration between animal-
ourced and rDNA Glucagon was
bserved after subcutaneous and
ntramuscular injection.
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THE APP1234567
Storage of all dat
Personalizednotifications
Blood GlucoseTrend Graph
Calendar/Schedu
Sport specificprogramming
Nutrition Log
Index ofCarbohydrates
Accessible by individualsendocrinologist via patenlogin
Dismissible alertsLoud alert when low oninsulin & high in bloodglucose
7, 14, 30-day historyBreakdown of specificaverages for certain timeday over long period
Daily activitiesSmart pump recognizesaverage times for exercismeals, and alcohol
Glucose regulation reactprogrammed exerciseAnaerobic vs aerobic opt
Manual entry f dietPie chart of daily calorieconsumption broken up food group
Barcode scanning capabStorage of scanning histAbility to drag from histonutrition log
FLEXible
insULIN
mage provided by Glucose Buddy, Inc.
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OPPORTUNITIES &
The insulin pump market volume in 2009 was $453 million and is expected to
grow to $843 million in 2016 in the US. Within this market, Flexulin unites the
two components of quality and comfort in a unique product. Although there
are big competitors, there is a great possibility to enter the market fo
Flexulin because of the huge size of the diabetic market and the diabetics
need for improved products. Flexulins anticipated deal with Medtronicwould mean that the Flexulin pump would penetrate Medtronics already
existing market and distribution channels.
DIRECT COMPETITION Flexulin competes directly with diabetes pump and
pod manufacturers Medtronic, Roche Disetronic, Animas Corporation and
Insulet Corporation. The biggest active player in this field is Medtronic,
followed by Roche. Flexulins other competitors are relatively small and worktogether with strategic partners in the field of diabetes and medical
technology.
The pump distributors are at an advantage, having pre existing relations wit
their customers. However, there is not one pump on the market that faoutcompetes any others. Therefore, other direct competitors like the Startu
Asante Solutions which received funding by more than 7 venture capitalists o
Insulet Corporation entered the market comparably late.
For instance, Insulet Corporation was founded in 2000 and only specializes i
pods. Their focal product, The Omnipod, includes 2 pods, works wirelessly
is waterproofed for one hour and has a retail price of approximately $1700Insulin pumps are priced between $4500 and $6000. The pods must b
exchanged every three days. This translates into monthly costs o
approximately $300 - $450 by consumers, ordering pods in standard 10 piec
sets. The separate continuous glucose monitoring device costs another $700
$900. In comparison, Flexulin combines these 2 parts into one product for th
reasonable cost of $4500 and the replaceables for $700.
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THREATS.
All in all, the leading companies have some of these good characteristics l
waterproofness, wifi-ability, alerts, painless insertion and lightness but Flexu
combines several of these characteristics more effectively and has ex
features like maintaining blood-glucose levels and a phone app. In addition
that, Flexulin is the only pump provider for athletes who do sports for m
than an hour without limitations.
Indirect competitors mostly include companies that sell insulin injections (e.g
syringes). Using syringes is generally the least expensive method. For
example, 100 syringes (each 1ml of insulin) costs $20 to $30. In addition to
that, wearing no pump is more comfortable and there are fewer dangers wh
participating in contact sports. Those people do not have the risk of allergie
or malfunctioning of the pump, as well. However, these people are less flexiand have worse control of their diabetes.
Moreover, having a pod leads to fewer injections and is important to the
reduction of long-term complications and better predictability. Although,there are advantages and disadvantages for each side, for most people the
advantages of the Flexulin pump outweigh disadvantages and costs.
Threats One threat is represented by a product which cures diabetes. Sin
diabetes has many different causes, there is not one medicine which can cu
diabetes. Recently stem cell research has shown that diabetic cells in t
pancreas can be retrained to behave normally when placed with non-diabecells. These cells can then be transplanted into the pancreas and essentia
stop the manifestation of diabetes in a person. However, the results only la
for about 9 months. This method is not price sustainable, as the patient wou
have to get a transplant about once a year and pay for transplant drugs so th
their body does not reject the transplant. Because researchers are far off fro
developing a cure for diabetes, this threat is minimal.
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58%
12%
11%
10%
6%3%
Medtronic Roche (Disetronic) Animas (J&J)
Insulet Corporation Deltec (Smiths Medical) Others
Company share of the global insulin pump market (% by revenue), 2009
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Positioning
Flexulin will provide a high-end diabetes pump including the maintenance o
the blood-glucose levels for Type 1 diabetics. Flexulin will not compete wit
the other manufacturers in low-cost products, but rather concentrate o
quality. It is a competitive, high-quality product for active people and th
characteristics of Flexulin are unique. By positioning it in the high-qualit
sector, the competition will be huge, but the possible share for Flexulin i
market volume will be large. A small market share is enough to be profitable
Furthermore, being positioned with a competitive, high-tech product will b
most attractive to possible buyers like Medtronic.
Exercise is recommended for most diabetes patients as an important tool of
therapy. Experts recommend moderate-intensity physical activity for at least
30 minutes for five or more days of the week. Although light exercise can be
effectively managed, when it comes to competitive athletics, diabetes
patients often have trouble with effective treatment plans. Flexulin can be
positioned for active diabetics who prioritize exercise.
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Price$5500
$1000 $4500Disposable Patch- Insulin cartridge- Glucose cartridge- Glucose sensor- Adhesive patch- 2 Needles with Cannulas- Compents are sold in sets of 10
(last a month)
- Electronic device- Collects and transmits data- Regulates glucose and insu
levels- Rechargable Lithium batter- Syncs with the App
Tech Device
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Target Market
1.3% of all people above the age of 20 years are diagnosed wiabetes. Thats 25.6 million people. Additionally, 0.26% of all peoounger than age 20 have diabetes. Thats about 215,eople. Since Insulin is a product with inelastic demaviable option is to straddle different age groulexulin targets active customers from the af 14 to 65. Since most kids enter high school aro
his age and begin seriously becoming involveports, the product can be most useful to the
Prospective pump users or theircaregivers must be able to change
nfusion sets, fill pump cartridges and program the
pump, and must demonstrate willingness to collaborate w
healthcare providers in achieving the goals of insulin pump
herapy. In general, patients likely to succeed on insulin pump
herapy will have had sufficient education and support while
using other forms of insulin therapy so that they are alrecompetent in assessing the nutritional value of meals an
monitoring blood glucose levels frequently (minimum four ti
a da , referabl 6-8 times).
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Distribution &
Distribution and marketing will be be taken care of by Medtronic, a company that ha
already established relationships with doctors and high-quality retailers. Over the fir
three years, Flexulin will take care of distribution and marketing strategy with Medtron
serving as a consultant. Afterward, the services will be outsourced.
It would be viable for Flexulin to be recommended by pediatricians and doctors first
and foremost because patients often will not heed medical advice that doesnt correlat
with the doctor they have built a personal relationship with. Leveraging Medtronics
brand name will be necessary in order to be recommended. Additionally, it is often
more convenient for customers to purchase from big-box retailers like Wal-Mart, Kroge
CVS, and Walgreens. Therefore, Flexulin components will also be provided there.
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Advertising
It is important to emphasize the flexibility and durability of the product above all else.
Print ads will be published in leading Diabetes magazines, including but not limited to
Diabetes Self-Management, Diabetes Forecast, and Diabetes Health. Partnering wit
the magazines will enable Flexulin to be seen by both customers and those wh
research diabetes on a scholarly basis. A 12-month subscription to Diabetes Forecacomes automatically with membership into the American Diabetes Association, whic
as of now holds over 16,000 members.
Typical readers of these trade magazines share certain characteristics:
They are proactive with treatment, have done substantial research, and like brande
subscription. With Medtronics brand equity, Flexulin will be able to have an easier initi
entry into the market.
They are responsive and engaged with the community at whole. They trust authoritie
about research. They share an easier reach because of how in-tune they must be.
They are influential customers. They are persuasive and good advice regarding
health to not only their own family but also other diabetics.They also engage onlinewith user feedback and will self-promote Flexulin.
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TV Spots will also additionally run in the first year and will eventually be faded away.
They will first air at the ADA Trade shows. Extensive advertising isnt necessary since
Flexulin will be associated with Medtronic and most Diabetes product sales are
increased through word of mouth and patient-led experimentation with products.
However, in order to introduce the product particularly to active and competitive
diabetic patients, Flexulin will be positioned with athletes and sports. Here is a sample
TV storyboard.
Flexulin. Let nothing stop you.
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F L E X U L I NLet nothing stop you
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Exit & GrowthFlexulin is in negotiations with Medtronic and is currently awaiting the development of
a prototype. Medtronic is a medical technology firm, which specializes in the
manufacturing and distribution of medical supplies. Amongst other products,
Medtronic produces insulin pumps, heart valves, and pacemakers. Medtronic is a
leader in the medical technology market generating over $16 billion in sales in 2012.
The Medtronic brand name should result in increased exposure and demand for theFlexulin insulin pump. The core goals and values of Medtronic align with those of
Flexulins management team resulting in a relatively easy relationship to maintain.
Medtronic is committed to bettering human welfare, and is emphasizes expansion into
foreign markets to better serve universal health care needs.
Under the terms of the agreement, Medtronic will agree to purchase a fixed amount of
Flexulin units (1000 units), and Flexulin will provide additional units each year at the
discretion of Medtronic. Per the terms of the agreement, Flexulin agrees to supply
their insulin pumps and replaceable parts solely to Medtronic at a fixed cost over a ten
year period.
Assuming that no deal can be made with Medtronic, Flexulin will approach various
other medical technology companies such as Insulet, Animas, and Roche to discuss a
potential purchase agreement.
Flexulin plans to maintain high levels of research and development expenses with the
intention of developing more innovative medical technology solutions. Additionally,
Flexulin plans to decrease the marginal costs of production by taking advantage of
economies of scale as the level of production increases.
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StrategyWorst Case: If Flexulin cannot come to an agreement with any of the above medical
technology companies, there is still a strong likelihood that Flexulin will be able to
recoup their investment. Flexulin has received strong interest in purchasing the patent
for their insulin pumps. Management has determined that should the sale of patent
and trade secrets occur, the proceeds from that sale should be sufficient enough to
cover the research and product development expenses.
Exit Strategy: Flexulin plans to offer investors a put option which takes effect in the
seventh year of business. This option guarantees that Flexulin will repurchase the
investors interest, and provide a minimum return of 25%. For the investors who
choose to hold their interest with Flexulin, they can expect to recoup their investment
with dividend payments beginning in 2016, the third full sales year.
Terms of Agreement:
Flexulin requires an initial investment of $4,
000,000 in return for 40% equity in the company
in order to create a prototype and cover start-up
costs for the first year of operations.
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Assumptions1. Each year, 15% of previous Tech Device owners no longer use the product and/or have to
repurchase it.
2. Initial profit margin is 15% based off of the margins of currently established companies, such asMedtronic, Insulet, Animas and Roche,
3. Units of adhesive patches sold based upon the number of tech strips sold
4. Due to relatively low sales volume in the first year, profit margins will not be as large as competitors
5. The growth in sales is more than 2% and continues to increase up and after 2019.
6. Legal expenses also cover patent and trademark costs.
7. The market for insulin pump therapy will continue to grow at an increasing rate. This is based off of
ADA growth projections.
8. The return on sales of insulin pumps is 2% of sales revenue.
9. Selling begins in January of 2015.
10. Liability Insurance cost is included in SG&A Expenses
11. Shipping costs are based on competitive shipping prices.
12. Rent expense for the office is $3000.00 per month. Utilities expenses are assumed to be constant at
$10,000 a year.
13. Dividend payments are 40% which is based on their equity ownership in the company.
14. The worst case scenario was based off of sales volume is reduced by 50% holding all fixed costs
equal. The best case scenario will be an increase in 25% of the sales volume of the projected sales.
This based on the assumption that Flexulin will be operating at the forefront of Medtronics sales.15. Each partner in the executive team has contributed $200,000.
16. R&D is lower than competitors because of the low amount of start-up capital and focus on a single
product in. The ratio of R&D to sales revenue is higher than that of Flexulins competitors.
17. Price is based off of competitive insulin pump prices as well as glucose monitoring systems.
18. Medtronic has agreed to a purchase floor of 1000 units. Additionally, the total units sold is based off
of the percentage of market share Flexulin is positioned to capture.
19. Glucose storage is assumed to be feasible in a wireless insulin pump. This is based off of current
research by Medtronic.
20. There can be three automated insertions that coexist in one device.
21. The device will be completely water-proof.
22. The data will be transmittable via cloud storage.
23. Flexulin will be covered by insurance.
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References