HCV portable diagnostic device
Ajith JinjilDaniele QuerciaLauren AresRichard Dias Azedo
Outline
Customer pain and our proposal HCV in the world and in the UK In-vitro and molecular diagnostics Value chain and business model GP practices & barriers to adoption Team analysis Summary and conclusions
Customer pain that our venture proposes to resolve:
Medical practitioners cannot screen all patients for HCV as they have to send away blood samples to laboratories for testing
This results in few patients being screened for HCV because of:
the large number of samples required, the associated cost, and the time required for taking samples, carrying out
the tests and obtaining the results
Our proposed offering:A portable HCV testing device
Our venture will enable medical practitioners to:
Administer a diagnostic test at point-of-care Provide almost instantaneous results Enable doctors to screen all patients Make timely decisions on medical treatment and
further tests Operation requires little training Help to reduce cost for diagnosis, therapy and
healthcare in the middle-term
Daniele Quercia
Value curve
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Dimension
Dim
ensi
on
Val
ue
1. Testing time2. Testing costs3. Portability4. Effectiveness5. Number people screened6. Information provided 7. Testing flexibility8. Chances of error9. Invasiveness of procedure10.Ease of use11.Expertise required12.Fit with current practices13.Responsibility of results14.Doctor Time15.Timeliness of treatment
The following graph shows the dimension values for the portable diagnostic device vs the traditional lab offering (constant dimension value equal to 0):
HCV in the world and the UK
•170 million people across the world (3% of world population) are infected with chronic hepatitis C
•Wildly varying prevalence rates across countries
• In England 200,000 people are chronically infected (0.4% of UK population)
•Five out of every six people with chronic hepatitis C are unaware of their infection
•To diagnose all infected cases, the whole population should ideally be screened ( UK population 2001: 58,789,194)
•Anti-viral therapy costs £10,000; Liver transplant costs £68,000.
•Estimated savings from therapy instead of liver transplant: 1,044,000,000 over twenty years
(2)(1)
Year 2002 2003 2004 2005 2006 2007 2008 2009 2010
Number of new infections 3800 3358 2968 2623 2318 2048 1810 1600 1414
= 31037 new patients since 2000(3)
(4)
UK new HCV patient trends
Global market for HCV testing
Estimate of UK market:
2.596 billion * 6%
= 156 million (2005)
= 376 million (2008)
Trends
HCV receiving more attention by health authorities around the world Focus on preventive care and therapy
Increasing government spending on healthcare in the UK
Healthcare reform - trend toward cost containment
Macro-market assessment: Attractive
In-vitro diagnostics industry
IVD is a mature market More than 20 billion blood tests are performed
annually worldwide. Traditional IVD is dominated by a few large
players Patents and licenses for nearly all existing
applications are claimed Competition is intense at the market level and
is focused on cost in diagnostics
Total world market for IVD in 2003 –
28 billion USD 7% annual growth Projection for 2008 –
39 billion USD UK share ~ 6%
IVD includes Hospital-based Over-the-counter Point-of-care
Estimated industry
size of P-O-C
segment in UK:
= 67 million (2003)
= 94 million (2008)
IVD industry segments
Molecular diagnostics (NAT)
Definition: Diagnostic tests of fluid samples using biochips
Numerous small players emerging More than 400 companies are involved in molecular diagnostics
Lots of competing technologies Convergence of semi-conductor industry and bioscience
Smaller companies have to: Establish distribution and sales collaborations Obtain right to use patents and licenses Get regulatory approval through clinical trials
Technology problems Cost, integration and live applications
Molecular diagnostics (NAT)
Molecular diagnostics is the fastest-growing subset of the IVD industry with 15% annual growth
Molecular diagnostics (NAT)
1. Threat of entry: Medium (On-going R&D, Patents, Regulation);
2. Existing rivalry: High (mail-in test, labs at hospitals, many large and small competitors in the IVD industry);
3. Substitutes: None;
4. Buyer power: Low-Medium (fragmented, switching costs);
5. Supplier power: Medium-High (suppliers with patents).
Five-forces assessment
Macro-industry assessment: Unattractive
Where we are:
Customer pain and our proposal HCV in the world and in the UK In-vitro and molecular diagnostics Value chain and business model GP practices & barriers to adoption Team analysis Summary and conclusions
Value chain in IVD-NAT
Business modelConcept and Design Device design completed internally
Two components: Instrument and cartridge
Raw materials License non-proprietary technologies such as bio-sensor and
reagents
Manufacturing Outsource the assembly and manufacturing
Clinical trials Enter into partnership agreement for clinical trials
Marketing, sales and distribution Enter into partnership agreement for sales and distribution
Sales and GM forecastYear 1 Year 2 Year 3London Medium England
Devices Revenues from device sales 160,700 201,250 375,911
Cost of goods sold 72,379 90,003 166,623 Gross margin on devices 88,321 111,246 209,289
Gross margin % on devices 55% 55% 56%
Cartridges Revenues from cartridge sales 6,131,610 11,080,648 35,017,325
Cost of goods sold 5,747,362 8,023,972 19,351,112 Gross margin on cartridges 384,248 3,056,676 15,666,212
Gross margin % on cartridges 6% 28% 45%
Net operating margin forecast
Year 1 Year 2 Year 3London Medium England
Total revenues 6,292,310 11,281,898 35,393,236 Total COGS 5,819,742 8,113,976 19,517,735 Gross margin 472,568 3,167,922 15,875,501
Operating costsResearch and development 2,456,005 3,497,388 7,786,512 Selling, gen & admin 3,838,309 4,964,035 7,432,580 Licensing fees - UCL 564,616 814,095 1,250,000 Licensing fees - Biosensor 562,923 612,819 853,932 Total operating costs 7,421,853 9,888,337 17,323,024
Net operating margin 6,949,284- 6,720,415- 1,447,523-
Cash requirements analysisStage 1 - Feasibility
Basic research & feasibility studies 50,000- Stage 2 - Prototype
Prototype development 100,000- Stage 3 - Sourcing & distribution
License fees 750,000- Contracts, patents, incorporation 150,000- Regulatory clearance & trials 500,000-
Stage 4 - CommercializationShortfall funding year 1 6,949,284-
Total cash requirements year 1 8,499,284-
Shortfall funding year 2 6,720,415- Total cash requirements year 2 6,720,415-
Shortfall funding year 3 1,447,523- Total cash requirements year 3 1,447,523-
Business model assessmentFavorable Recurring nature of
cartridge sales High margins on
instruments and cartridges
Low capital requirements
Unfavorable Unfavorable cash
cycle High cost of
cartridges High R&D costs High SG&A costs
Overall micro-industry and business model assessment:
Moderately attractive
GP practices in the UK
There are 10,683 GP practices in EnglandExpected to decline slightly in future
Declining number of patients per GP A decrease of 12.5% per year
Low and declining rate of incidence of HCV in the UK
Barriers to adoption Practice issues Low rate of incidence Condition doesn’t require immediate diagnosis Doctors are very protective of time Changing behavior from laboratory testing
Structural issues Patient counseling Information management Sufficiency of infrastructure Ethical and legal issues
Overall micro-market assessment:Unattractive
Team analysis Mission, aspirations and propensity for risk
Empowerment of doctors Improving disease diagnosis Medium propensity for risk
Ability to execute on the CSFs R&D Sales and distribution Partnerships
Connectedness up, down and across Limited connections with R&D institutions
Summary and conclusions
Feasible Macro market
Growth and large infected population
Micro industry Viable but may not be
sustainable
Infeasible Micro market
Barriers to adoption
Macro industry Structure
Team Inability to execute on
CSF
Overall: Infeasible
Alternatives
Develop device for acute infectious conditionsMeningitis
Other target segmentsHospital emergency rooms and ICUs
Other geographic markets License the technology
Any questions?
Research questions and results
Would the possibility of having instantaneous results on HCV be something that medical practitioners and health organizations would be prepared to pay for?
Would other diseases be better targets? Would other markets be more attractive than the UK? Is there a true need for instantaneous medical
diagnostics? Would competition arrive so rapidly from so many fronts
as to preclude the ability to generate significant returns? Are there so many patents and regulation as to make
development unfeasible?
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