Transcript hcv_old

HCV portable
diagnostic device
Ajith Jinjil
Daniele Quercia
Lauren Ares
Richard 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:
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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
The following graph shows the dimension values for the portable diagnostic device
vs the traditional lab offering (constant dimension value equal to 0):
4
3
Dimension Value
2
1
0
-1
1
2
3
4
5
6
7
8
9
-2
-3
-4
Dimension
10
11
12
13
14
15
1. Testing time
2. Testing costs
3. Portability
4. Effectiveness
5. Number people screened
6. Information provided
7. Testing flexibility
8. Chances of error
9. Invasiveness of procedure
10.Ease of use
11.Expertise required
12.Fit with current practices
13.Responsibility of results
14.Doctor Time
15.Timeliness of treatment
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
UK new HCV patient trends
(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
(3)
= 31037 new patients since 2000
(4)
Global market for HCV testing
Estimate of UK
market:
2.596 billion * 6%
= 156 million (2005)
= 376 million (2008)
Trends
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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
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Total world market for
IVD in 2003 –
28 billion USD
7% annual growth
Projection for 2008 –
39 billion USD
UK share ~ 6%
IVD industry segments
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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)
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Molecular diagnostics (NAT)
Definition: Diagnostic tests of fluid samples using biochips
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Numerous small players emerging
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Lots of competing technologies
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Convergence of semi-conductor industry and bioscience
Smaller companies have to:
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More than 400 companies are involved in molecular diagnostics
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)
Five-forces assessment
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).
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 model
Concept and Design
 Device design completed internally
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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 forecast
Revenues from device sales
Cost of goods sold
Gross margin on devices
Gross margin % on devices
Year 1
London
Devices
160,700
72,379
88,321
55%
Cartridges
Revenues from cartridge sales 6,131,610
Cost of goods sold
5,747,362
Gross margin on cartridges
384,248
Gross margin % on cartridges
6%
Year 2
Medium
Year 3
England
201,250
90,003
111,246
55%
375,911
166,623
209,289
56%
11,080,648
8,023,972
3,056,676
28%
35,017,325
19,351,112
15,666,212
45%
Net operating margin forecast
Total revenues
Total COGS
Gross margin
Operating costs
Research and development
Selling, gen & admin
Licensing fees - UCL
Licensing fees - Biosensor
Total operating costs
Net operating margin
-
Year 1
London
6,292,310
5,819,742
472,568
Year 2
Medium
11,281,898
8,113,976
3,167,922
Year 3
England
35,393,236
19,517,735
15,875,501
2,456,005
3,838,309
564,616
562,923
7,421,853
3,497,388
4,964,035
814,095
612,819
9,888,337
7,786,512
7,432,580
1,250,000
853,932
17,323,024
6,949,284 -
6,720,415 -
1,447,523
Cash requirements analysis
Shortfall funding year 1
Stage 1 - Feasibility
50,000
Stage 2 - Prototype
100,000
Stage 3 - Sourcing & distribution
750,000
150,000
500,000
Stage 4 - Commercialization
6,949,284
Total cash requirements year 1
Shortfall funding year 2
Total cash requirements year 2
Shortfall funding year 3
Total cash requirements year 3
-
Basic research & feasibility studies
Prototype development
License fees
Contracts, patents, incorporation
Regulatory clearance & trials
8,499,284
6,720,415
6,720,415
1,447,523
1,447,523
Business model assessment
Favorable
 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
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There are 10,683 GP practices in England
 Expected
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to decline slightly in future
Declining number of patients per GP
 A decrease
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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
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Ability to execute on the CSFs
 R&D
 Sales
and distribution
 Partnerships
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Connectedness up, down and across
 Limited
connections with R&D institutions
Summary and conclusions
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Feasible
Macro market
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 Growth
and large
infected population
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 Barriers
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Micro industry
 Viable
but may not be
sustainable
Infeasible
Micro market
to adoption
Macro industry
 Structure
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Team
 Inability
CSF
to execute on
Overall: Infeasible
Alternatives

Develop device for acute infectious
conditions
 Meningitis
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Other target segments
 Hospital
emergency rooms and ICUs
Other geographic markets
 License the technology
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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?