Mammoptics E245 Final Presentation

MammOptics Final project presentation for E 245 Winter 2011

MammOptics The Team

Pedro Hernandez Emma Medjuck

Josef Miler Ramin Miri

BS Chemical Eng., Stanford U. MS Chemical Eng. (candidate) Mayfield Fellow 2010

BS Mechanical Eng, MIT MS Mechanical Eng., Stanford U. PhD Mechanical Eng. (candidate)

BComm Business/Math, McGill U. MS MS&E (candidate)

BS Electrical Eng., Sharif U. MS Electrical Eng., Stanford U. MS MS&E, Stanford U. PhD, Electrical Eng. (candidate)

Brings experience of internship at Pacific Biosciences. Numerous courses in entrepreneurship.

Technical consulting for start-ups. Expert witness in medtech IP case. Background in IP.

PhD research in optical spectroscopy signal processing. Numerous courses in entrepreneurship.

Previous experience with customer discovery and customer activities.

Project overview Initial hypotheses

Canvas #1: Finding the right customer Testing value proposition Purchasing decision tree

Canvas #2: Getting to the customer Medical marketing Medical sales

Canvas #3: Building the company Clinical trials Reimbursement Financing the company Company timeline

Reflection on the company Reflection on the medtech industry Key industry requirements Lessons learned

Appendix Financial calculations Business model canvas weeks 1-10

Project Overview Initial industry guesses and customer hypothesis

MammOptics Initial Idea

Breast cancer Leading cause of cancer in women 190,000 diagnosis every year US 41,000 deaths every year US Increasing diagnosis rates

Mammography

15%-25% false negatives rate 25% false positives rate Requires X-ray radiation Low resolution

Novel technology based on RF-modulated optical spectroscopy

MammOptics

-  Earlier detection -  Non-radiative -  Non-invasive

MammOptics Technology Comparison

Risk Invasiveness Resolution False Pos.

False Neg.

Device Cost Time

Required

MammOptics Very Low Very Low <.1 cm <15% 5% 15-20k 10 min.

Mammography High High .6 cm 25% 30% 20-50k 20 min.

MRI Medium Medium .1 cm 70% 5% 1000k 45 min.

Ultra-Sound Very Low Very Low >.6 cm >30% >40% 5-15k 20 min.

I.I.T.Y.I.W.H.T.K.Y

MammOptics Business Model Canvas 1 of 4

Radiation-free Earlier detection Non-invasive

Pioneering radiologists in hospitals

Direct sales to hospitals

Strong clinical data Training Maintenance

Product Development Clinical trials Operating Costs Capital equipment sales

and disposable item

Product Development IP Clinical trials FDA

IP Leading doctors Technical Expertise

Hospitals Leading doctors 3rd party manufacturers Distributors


Radiation-free Earlier detection Non-invasive

Pioneering radiologists in hospitals

Direct sales to hospitals


Product Development Clinical trials Operating Costs Capital equipment sales

and disposable item





Test: Customer segment

Value proposition

Finding the right customer From radiologists to gynecologists

MammOptics Excursions into hospitals

Leading doctors

Patients

Hospital Managers

Technicians

Debra Ikeda Jason Davies

Jafi Alissa Lipson Sunita Pal

6 women >40 8 women <40

Alicia X-ray mammography

Paul Billings Holly V. Gautier

MammOptics Hospital purchasing decision tree

MammOptics Hospital purchasing decision tree

Hospitals Complex purchasing decision tree.

Several saboteours

MammOptics Private practice purchasing decision tree

MammOptics Private practice purchasing decision tree

Private practice

Faster adoption rate

Attractive value proposition ✔

Pioneering Doctors Hospitals OB/GYNs PCPs

Direct Sales to doctors


Product Development Clinical trials Operating Costs

Capital Equipment Sales and disposable item



Hospitals (Capital Spending Committee) Leading doctors 3rd party manufacturers Distributors Research Hospitals

Doctors: Earlier detection Price Accuracy

Patients: Radiation Free Non-Invasive



Direct Sales to doctors










How do we get to our customer?

Need sensitivity and specificity

Getting to our customer The world of direct sales and medical marketing

MammOptics Interviews

Breast Cancer Advocacy Groups

OB/GYNs

FDA/Clinical Trials

Medical Sales

Be Bright Pink Jennifer Glover

Dr. Cindy Woo Dr. Jags Powers

Dr. Aaron Shuvkan

Katrina Bell Tanay Dudhela

Jed Hwang

Phyllis Whitely Carl Simpson

Market Adoption

Key Opinion Leaders (KOLs)

Medical Journals

Continuing Medical Education

Conferences


American College of Obstetricians

and Gynecologists (ACOG)

MammOptics Marketing

Market Adoption


Medical Journals


Conferences





Access to ACOG by former member

Strong influence on doctors via ACOG Standard of Care

Strongly influenced by KOLs


Market Adoption


Medical Journals


Conferences





Researchers conducting important

clinical trials

Researchers with numerous

publications

Outsourced survey research

Researchers with strong peer

recommendations


Market Adoption


Medical Journals


Conferences





Focus on prominent journals Need two big

publications

Choose KOL as Principal Investigators (PI)


Market Adoption


Medical Journals


Conferences





Effective method for educating doctors

Doctors required to attend workshops

Workshop must be approved by ACOG

Taught by objective medical experts


Market Adoption


Medical Journals


Conferences





ACOG Annual Clinical Meeting

Miami Breast Cancer Conference

Opportunity for feedback from

doctors


Market Adoption


Medical Journals


Conferences




Trusted information source for patients

Critical opinion leader for technology adoption

Access to media outlets


Individual Doctors

Purchasing Administrators

High value medical products

(e.g. cardiovascular stents)

Commodity medical products

(e.g. latex gloves)

•  Doctor education •  Direct feedback from doctors •  Very expensive

•  No doctor education •  No customer feedback •  Inexpensive

Direct Sales

Distributors

MammOptics Channel Strategies and Costs

Individual Doctors

Purchasing Administrators

Channel Strategies and Costs MammOptics

5 dedicated sales people $150,000 each/year

Hire nurses or technicians with established relationships

Early adopter feedback

Continue with core group of sales people

Use women’s healthcare equipment distributor

Already established network of customers

Sales strategy 1 Sales strategy 2

MammOptics Pricing Strategy

Equipment Lease model Per-use model Consumable

Cost of the device

Service per year

Per-use fee

Consumable

$50,000

$3,000

0

0

$5,000

$10,000

0

0

$5,000

0

$50

0

$25,000

0

0

$20

MammOptics Pricing Strategy

Equipment Lease model Per-use model Consumable

Cost of the device

Service per year

Per-use fee

Consumable

$50,000

$3,000

0

0

$5,000

$10,000

0

0

$5,000

0

$50

0

$25,000

0

0

$20

Approved by customers

and investors

ACOG ACS

Doctor specialty committee

Hospital Administration

Technician

Radiologist Mammography

MammOptics Customer Workflow

Current market Insurance

ACOG ACS



Technician



Current market

But what would happen if we replace mammography?

Insurance

ACOG ACS



Technician



Breast Radiologists Technicians Hospitals

Loss of jobs Loss of jobs Eliminates loss leader

Puts emphasis on biopsies

Insurance

ACOG ACS



Technician



Insurance

ACOG ACS



Technician



Insurance Same cost as mammography ($140) Reduced number of biopsies ($1000)

ACOG/ACS Improved healthcare

(mammography weak technique)

Insurance

ACOG ACS



Technician

Insurance



Insurance



Technician



ACOG ACS

MammOptics

Patient PCP OB/GYN

Insurance



Technician



ACOG ACS

MammOptics

Patient PCP OB/GYN


Technician


MammOptics

Patient PCP OB/GYN PCP OB/GYNs

Increased revenue More complete patient care

Patient Improved healthcare

Comfort

MammOptics Revenue

ACOG ACS



Technician

Insurance



MammOptics

Patient PCP OB/GYN

OB/GYNs PCPs

Direct Sales to hospitals Distributor

Strong clinical data Training Maintenance Conferences CME courses

Product Development Clinical trials Operating Costs Marketing Costs

Capital Equipment Sales and disposable item Per use fees

Product Development IP Clinical trials FDA Publishing


Leading doctors Key Opinion Leaders 3rd party manufacturers Distributors Breast Cancer Foundations ACOG ACS




OB/GYNs PCPs





Product Development IP Clinical trials FDA ReimbursementPublishing






Learned how to reach the customer

How do we build a company based on this?

Building the company The backstage of a medical device company

MammOptics Interviews

FDA Clinical Trials

Manufacturing

Venture Capitalists

Reimbursement

Stanford Statistics Steve Axelrod

Marga Ortigas-Wedekind

Nick Mourlas Don Archambault

Shannon Bergstedt Ali Habib

Dana Mead Bill Starling

Doctors/Sales Dr. Aron Shuftan Jed Hwang

Michael J. Nohr

Manufacturing

MammOptics Partners

Choose manufacturing facility close to

home

Manufacturing Partner

75% gross margin

9 Inches

~5 lbs

DSP

RFIC

Photo probe

Disposable head

Discounts for Revenue Model COGS

$4-5k per unit

MammOptics

I.I.T.Y.I.W.H.T.K.Y

Part IP Development Manufacturing COGS

1 Digital Processing Unit / Algorithms MammOptics In-House Off the Shelf $200

2 Customized RF Integrated Circuitry MammOptics In-House Out-Sourced $500

3 Probe Bank (Lasers and Photo-Detectors) Licensed - Off the Shelf $1500

4 Disposable Skin Contact Pad MammOptics In-House Out-Sourced $2

5 Packaging MammOptics Out-Sourced Out-Sourced $2000

Technology MammOptics

I.I.T.Y.I.W.H.T.K.Y

Manufacturing Reimbursement

MammOptics Partners

Difficult to get coverage for new

product.

Manufacturing

MammOptics Partners

Reimbursement Partners MammOptics

Insurances

CPT Codes $75-$150

MammOptics Partners

Manufacturing

FDA Clinical Trials

Reimbursement

510K vs. PMA Largest cost

Biggest financial risk

Clinical Trials

12/4/2009

Stage 1 Pilot trials

50 patients $600K

MammOptics

6 months

Feasibility Comparison with mammography

Clinical Trials

12/4/2009

MammOptics

6 months 15 months


Stage 2 Interim trials

500 patients $7.2M

Prove superior safety-efficacy &

sensitivity

Clinical Trials

12/4/2009

MammOptics

6 months 15 months



24 months

Stage 3 FDA pivotal

trials 1500 patients

$20.5M

FDA class II, 510(K) w/ trials

Focus on superiority & economic end-

points

Clinical Trials

12/4/2009

MammOptics

6 months 15 months



Stage 3 FDA pivotal

trials

Stage 4 Post-market

studies 2000 patients

$26.8M

Specific Cat III CPT/ACP Codes

Market traction

24 months 24 months

Clinical Trials

12/4/2009

MammOptics

6 months 15 months



Stage 3 FDA pivotal

trials $600K

$7.2M

$20.5M

$26.8M

Stage 4 Post-market

studies

24 months 24 months

Clinical Trials

12/4/2009

MammOptics

MammOptics Partners

MammOptics Partners

Manufacturing

FDA Clinical Trials

Reimbursement

Financial timeline

Funding

$10M

$15M

2012

Series A $3.5 MM

Cash

Res

erve

Cl

inic

al

Mile

ston

es

$5M

Initialize

Des

ign

Mile

ston

es

Regu

lato

ry/ I

P M

ilest

ones

Q1 Q2 Q3 Q4

2013 Q1 Q2 Q3 Q4

2014 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2015 2016

Series B $9 MM

2017 Q1 Q2 Q1 Q2 Q3 Q4

2018 Q3

Launch

Series C $30.5 MM

$30M

$20M

Regulatory / Clinical

Series D $35 MM

M&A / IPO $50 MM $40M

56 12/4/2009

Proof of Concept

Pilot Studies

IC and Processing

Patents

Marketable Product

Provisional Patent

Beta-Version Testing

Application and System

Patents

IRB / IDE

Clinical Results

Second Release

Initial Product Launch

Specific Codes (Cat. I CPT / APC)

Non-Specific Codes

1st Release

Test

2nd Release Test

Publication

Post-Market Clinical Studies

Beta Prototype

US Interim Trials

FDA – Class II – 510 (k) with Clinical Trials

Publication

Financial / Operations Timeline

Cat III CPT

US Pivotal Clinical Trials

Laboratory Prototype

Technology Licensing

MammOptics MammOptics

Financial timeline

$10M

$15M

2012

Cash

Res

erve

Cl

inic

al

Mile

ston

es

$5M

Initialize

Des

ign

Mile

ston

es

Regu

lato

ry/ I

P M

ilest

ones

Q1 Q2 Q3 Q4

2013 Q1 Q2 Q3 Q4

2014 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2015 2016 2017 Q1 Q2 Q1 Q2 Q3 Q4

2018 Q3

$30M

$20M

$40M

57 12/4/2009

Proof of Concept

Provisional Patent




$10M

$15M

2012

Series A $3.5 MM

Cash

Res

erve

Cl

inic

al

Mile

ston

es

$5M

Initialize

Des

ign

Mile

ston

es

Regu

lato

ry/ I

P M

ilest

ones

Q1 Q2 Q3 Q4

2013 Q1 Q2 Q3 Q4

2014 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2015 2016 2017 Q1 Q2 Q1 Q2 Q3 Q4

2018 Q3

$30M

$20M

$40M

58 12/4/2009

Proof of Concept

Provisional Patent



Beta Prototype



Pilot Studies


$10M

$15M

2012

Series A $3.5 MM

Cash

Res

erve

Cl

inic

al

Mile

ston

es

$5M

Des

ign

Mile

ston

es

Regu

lato

ry/ I

P M

ilest

ones

Q1 Q2 Q3 Q4

2013 Q1 Q2 Q3 Q4

2014 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2015 2016

Series B $9 MM

2017 Q1 Q2 Q1 Q2 Q3 Q4

2018 Q3

$30M

$20M

$40M

59 12/4/2009

IC and Processing

Patents

Marketable Product



Patents

IRB / IDE

Beta Prototype


Pilot Studies




$10M

$15M

2012

Cash

Res

erve

Cl

inic

al

Mile

ston

es

$5M

Des

ign

Mile

ston

es

Regu

lato

ry/ I

P M

ilest

ones

Q1 Q2 Q3 Q4

2013 Q1 Q2 Q3 Q4

2014 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2015 2016

Series B $9 MM

2017 Q1 Q2 Q1 Q2 Q3 Q4

2018 Q3

Series C $30.5 MM

$30M

$20M


$40M

60

IC and Processing

Patents


Patents

IRB / IDE

Cat III CPT

Second Release

1st Release

Test

US Interim Trials US Pivotal Clinical Trials

Publication


Pilot Studies


$10M

$15M

2012

Cash

Res

erve

Cl

inic

al

Mile

ston

es

$5M

Des

ign

Mile

ston

es

Regu

lato

ry/ I

P M

ilest

ones

Q1 Q2 Q3 Q4

2013 Q1 Q2 Q3 Q4

2014 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2015 2016 2017 Q1 Q2 Q1 Q2 Q3 Q4

2018 Q3

Launch

Series C $30.5 MM

$30M

$20M


Series D $35 MM

$40M

61 12/4/2009

Clinical Results

Second Release


Non-Specific Codes

2nd Release Test

Publication

US Interim Trials


Publication




$10M

$15M

2012

Cash

Res

erve

Cl

inic

al

Mile

ston

es

$5M

Des

ign

Mile

ston

es

Regu

lato

ry/ I

P M

ilest

ones

Q1 Q2 Q3 Q4

2013 Q1 Q2 Q3 Q4

2014 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2015 2016 2017 Q1 Q2 Q1 Q2 Q3 Q4

2018 Q3

Launch

$30M

$20M


Series D $35 MM

M&A / IPO $50 MM $40M

12/4/2009

Clinical Results



Non-Specific Codes

Publication



Financial / Operations Timeline MammOptics MammOptics

$10M

$15M

2012

Series A $3.5 MM

Cash

Res

erve

Cl

inic

al

Mile

ston

es

$5M

Initialize

Des

ign

Mile

ston

es

Regu

lato

ry/ I

P M

ilest

ones

Q1 Q2 Q3 Q4

2013 Q1 Q2 Q3 Q4

2014 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2015 2016

Series B $9 MM

2017 Q1 Q2 Q1 Q2 Q3 Q4

2018 Q3

Launch

Series C $30.5 MM

$30M

$20M


Series D $35 MM

M&A / IPO $50 MM $40M

63 12/4/2009

Proof of Concept

Pilot Studies

IC and Processing

Patents

Marketable Product

Provisional Patent



Patents

IRB / IDE

Clinical Results

Second Release



Non-Specific Codes

1st Release

Test

2nd Release Test

Publication


Beta Prototype

US Interim Trials


Publication


Cat III CPT






OB/GYNs PCPs

Direct Sales to hospitals Distributor Online



Per use fees

Product Development IP Clinical trials FDA Reimbursement Publishing


KOLs 3rd party manufacturers Distributors Breast Cancer Foundations ACOG ACS Clinical trial designer

Doctors: Earlier detection Price Accuracy Immediate Results



Earlier detection Non invasive Price Accuracy Immediate Results

OB/GYNs PCPs

Direct Sales to hospitals Distributor Online



Per use fees



KOLs 3rd party manufacturers Breast Cancer Foundations ACOG ACS Clinical trial designer

Final iteration of our business model

But… need to think about the big picture…

Reflection on the Company Lessons learned from the medical device industry

MammOptics Fundamental Challenges of a Medtech Startup

FDA approval

Medical technology

Reimbursement

Intellectual Property

MammOptics Fundamental Challenges of a Medtech Startup

FDA approval

Reimbursement Capital intensive

Long time to market

Dependence on KOLs

Profitability networks

Medical technology


Gives freedom to operate

Creates entry barrier for competitors


Thank you… Business Model Recap

Near 50 interviews Around 50 hrs/week

Special thanks to our mentors

Rowan Chapman Steve Turner

Jason Davies

Radiation-free Earlier detection Non invasive

Pioneering Doctors Hospitals

Direct Sales to hospitals







MammOptics Business Model Canvas 1

Radiation-free Earlier detection Non invasive








Hospitals Leading doctors 3rd party manufacturers Distributors Research Hospitals









Hospitals (Capital Spending Committee) Leading doctors 3rd party manufacturers Distributors Research Hospitals Breast Cancer Foundations




OB/GYNs PCPs





Product Development IP Clinical trials FDA ReimbursementPublishing






OB/GYNs PCPs







KOLs 3rd party manufacturers Distributors Breast Cancer Foundations ACOG ACS




OB/GYNs PCPs




Per use fees



KOLs 3rd party manufacturers Distributors Breast Cancer Foundations ACOG ACS Clinical trial designer




OB/GYNs PCPs




Per use fees



KOLs 3rd party manufacturers (local) Breast Cancer Foundations ACOG ACS Clinical trial designer




MammOptics Operations Stack

Head Count 11 20 30 36 50 59 66

• Gain support of private insurance • Greater market trac@on

CPT Code Finalized

•  Similar demographic, procedure count Market adop@on rate modeled aKer Cytyc’s

ThinPrep

• Begin at 2,500/device • 4,000/device average mammograms

Steady growth of procedure count

• ThinPrep 78% gross margin • Typical in medtech industries

Priced for 75% gross margin

MammOptics Financial Assumptions

$0

$50,000,000

$100,000,000

$150,000,000

$200,000,000

$250,000,000

Forecasted Revenue Forecasted COGS Proxy (Cytyc) Revenue AKer Support from Insurance

2018 2019 2020

800,000 procedures

3,300,000 procedures

7,300,000 procedures

800 devices

1,900 devices

4,000 devices

75% of revenue comes from per-use model revenue

MammOptics Post-Launch Revenue Projection

MammOp@cs Steady State

Cytyc, Year 2000 Steady State

Revenue $75.6M $142.1M

Cost of Revenue

$18.9M $24.6M

Gross Margin 75% 83% Engineering $5.3M (13%) $14.2M (10%) Sales and Marke7ng

$26.5M (35%) $55.2M (39%)

G & A $3.0M (7%) $13.9M (10%) Net Margin 19% 24%

MammOptics Proxy Margins Comparison

Mammoptics E245 Final Presentation

Education

Transcript of Mammoptics E245 Final Presentation