SWINT splint Columbia 2015

0

Cohort 1 Team 3

Gaby Sanguineti, Stephanie Schreiber,

Mia Shandell & Eddie Vogel

Total Number of Interviews to Date: 38

Interviews Conducted, Day 4: 8

SWiNTsplintImproving the bone healing process in spine fractures

11

Business Canvas – Day 4

Partners

• Labs specializing in

nanomaterials

engineering

• Incubators

• Orthopedic research

specialists

• Contract research

organizations (CROs)

Activities

• Design the product

• Design clinical trials

• FDA approval

- “Combination

Product”

- Primary mode of

action: biologic

BLA ($2mil)

- 4-8 years

• Manufacture product

• Sales/Marketing

• Distribution to

hospitals

• Educate physicians

• Build relationships

with investors,

potential acquirers

Value Proposition

• Improved healing for

spinal fractures due to

an implant that

promotes bone

growth, resulting in:

• Orthopedic

Surgeons: Improved

outcomes, ease of

use, reduce feelings

of “what did I do

wrong”, reduced cost,

confidence in patient

conversations that

treatment / healing will

go according to plan;

• Facilities: Reduced

overall cost of care,

improved quality,

filling surgeon

request, being the ‘go-

to’ hospital, being an

innovator in a

specialty area

• Patients: Faster

healing, reduced

incidence of

subsequent nonunion

Customer Relationships

Get:

• Scientific advisory board

• Conferences, magazines,

hospital product fairs

• Sales reps

• Develop relationships with

key opinion/thought

leaders– co-develop, early

adoption

• Target CMEs (continuing

medical education

programs)

Keep:

• Ongoing education

Grow:

• Expand product

indications

Customer Segments

Multi-sided market:

• Orthopedic

Surgeons: key

opinion and thought

leaders

• Facilities: hospital

sourcing divisions

• Patients with spinal

fractures –

Supplement to an

initial fracture

treatment plan

(surgery)

- Initial focus on

spinal surgery

(common

patients: males

who work as

physical

laborers, 40-60).

• [Investors]

• [Acquirers]

Resources

• Patents / Licensing

agreements

• IP lawyer

• Orthopedic surgeons

• Scientists

• Manufacturers

• Marketing / Sales

• Materials

• Lab space

• Manufacturing space

Channels

• Inpatient facilities

• Outpatient facilities

• Ambulatory surgical

centers

• Skilled nursing facilities

(SNF)

• Inpatient rehab facility

(IRF)

Costs

• Patents

• Clinical trials (!!)

• Research and development: lab space, labor, equipment

• Production costs: manufacturing space/equipment, labor

• Materials (i.e. nanotubes, molecular biology tools)

• Marketing / sales force

• Physician education

Revenue Streams

• Hospital payments

• Group Purchasing Organizations (GPOs) – drug wholesalers

22

Learnings and Next Steps

What We Thought What We Did What We Learned What Next

Price is the primary driver of

hospital administrator

decision-making

Talked to hospital

administrators and

surgeons

Administrators will approve more

expensive products:

• Surgeon tends to be primary driver of

decision

• Want to be the ‘place patients want to

go’

• Particularly in areas where hospital is

‘known for’, want to be on cutting edge

Identify examples of

more expensive

products that were

approved

Hospitals and surgeons

make decisions about which

products to purchase

Talked to hospital

administrators and

surgeons

Decisions are made via a steering

committee that includes representation

from many hospital functions (finance,

reimbursement, clinical, sourcing)

Talk to more

administrators

SWiNTsplint would distribute

its product through a

wholesaler

Talked to hospital

administrators and

drug distribution

experts

Since the product is new/ innovative with

fairly small volumes in the early years, we

would manage our own distribution

Talk to product

managers at med

device companies about

distribution decision-

making

Drugs are ordered in bulk by

hospitals from drug

manufacturers

Talked to hospital

administrators about

drug pricing

decisions and

negotiation

For new/ innovative products,

administrators will often negotiate

arrangements such as ‘on demand’

ordering and trial periods (e.g. try it in 5

patients, analyze financial and clinical

outcomes, then decide on larger order)

Ask other biotech

startups what deals

they’ve created with

hospitals

Surgeons learn about new

drugs from literature and

conferences / trade shows

Talked to surgeons

and administrators

Trade shows / conferences are key for

getting surgeons excited about new

products

Discuss marketing

tactics with biotech

companies; identify key

spinal trade shows

33

Revenue Stream: Value-Based PricingSWiNTsplint will be sold on a per-unit price – we learned from surgeons and reimbursement experts that it can save ~7k on average per treated patient

Cost of Care: Bone Fuses Cost of Care: Bone Does Not Fuse

$150 Pre-op consultation with surgeon

$27,000 Spinal fusion surgery

$27,150 Total episode

$150 Pre-op consultation with surgeon

$27,000 Spinal fusion surgery

$1,450 6-month CT scan

$120 6-month follow-up

$1,450 1-year CT scan

$120 1-year follow-up

$30,000 Second spinal fusion surgery

$60,290 Total episode

Higher-risk, receive SWiNTsplint during surgery

SWiNTsplint saves:

$33,130 in patients with bone non-fusion

$7,245 per patient across treated population

Spinal Fracture Population Receiving Surgery

Sources: Primary interviews, ModernHealthcare, New Choice Health. Assumes SWiNTsplint is implanted into 40% of the highest risk spinal

fusion patients and prevents second surgery in 75% of patients that would have suffered a nonunion (10% of surgical population).

44

Cost Analysis vs. Competitor Price (Benchmarking)Our primary product cost will be materials as SWNTs are expensive—but our cost is still well within the range of our closest competitor’s price

Average Cost/Unit: $3000

Materials: $2000

• SWNT - $1200

• Gel - $750

• Growth Factors - $15

Labor: $800 (5 day process)

• One Lab Tech

• Salary: 18/hour (8 hour/day) - 720

• Benefits: 80

Facilities (Epibone incubator rate) - $200

• Rent: $1000/month - 8 hours/day open –

5 day production - $165

• Utilities (5 day period) - $35

SWiNTsplint Medtronic INFUSE

Average Price/Unit: $5500

55

Channel: Direct Distribution to Hospitals

Spinal Fracture

Patient

Orthopedic

Surgeons

Biotech / Life

Sciences

Company

Key Insights:

• Given the type of product

and expected volumes, we

would likely manage our

own distribution selling

directly to hospitals

• Once hospital decides to

purchase SWiNTsplint, we

would negotiate on price

– Discounts are typically

given on price

• Since the product is new /

innovative, we may

negotiate “trial” sales and

on-demand distribution

• Product will be reimbursed

as a “medical benefit” and

not distributed through a

specialty pharmacy

Health Insurance

Companies

Hospital

Administrators

$Copay

Insurance

coverage

$Reimbursement

for product

Treatment

Product

recommendation

ProductProduct price

(net)$

Mark

eting

Out of pocket expenses

$

66

Channel: Hospital Decision-Making Process

Spinal

Fracture

Patient

Orthopedic

Surgeons

Biotech / Life

Sciences

Company

Health

Insurance

Companies

Hospital

Administrator

s

Surgeon develops

interest in product

Surgeon

discusses with

Chief of Specialty

Surgeon submits

request to

hospital

administrators

Hospital

Steering

Committee

convenes

Negotiations

and

procurement

• Surgeon is introduced

to product

– Frequently at trade

shows

– Spinal in

November

• Reviews literature /

studies

• Decides he or she is

interested in trying

out the product

• Surgeon discussed

product with Chief of

his or her specialty

• Receives sign-off

from Chief to move

forward in

procurement process

• Surgeon submits a

standard form to

hospital sourcing

• Hospital sourcing

prepares for Steering

Committee:

– Reviews literature

on product

– Competitive

assessment: cost

and efficacy of

other products in

the market

– Checks

reimbursement

– Discuss with

finance team

• Steering Committee

typicaly comprised of

all service lines and

various functions

within the hospital

– Clinical

– Finance

– Reimbursement

– Sourcing

• Meets ~1x/ month

• Debates adding the

product “to the shelf”

• For newer products,

decision process is

typically 2-3 months

• Sourcing negotiates

price with drug

company

• For new/innovative

products, may not

submit a full purchase

order upfront

– May say, let‘s try it

in 5 patients,

review results and

then decide on

larger order

– May also order on

demand when

patients are

scheduled for

surgery

77

“Get”

Strategy

88

Advertise at orthopedic conferences

(AAOS, ORS)

Advertise in orthopedic journals

(JBMR, Spine)

Present at biotech

product fairs

Choose KOLs as principal

investigators in journals

99

Identify respected scientists

to advise on product

Help spread word of

progress and potential

Build reputation

amongst

scientific/medical

community

1010

Advertise amongst

established KOLs

Target medical residents

through seminars and

educational visits

1111

Effective method for

educating doctors

Taught by objective

medical experts

Surgeons are required

to attend workshops

Appendix

1313

Customer Segments

• ~28k US orthopedic surgeons

• Older generations tend to be

less willing to try newer products

than younger (on average)

– Even if reimbursement,

regulatory approval in place

• Always think “what did I do

wrong” if surgery doesn’t go well

– Highly motivated by success

– Difficult conversation to have

with patient if surgery or post-

op doesn’t follow the plan

• Product that improves likelihood

of success makes physicians

more confident in pre-op, in

operating room and in post-op

• 5,723 hospitals in the US

• Sourcing / procurement

departments make decisions on

which medical products to make

available

– Heavy input from doctors

• Hospitals are a low- and

declining-margin business

– Administrators motivated to

keep costs down

– Paid a single fee for each

hospital admission based on

procedure – incentivized to

keep length of stay down

• More than ~700k patients per

year suffer a spinal fracture

• Risk of bone not fusing – and

need for a 2nd surgery – is high

– Higher if patient has

comorbidities, smokes, more

elderly, physical labor

• Healing process is very lengthy

and painful

– 3-7 days in hospital

– Can be 6 months before

physical activity allowed

• Cost of each surgery is ~$27k

– Patients may have a high

deductible ($6k-$8k)

Orthopedic Surgeons Spinal Fracture PatientsHospital Administrators

Sources: Primary interviews, American Academy of Orthopedic Surgeons, Department of Orthopedics and Rehabilitation at Yale, ModernHealthcare

1414

Value Proposition

• Improved likelihood of

success in spinal fracture

surgery

– Reduce feelings of “failure”

(even if not surgeon fault)

– Easier to interact with

patients when operating

and treatment is going

according to plan

• Increased confidence in

interactions with patient

– Since healing takes 3+

months, feel more confident

reassuring patient in month

3 even if not fully healed if

have faith in product

• Reduced overall cost of care

– Particularly for hospitals in

value-based contracts

– Avoid second surgery

• Higher quality ratings

• Reduced healing time – back

to work / on feet sooner

• Reduce pain from nonunion

fracture

• Avoid second surgery to

repair a fracture

Orthopedic Surgeons Spinal Fracture PatientsHospital Administrators

1515

Clinical Trial Process

Source: Pharmaceutical Research and Manufacturers of America, FDAReview.org, Parexel Statistical Sourcebook

Preclinical Clinical Approval Market

Phase I Phase II Phase III

Description • Evaluation of

implant’s toxic

and

pharmacologic

effects through

laboratory animal

testing (rabbit)

• Shows that the

implant is

biologically

active and is

reasonably safe

for human

testing

• Initial

introduction

of new drug

into humans

• Tests safety

• 20-100

volunteers in

clinical trials

• Unethical,

have to do

spinal

surgery

• Studies the

effect of the

implant in

patients with

spinal

fractures

• Tests safety,

dosing,

efficacy

• 50-100

injured

patients in

trials

• Can’t do

placebo!

• 2 clinical

trials to prove

the implant is

safe and

effective in

the target

population

• Also tests

side effects

• 1,000-5,000

injured

patients in

trials

• Can’t do

placebo!

• Review of ALL

pre-clinical and

clinical data,

approval by

FDA

• Known as

Phase IV

• Post-market

surveillance

Cost Varies based on

amount of R&D

~$15 million ~$25 million ~$90 million Varies by

market

Varies by

duration

Time 3 to 5 years 0.6 to 2 years 11 to 14 years4 to 8 years

Submit BLA, Pre-

IND meet with FDA

End of Phase II

meet with FDA; if

positive, move to

Phase III

1616

Clinical Trial Design (Phase II – Safety/Efficacy)

Estimated

Enrollment

Spinal fusion rate of targeted vertebral bodies (L5-S1), evaluated by CT scan [Time Frame: during 12-15mo. after

surgery]

Rate of (serious) adverse events with a potential relation with SWiNTsplint [Time Frame: 24-27mo. after surgery]

Inclusion /

Exclusion

Primary

End-Points

Study Type Interventional, single group assignment model, randomized, double-blind (subject, outcomes assessor)

Secondary

End-Points

Reduced incidence of 2nd surgery due to non-union, evaluated by CT [Time Frame: during 12-15mo. after

surgery]

Reduced incidence of re-hospitalization [Time Frame: During the first year (12-15mo.) after surgery]

Reduced pain, evaluated by visual analogue pain scale [Time Frame: During two years (24-27mo.) after

surgery]

Spinal fusion rate after two years [Time Frame: Two years (24-27mo.) after surgery]

100 patients

Endpoint

ClassificationSafety/Efficacy study

Primary

PurposeTreatment

Conditions –

active

comparator,

experimental

Patients who require

surgical graft for L5-S1

spinal fractures

SWiNTsplintIlial crest

autograft

Randomization Autograft/SWiNTsplint both implanted in one patient, randomized side of injury

Product Company Status

INFUSE Bone Graft Medtronic - Reached $900 million in sales in 2011

- 2011 review of product revealed many unlisted side

effects (including high risk of cancer, sterility, nerve

damage, etc.)

- Hundreds of lawsuits filed

BIO Osiris

Therapeutics, Inc.

- Acquired by NuVasive, Inc. for $35 million in 2008

- Strategically partnered with Stryker Corporation in 2014

- Evidence presented that this is no more effective than

other current allograph products

Spinal-Stim Orthofix - 2008 earnings: $170 million

- Lawsuits filed for misleading providers of device effects

- Effectiveness remains inconclusive from review studies

- Half of fracture patients make use of product

ProxiesSimilar attempts at solving the bone fracture fusion problem

Medtronic INFUSE Orthofix Spinal-Stim

1818

Market Size

Market Description

Total Available

Market

Bone Graft Substitute Market

(Biomaterials)

Total Served

Market

Bone Graft Substitute Market

for Spinal Fusions

(Biomaterials)

Target Market Bone Graft Substitute Market

for Nonunion Spinal Fusions

(Biomaterials)1

Source: Millenium Research Group, 2014. 1. Estimate of 10% based on orthopedic surgeon interviews.

Total Available

$1.6 B

Total Served

$1.12 B

Target

$112M

With our changed goal – augmenting

existing surgical technique and not just

treating non-union, our market expands a

to graft substitutes for spinal fusions

1919

Type of BusinessIntellectual Property - Niche Market

Intellectual Property

Copyrights

Patents

Trademarks

Designs

Trade Secrets

Utility Patent Timeline

Provisional

0 months

Cost: ~$10k

Full

12 months

Cost: ~$25k

National Stage

30 months

Cost: ~$40k

Total Time

30 Months

Total Expense

$100-150k

2020

Proposed Experiments

Key hypotheses Proposed experiment Pass/Fail

In making product purchase

decisions, hospital administrators

balance several factors including cost,

outcomes and surgeon satisfaction

Interview hospital sourcing divisions

to understand better decision-making

process

Pass: Hospital administrators identify

factors beyond direct cost of material

as being important

Fail: Direct cost of materials is only

factor

There is a subset of orthopedic

surgeons willing to try “cutting edge”

technologies and be a champion for

our product in the market

Interview orthopedic surgeons to

identify surgeons on the “cutting

edge” of research

Pass: We are able to identify 3-5 key

opinion leader surgeons in the

orthopedic market

Fail: We are not able to identify

10% of spinal fracture patients

experience a non-union post-

procedure

Interview orthopedic surgeons

specializing in spinal injuries

Pass: 10% or more patients

experience non-unions

Fail: <10% experience non-unions

Product will be classified as a

Combination Product (BLA) by the

FDA

Interview people that have worked in

the FDA

Pass: Our product is classified as a

Combination Product (BLA)

Fail: Product classification is different.

The DRG fee for spinal procedures

(and our potential share) is large

enough to justify R&D and operating

costs

Talk to insurance companies about

bone fracture DRG rates and

research pricing for bone fracture

episodes

Pass: DRG fee is large enough to

cover the cost of the material

Fail: DRG doesn’t completely cover all

the costs and patient might have to

pay out of pocket.

The primary patient demographic for

our product is middle-aged males

Interview orthopedic surgeons Pass: Primary patients are middle-

aged men

Fail: Primary patients are NOT

middle-aged males.