While developing our therapeutic, we always had the patient and their needs in mind. There would be no point in developing our project if there is no value proposition that our therapeutic could provide.
We had developed the theory behind our project in June 2018, however after the UK iGEM meetup at which we spoke to Ben Reeves - an ex-iGEMer, who co-founded Customem along with multiple members of the Imperial 2014 team, we thought that there may be some potential in looking to take the therapeutic to market in the future.
In the beginning, we were strongly convinced that getting a patent would be the first step. However what we realised after speaking to experts is that it is, in fact, beneficial to look for one post-iGEM rather than before, and to take the openness of the competition and conference as a blessing rather than a hindrance where everything gets put in the public domain.
Instead we chose to focus on the needs of our potential customers (which involves more parties than patients) and come up with a good value proposition, find out more about the different avenues of taking a medicine to market, and plan out the business model canvas (which will change with time post-project).
This section of the wiki does overlap with Product Design which is key in the Value Proposition Design, as well as with Human Practices which is key to understanding the law regarding taking medicines to market, therefore there may be links to certain parts of those pages. We hope that this section would not only show our plans and considerations, but could also act as a manual for future iGEM teams considering entrepreneurship.
We first planned to apply for a patent, therefore we spoke to Oxford University Innovation, who are our technology transfer office. We filled in the invention disclosure form and after a number of meetings were informed that we need more data. We were told that it is likely that anything we develop in the future would be far refined from what we were able to present then, therefore our patent would not be compromised by presenting our whole project.
OUI also recommended that for the entrepreneurship plan, we should follow the business model canvas methodology offered in ‘Business Model Generation’ by Alexander Osterwalder and Yves Pigneur. We also considered ‘Value Proposition Design’ by the same authors in order to come up with a proposition around which to centre our model.
While building our value proposition[A] and business model canvas[B], we stayed in touch with OUI, and constantly involved the customers in all our decisions.
Why do we need a value proposition?
The value proposition is important in order for us to understand that what we are offering is truly needed in the market. This helps to get everybody in the team aligned towards a common goal post-project.
Why do we need a business model?
We need the business model to understand how we will go about delivering our therapeutic in the real world in the most efficient way to reach people who will benefit most greatly from it, while still making the venture sustainable.
Business Value Proposition
It is key to consider what the customers want in order to determine the best value proposition to provide. This would help validate the need for the idea and would maximise chances of creating a therapeutic that would be used. We used a number of techniques to understand what each customer segment wants. To understand patients, we used mainly the journalistic approach, interviewing patients with some desk research. When understanding doctors’ and the NHS needs, we primarily used the desk research approach with some interviewing, while with understanding the needs of the general public who influence the NHS decision, we mainly used the desk research approach due to time constraints.
From this, we created customer profiles and a value map, which shows how we address the customers’ needs and wants. Every customer's value map will be under their collapsible bar.
Customer profiles help us understand what we can help a customer achieve. All jobs, pains and gains are arranged in order of importance with the most important ones being near the top.
The value map helps us to look at how our therapeutic addresses the customer needs. The pain relievers and gain creators need not touch on every pain and gain; but need to address some in great detail
We spoke to Chris Butler from Nuffield Department of Primary Care Health Services GP to find out that they would start prescribing a new medicine if there are results showing that there were successful clinical trials and that NICE had published guidance recommending the prescription of the medication in the first instance. He said that the actions of the local CCG (clinical commissioning group) ultimately determine what medication he is able to prescribe to patients, but then he assesses each case on a patient by patient basis based on clinical need and obviously the ultimate decision lies in the hands of patients. He said that most doctors would be hesitant to switch patients to a new treatment if patients are already satisfied with the current treatment and their symptoms are largely controlled. We also used the NICE website and our interview with Dr Michael Morrison from HELEX to understand how NICE and CCGs make the decision on when to prescribe a certain medication. From this we created both a customer profile and value map. However the pains and gains were not separated, since NICE and CCGs have a checklist of what they go through to select a new drug, rather than specific needs.
Next we looked at the parties that would influence the decisions of NICE and CCGs externally. This would include the media and the public. |Therefore we created customer profiles and value maps for them
From our research and interviews, we found that in severe cases of IBD, patients struggle to live a normal life with their disease affecting them in even the most basic actions. This shows that a therapeutic that could prevent flare ups with minimal side effects is required. However, a therapeutic addressing this alone would not cause organisations in the UK such as the NHS to start purchasing it. A new therapeutic on the market would need to affect patients on whom the current treatments do not work and would need to be cost effective. We believe that our therapeutic will succeed because it could work for some patients who are not affected by current treatments (although we cannot be 100% certain yet), while it would also hold fewer side effects than current immunosuppressants. In order to make this an attractive proposition to NICE and NHS, we would have to make the therapeutic cheaper than £20,000 per quality-adjusted-life-year
Laws and Regulations
Before we could proceed to analyse the business model environment, we need to look at the laws and regulations surrounding our therapeutic. Without going through these, we would not be able to reach the business model stage. Therefore on the business side, the priority is to go through the clinical trials which can take 10+ years, after getting a patent. These can be costly: phase 2 clinical trials cost $15,800,000 and in phase 3 cost $14,500,000 for gastrointestinal diseases.
Business Model Environment
What it is
In order to conceive a business model, we need to analyse the environment that it is being put in place at. This would mean looking at the external factors that could affect key decisions in the building of it. This would include the industry forces, key trends, market forces and macroeconomic forces.
Each of the external factors is then separated into sub-factors in order to help analysis.
This investigates the regulatory trends that could have an impact on business model
- Not homogenous global regulatory landscape
- Some countries stop drug companies marketing directly to customers
- Regulatory agency pressure to publish data on unsuccessful clinical trials
- Could be possible to apply for accelerated development via PRIME, which we learnt about when we visited the Cell and Gene Catapult’s offices in London
This investigates the technology trends that could impact the business model in either a negative or positive way
- Emergence of pharmacogenomics/ personalised medicine
- Declining cost of gene sequencing
- Major progress in diagnostics
- Use of pervasive computing and nanotechnology for injection/delivery of drugs
Societal and Cultural Trends
This investigates the trends in society that may influence the business model
- Unfavourable image of big drug makers
- Social consciousness is growing among consumers
- Customers prefer ‘green’ purchases
- Customers are better informed about drugmaker activity in developing countries
This investigates the major socioeconomic trends
- Ageing society in many mature markets
- Increasing prevalence of IBD, especially in emerging markets
- Since 1990, incidence has been rising in newly industrialised countries in Africa, Asia, and South America, including Brazil (APC for Crohn's disease +11·1% [95% CI 4·8–17·8] and APC for ulcerative colitis +14·9% [10·4–19·6]) and Taiwan (APC for Crohn's disease +4·0% [1·0–7·1] and APC for ulcerative colitis +4·8% [1·8–8·0]).[D]
- Growing middle class in emerging markets
- Large, unsatisfied healthcare needs in developing countries
The key trends show that it may be difficult in getting the drug approved due to the intense regulations on genetically modified treatments. It would also require us to go through different procedures in different countries.
From this, it may seem logical to only market the medicine in certain developed countries, but the rising prevalence of IBD in developing countries does point to the benefit of making the therapeutic more available in the world, especially with more relaxed laws in such countries.
Moreover, the unfavourable image of big drugmakers in society could help propel an emerging biotech firm’s new therapeutic to be more preferential to use. This would help reinforce the idea that it may be beneficial for us to proceed as an individual entity rather than license the therapeutic to larger companies (once and if we do get a patent).
This helps to understand the key established competitors
- Several large and medium-sized companies compete in the pharmaceutical industry
- Most companies are struggling to create new products
- The trend to consolidation through mergers and acquisitions
- Major companies buy biotech and smaller companies to fill product pipeline
- Several companies are now starting to build on open innovation processes
This helps to find the new players and helps understand if they compete with our business model.
- Few new players in the pharmaceutical industry over last decade
- New entrants are mainly non-patented drug companies, especially from India
Substitute Products and Services
This helps find potential substitutes to our value proposition, including from outside markets
- Prevention. However, Crohn’s and IBD is not understood well enough yet for prevention
- Patent-expired drugs replaced by low-cost generic drugs
Suppliers and other Value Chain Actors
This helps to understand the key players in the value chain
- Large use of research contractors
- Biotech firms are important new product generators
- Doctors and healthcare providers
- Insurance companies
- Bioinformatics providers
This helps to understand who may influence the organisation and business model
- Shareholder pressure forces drug companies to focus on short-term goals
- Governments/regulators have a strong stake in actions of pharmaceutical companies because healthcare services play a pivotal role
- Lobbyist and social enterprise groups campaigning for lower cost treatments
- Scientists, who represent core talent of drug manufacturing industry
Large pharmaceutical companies struggle with creating new products and are looking for new products to fill their pipeline. At the same time, there are very few new pharmaceutical companies, with most simply reproducing older drugs for cheaper. This could mean that there could be interest from larger firms should we get a patent and take it far enough in clinical trials.
Also the analysis of suppliers and other value chain actors helped us understand that we should target doctors and insurance companies as customers too as they play a major part in the use of therapeutic, and in fact play a much larger role than patients do.
This finds the key issues in the changing market on the customer and offers perspectives
- Increasing healthcare costs
- Emphasis shifting from treatment to prevention
- Treatments, diagnostics, devices and support services are becoming a single product
- Emerging markets are increasing their share in the pharmaceutical industry
- Shift towards more personalised treatments
This helps to find the major market segments and look at how much potential there is in them
- Doctors and healthcare providers (insurance, NHS etc)
- Governments and regulatory bodies (we have a flowchart for this)
- IBD patients
- Strong potential in emerging markets
- US and Europe still main market
- Europe has highest values with ulcerative colitis 505 per 100 000 in Norway and Crohn's disease 322 per 100 000 in Germany. In North America the prevalence of ulcerative colitis is 286 per 100 000 in the USA). The prevalence of inflammatory bowel disease exceeded 0·3% in North America, Oceania, and many countries in Europe.[C]
Needs and Demands
This helps to identify what is needed in the market, i.e. what customers need (refer to customer interviews and value proposition)
This helps to understand what factors influence customers switching to a new product
- Patent means that only one company can provide a certain benefit
- Low cost to switch to another company’s patent-expired drug
- A large amount of detailed information about different treatments available online
- Deals with governments and large-scale healthcare providers increase switching costs
This helps understand the pricing power
- High margins on patent-protected drugs
- Low margins on generic drugs, but not much complexity in manufacture
- Healthcare providers and governments have growing influence on the prices
- Patients have very little influence on prices
- Price needs to be lower than £20k per quality-adjusted-life-year for NHS to take on
This shows that we need to provide an exclusive benefit in order to get patients and doctors to switch to our therapeutic. However, in order to provide the exclusive benefit, a patent is absolutely necessary.
We would also have to make the price per patient lower than £20k in order for the NHS to take the therapeutic on.
The emergence of the market in developing countries could provide extra opportunity to move into.
Global Market Conditions
This helps us understand the current macroeconomic conditions
Decreasing GDP growth in Europe, Japan and USA[E]
Slower growth rates in China and India
Uncertainty as to when the recovery will occur
This explores how the current capital market is positioned in relation to our needs
- Lots of venture capital available
- In 2016, 936 deals were completed, delivering €4bn in investments.[F]
Commodities and other resources
This looks at current prices and price trends for resources needed for the business model to succeed
- Competition for prime talent
- Employees seek to join pharmaceutical companies with positive public image
This explores the current economic infrastructure of the market in which the business operates
- Specific to region company operates
- In the UK and europe there is PRIME etc
The UK and european economic infrastructure is strong in helping bring a potential medicine through clinical trials to market and help it find investment, with a very strong venture capital scene, through which investment could be obtained. The main drawback, however, would be the large cost of clinical trials.
It could also be very useful to focus on public initiatives as a company in the future (post trials), since that could help attract employees to join the company.
Business Model Canvas
We analysed every category in detail in order to create a business model canvas. It is, however, important to understand that the whole landscape will change once and if the therapeutic passes clinical trials, as this will take around 10 years. Therefore this business model would change and exists more to give an understanding of the current situation, to see whether such a product is viable. The business model is relatively standard for such a therapeutic, however certain other options were explored, such as creating a platform for IBD patients to communicate. This model and any model we can build would also be completely dependent on receiving a patent.
The business model canvas is used to understand how the business will function. This concept is used by large companies such as IBM, Ericsson and Deloitte.
It works by separating the whole business model into nine blocks. The value proposition is the central and most important block, as previously discussed. However, in order to deliver that value proposition, key partners are needed in order to generate the key resources and key activities of the business. Those key activities and key resources help create the value proposition. The value proposition is delivered to the customer segments via key channels and customer relationships. The lowest two blocks are the revenue and cost structure, which help visualise whether the model is sutainable.
This block defines who we want to reach with our product. We agreed that our therapeutic would be targeted towards a ‘Niche market’ since only patients with IBD would benefit from it. Such a business model depends heavily on purchases from IBD patients, as it relies on a supplier-buyer relationship.
We would target the UK, Europe and US, since we are based in the UK and there is a high prevalance of IBD in the UK, Europe and the US. Moreover, the regulatory laws in these countries are similar. However, in the next stage, it would make sense to target the developing countries in which the prevalence of IBD is increasing (as found in the market analysis).
In the UK, we would need to aim our therapeutic towards a number of different customers, mainly the NHS. The NHS has its own criteria for adopting/buying medicines which are addressed earlier in the Business Value Proposition section . However, in the US, the consumer and doctor has a much greater power in choosing the therapeutic.
Performance - The performance of our therapeutic is the unique selling point. In theory, it should be able to stop flare ups from occurring automatically, unlike current treatments and would thus be safer to use. This is due to the constant feedback loop. However, we need to carry out more research and clinical trials to find out if the system works.
Price - After speaking to ‘Cell and Gene Therapy Catapult’, we found that the main price determinant in a therapeutic is the cost of disease and comparable treatments. This is because the main cost in taking a therapeutic to market is the clinical trials, which will have a similar cost for most treatments for a certain disease. However due to the extra regulations on genetically modified organisms, our therapeutic may have a greater cost of taking to market than comparable treatments. Therefore cost may not be our unique selling point.
Risk Reduction - Our therapeutic would self-regulate and therefore would present a much lower risk of affecting the patients’ immune system. This would be due to the feedback loop, which would prevent too much of the anti-inflammatory interleukin 10 being released.
Convenience/usability - It would come in capsules which could be consumed on the go, as suitable for the patient.
This block talks about how we will reach our customer segments. We address four phases of channels, excluding the after sales channel since the doctor would be more qualified to give support.
Awareness - The success of clinical trials should create awareness. Featured in media such as https://labiotech.eu/tops/medical-biotechnology-clinical-success-2016/. We have also already hosted a number of outreach events to promote synthetic biology and have talked about our system.
Evaluation - The success of clinical trials should allow our product to be shown to be attractive to customers. However, this is heavily reliant on the clinical trials working.
Purchase - Our area is very different from other business areas since the medical practitioner is the one who decides to recommend the medicine. Therefore it is very important to target the therapeutic towards medical practitioners.
Delivery - Our therapeutic would be available at pharmacies to people prescribed it.
After sales - We would refer our customers to the doctor/ not applicable.
This block refers to the relationships we would need to establish with our customer segments.
Our therapeutic is designed in a way that it is required to be taken on a regular basis. This forms our key customer relationship, as the patients would rely on our therapeutic to treat their disease.
The main priority is getting the medicine to market, however, after that, we could create a community platform for IBD patients to talk about their problems and create new connections. This would increase awareness of our therapeutic and could mean that the therapeutic could reach more people, who would otherwise struggle with current therapeutics.
This block describes how revenue is generated from each customer segment. We are considering two possible revenue streams. The asset sale stream would be the one that would be taken up should we take the medicine to market ourselves, while the licensing stream would mean that the business model canvas is handed over to the company we license to.
Asset sale - One possible way to go about the revenue stream, is to go through clinical trials, and then sell the actual therapeutic. The main problem with this, however, is that it is expensive and will require significant external investment. However, should the therapeutic go to market, it would have to be used weekly or monthly, hence we could provide either a subscription fee or sell it one-time with a returning customer base.
Our pricing model would be a fixed menu pricing model, since it is a medicine in which the price depends on the value proposition and is dependent on customer-segments rather than on the real-time market.
Licensing - However another likely scenario is that we patent our therapeutic (more on that later) and then sell the license to a larger pharmaceutical conglomerate for a fee. In this case, our business model would change and we would simply make up a part of a larger pharmaceutical company’s patent pool.
This block talks about the assets required to make our value proposition work.
Physical assets - Manufacturing facilities are key to produce the therapeutic, however, it could be outsourced to a reliable company, which is more common in earlier stage companies.
Intellectual - We would need to patent our invention. As mentioned earlier, we spoke to OUI and have found that now is not the best time to patent the product. We would wait until after the conference, and then do more lab work to see what parts of our system could be improved and described in more detail. The patent would be free to obtain with OUI, however, they would take a certain percentage of the company later. Alternatively, we could pay, although the sum would depend on the complexity of the patent.
Human resources - Human resources are crucial in any pharmaceutical company since scientists are required to carry out the research to take the product to market and to adapt it to any new findings in clinical trials. The team’s experience in iGEM should form a substantial base to take the project further, however, we do acknowledge that we would need external help from more experienced scientists. This is especially important since the team is one of the most important determinants for investors when deciding whether to put money into a company.
Financial assets - This is the most important part to make the whole model work. The first barrier to entry would be clinical trials, which require a large amount of financial assistance. On average in the US, phase 2 clinical trials cost $15,800,000 and in phase 3 cost $14,500,000 for gastrointestinal diseases[G]. In order to get an investment, we would first need to receive a patent or multiple. However, we do understand that this will strongly diminish our shares in the therapeutic.
This block focuses on the most important actions we would need to undertake to operate successfully. We focus on all two types of key activities - production and problem solving, we do not focus on the platform/network idea.
A key activity would be to manufacture the therapeutic, which we will outsource to an experienced manufacturer, due to a lack of own resources (presumably most investment would be spent on clinical trials) or experience in manufacturing. More information on how we plan to manufacture the product can be found in the Product Design Section
We have thought about logistics, with the probiotic being freeze-dried to increase shelf life, therefore reducing transport costs as there is no need to deliver it instantly. This is a key activity since we have to deliver it to pharmacies for patients to access. This would be done through an established delivery company.
This block focuses on the partners that will be required to make our therapeutic become a product. We focus on two types of key partnerships: joint ventures to develop new businesses, and buyer-supplier relationships to assure reliable supplies.
OUI (or another incubator) - OUI or another suitable incubator would help us with the initial stages of applying for a patent and then finding investment. This would help in taking the therapeutic to clinical trials and later to market.
Investors - Investors are key to make sure the medicine goes through clinical trials. This is because as previously mentioned, clinical trials cost in the region of $15,000,000 for each of phase 2 and phase 3.
Manufacturers - As we would be a small company coming out of clinical trials, we would not have the assets, experience or manpower to start manufacturing the therapeutic ourselves.
NHS - In order to sell in the UK, we’d need to partner up with the NHS. In order to do so, we’d need to pass the NICE and CCG requirements.
This is the section that refers to how we minimise costs in our business model in order to garner the most revenue.
We will have high spending initially on clinical trials and passing regulations. We will then a value-driven structure with the fixed cost of the product, meaning we would not try to save money while compromising on quality. We would aim to automate as many parts of production as possible, however, the best manufacturing equipment would be used in order to assure the quality of our probiotic.
Since our product is a therapeutic, it is required to have gone through a number of clinical trials. This means that we cannot create a real minimum viable product, apart from models of the final variant. Therefore to create a minimum viable product, we created a mock-up of a yoghurt pot, a yoghurt drink, a capsule and an injection.
In order to test them by lean startup principles, we took these mock-ups to survey the public at the Natural History Museum as to which they would prefer. The public there, although had some interest in science, mainly had generic knowledge of the subject. From that survey, we found that people did prefer the yoghurt drink by a negligible margin ahead of capsules. However many relevant points were raised by people who picked capsules, such as it would be easier to transport and store. We also surveyed the Oxford University Biochemistry Departments, in which the overwhelming majority voted for capsules for similar reasons. Therefore we used these tests to decide that we will create a final product in the form of capsules, which would be freeze-dried. Our visit to Cell and Gene Catapult reinforced this (more on final product in Product Design)
The value proposition analysis shows that there is a clear need for a drug like ours.
After iGEM, the main priority is applying for a patent. However as mentioned earlier, we talked to OUI (our tech transfer office), who said that more data is needed, with which their lawyers agreed. Therefore our focus will be on getting more data and improving the project design further. This would be done in a similar way to Customem, who came out of Imperial's 2014 iGEM team and with whom we have been in close contact. They took another year's of individual research from their team members before becoming a startup.
As per their example, we have decided that it is too early to consider team structure before any patent is obtained.
After this we would turn to clinical trials and look to start communicating with regulatory bodies as early as possible.
Only when we would be approaching the end of trials would the Business Model Canvas come into play.
Business Model Canvas - a strategic management and lean startup template for developing new or documenting existing business models.
Cell and Gene Therapy Catapult - a centre with the core purpose of building a world-leading cell and gene therapy sector in the UK as a key part of a global industry. They help cell and gene therapy organisations across the world translate early-stage research into commercially viable and investable therapies.
Creative Commons - Creative Commons is an American non-profit organization devoted to expanding the range of creative works available for others to build upon legally and to share.
Creative Commons(CC) attribution license 4.0 - The intellectual property license iGEM uses. You may not apply legal terms or technological measures that legally restrict others from doing anything the license permits.
Macroeconomic - a branch of economics dealing with the performance, structure, behaviour, and decision-making of an economy as a whole.
MVP - A minimum viable product (MVP) is a concept from Lean Startup that stresses the impact of learning in new product development.
NHS - The national health service within the United Kingdom, it is free to use for all citizens.
NICE - The National Institute for Health and Care Excellence (NICE) provides national guidance and advice to improve health and social care in the United Kingdom.
OUI - Oxford University’s tech transfer office.
Patent - A patent is a form of intellectual property. A patent gives its owner the right to exclude others from making, using, selling, and importing an invention for a limited period of time, usually twenty years.
Patent Pool - Patent pools can be defined as an agreement between two or more patent owners to license one or more of their patents to one another or to third parties.
Quality-adjusted-life-year - A measure of the state of health of a person or group in which the benefits, in terms of length of life, are adjusted to reflect the quality of life. One QALY is equal to 1 year of life in perfect health. QALYs are calculated by estimating the years of life remaining for a patient following a particular treatment or intervention and weighting each year with a quality-of-life score (on a 0 to 1 scale). It is often measured in terms of the person’s ability to carry out the activities of daily life, and freedom from pain and mental disturbance.[H]
Tech Transfer Office - office dedicated to identifying research which has potential commercial interest and strategies for how to exploit it.
Value Chain - A value chain is a set of activities that a firm operating in a specific industry performs in order to deliver a valuable product or service for the market.
Value Proposition - an innovation, service, or feature intended to make a company or product attractive to customers.
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