Regulatory Trends

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

Technology Trends

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

Socioeconomic Trends

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

Conclusions

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).

Competitors

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

New Entrants

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
- Laboratories

Stakeholders

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

Conclusions

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.

Market Issues

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

Market Segments

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)
- Distributors
- 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)

Switching Costs

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

Revenue Attractiveness

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

Conclusions

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

Capital Markets

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

Economic infrastructure

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

Conclusions

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.

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.