CRITICAL SUCCESS ACTORS FOR DIAGNOSTICS COMPANIES ... · Multi-national companies Not-for-profit Global Health Mostly diagnostics, some medical devices and therapeutics Mix of LMIC

© 2018 Halteres Associates LLC

HIV Counseling and Testing Center – Busia, Kenya

CRITICAL SUCCESS FACTORS FOR

DIAGNOSTICS COMPANIES

COMPETING IN LOW- AND MIDDLE-

INCOME MARKETS

September 24, 2018

Mickey Urdea, Founder and Partner

Halteres Associates


Outline

Background on Halteres

Why do some diagnostics companies succeed and not others?

Study for the Bill and Melinda Gates Foundation

Context of the study of diagnostics company success factors

Some insights from business modeling

We have permission to share everything presented here that is

based upon work conducted for specific clients


Halteres Associates

Founded 2002

4 employees and over 150 associates (independent consultants)

Almost all have been an employee of a company

Client types:

International start-ups, over 175 to date

Multi-national companies

Not-for-profit Global Health

Mostly diagnostics, some medical devices and therapeutics

Mix of LMIC and HIC products, companies and funders/procurers

Due to our network, we can do whatever the client needs

Research, product development, manufacturing, clinical studies,

regulatory, reimbursement, marketing, business modeling, help to raise

capital

In last 3 yrs, we’ve conducted ~90 projects with 37 consultants

Page 3


Diagnostic Company Success Factor Assessment: BMGF Project

We evaluated 28 diagnostic companies (and others not shown)

Companies were assessed/scored by how well each did or are doing

The results were organized by phase of product development in

accordance with the definitions created by the BMGF Dx team

We defined three types of companies:

Successes based upon reaching and maintaining sustainability for at

least 3 years after product introduction

Zombies were identified based on their continued struggle to become

sustainable; in our collective opinion they are likely to ultimately fail

Failures that are out of business or sold off for very little

For Failures and Zombies we identified specific events in the phases of

development that we believe triggered the eventual or probable failures

We confirmed assessments with input from industry expert interviews to

ensure objectivity, some of whom had direct inside knowledge

Funders, grant providers, management, key employees, industry experts

We are not at liberty to show the companies by name

Page 4


Diagnostics Company Growth Phases: Zero to Four

Slide 6

Phase Zero

Design Phase — Concept

Clearly defined Intended Use for actionable

intervention decision and has market size large

enough to support investment

Performance (Sens /Spec/ Repro) specifications fill

an unmet need

Customer Needs are understood (Voice of the

Customer)

Phase One

Feasibility and Planning

Experienced Leadership/employee

team capable of addressing business/tech

challenges

All inventions have been completed to achieve final

product/scale/COGs targets

Menu Strength (one product vs.

multiple). Company has back up plan in event of

failure

Phase Two

Design and Development

Disciplined development processes (Design

Control, Quality System)

Supply Chain process, COGs targets, capital

needs. Product designed for Manufacturability

Robust IP, freedom to operate

Phase Three

Validation and Launch Readiness

Established manufacturing and design control

processes

Clinical Studies supporting regulatory approval AND

commercial /reimbursement strategy

Market entry strategy in place, specific initial customers identified

Phase Four

Commercialization Complete plans for

commercial positioning and targeted launch

Reimbursement and/or payment strategy with clear objectives, budget and timelines. Partners

identified

Operations robust and stable enough to transfer to sustaining operations.

Have sufficient cash planed to profitability or

liquidation

© 2018 Halteres Associates LLC Page 6

Clearly

defined

Intended Use

for actionable

Rx decision

and has

market size

large enough

to support

investment

Performance

(Sens /Spec/

Repro)

specifications

fill an unmet

need

Customer

needs are

understood

(VOC

/Adboard)

Experienced

Leadership/

employee

team capable

of addressing

business/tech

challenges

All inventions

have been

completed to

achieve final

product/scale

/COGs targets

Menu strength

(one product

vs. multiple).

Company

has back up

pipeline in

event of

failure

Disciplined

development

processes

(design

control, etc)

Supply chain

process COGs

targets,

capital needs,

back up

sources.

Product

designed for

Mfg

Established

manufacturin

g and design

control

processes

Clinical

studies

supporting

regulatory

approval AND

commercial

/reimburse-

ment strategy

Complete

strategy for

commercial

positioning

and targeted

launch

Reimburse-

ment strategy

with clear

objectives,

budget and

timelines

Operations

robust and

stable stable

enough to

transfer to

sustaining

operations.

Have

sufficient cash

to profitability

Success #1

Success #2

Success #3

Success #4

Success #5

Success #6

Zombie #1

Zombie #2

Zombie #3

Zombie #4

Zombie #5

Zombie #6

Zombie #7

Zombie #8

Failure #1

Failure #2

Failure #3

Failure #4

Failure #5

Failure #6

Failure #7

Failure #8

Failure #9

Failure #10

Failure #11

Failure #12

Failure #13

Failure #14

Company

Phase 0 —

Design Phase — Concept

Phase 1 —

Feasibility and Planning

Phase 2 — Design

and Development

Phase 3 — Validation

and

Launch Readiness

Phase 4 —

Commercialization


Where Do Diagnostics Companies Fail Or Become Zombies?

Phase 0

Phase 1

Phase 2

Phase 3

Phase 4

Sustainable Business

~70%

~10%

~10%

~05%

~05%

Failures

~40%

~60%

Zombies At any point failure

can be due to wrong

management team


Expert Interview Findings: What Are The Keys To Success?

Most important success factor is an experienced leadership team Have they done it before?

Have they done it in diagnostics, not tools, not pharma, not biotech?

Quality systems must be in place early Don’t take shortcuts, it will ultimately cost you time and may cost you the business

Companies must have the ability and desire to partner with others with

requisite expertise

There must be realistic projection for time to market following feasibility 5-7 years for successful new biomarkers or new platforms

3-5 years for successful test menu additions to existing platforms

Companies must have a very deep understanding of the customer Who will use it

How will they use it

What alternatives exist

What does the entire ecosystem look like

What are the pain points that must be dealt with in addition to introducing the new product

Products must be designed for manufacturing (scale, COGS, quality)

There must be attractive ROIs for all parties

Page 8


Questions To Address When Evaluating Companies: General

Does the team have a thorough understanding of the customer(s), stakeholders and the

unmet need the product/technology will satisfy?

If so, how do they know someone will buy it and at what price? What alternatives exist?

In a start-up there is no time to teach anybody a new job. Does the team have

successful diagnostic company experience? (not tools, not pharma, not biotech)

If not, what is the plan to develop a team with the requisite skills in key roles of responsibility

Does the team have plans to implement design control and do they have direct

experience in developing products under this system?

If not, do they plan to bring in this expertise or partner with others who are expert?

Does the team have experience and intentions to partner with others for skills or

competencies that are needed for success?

Does the product development plan include processes to design for manufacturing?

Does the team have realistic and detailed assessment of the timeline to feasibility,

product development, manufacturing and commercial launch?

Does the company understand the full ecosystem into which they will introduce the

product and all the pain points for the users that must be overcome?

What is the projected return on investment for each type of investor? Is this sufficient to

attract the required investment to commercialize the product?

If not, what provisions need to be made to ensure all stakeholders have attractive returns to offset

the development/commercialization risks?

Page 9


Questions To Address When Evaluating Companies: Phases

Phase 0 – Concept— Concept Is the intended use statement clear?

Is there a clear intervention action informed by the use of the test?

Has the voice of the customer been incorporated as part of the initial feasibility assessment?

Is there a clear unmet need that could be addressed by the invention?

Phase 1 – Feasibility and Planning Will all inventions required to initiate product development under design control be finalized at the

end of this stage?

Does the company have back up plans in the event of failure with this product design?

Does the initial feasibility data continue to support the intended use in a demonstrable way?

Phase 2 – Design and Development Does the company have a robust development and quality plan in place?

Is the product designed for manufacturing at the scale required in the business plan?

Are cost of good targets likely to be met?

Have all elements of the supply chain been identified, and are plans in place to secure all critical

rare reagents and other key materials?

Has all intellectual property (IP) been filed?

Is there freedom to operate?

Page 10


Questions To Address When Evaluating Companies

Page 11

Phase 3 – Validation and Launch Readiness Have all manufacturing and design control processes been finalized?

Has manufacturing at scale been achieved?

Is the company using the final manufactured product in its clinical validation studies

(NOT PROTOTYPES!)?

Is an actionable clinical study plan in place that addresses regulatory and reimbursement

requirements?

Have marketing/pre-clinical studies been developed with involvement of representative

intended users?

Phase 4 – Commercialization Is the commercial launch plan complete and achievable?

Is the reimbursement plan complete and achievable?

Are the company operations robust and reliable?

Can the market bear the initial COGS while the company increases manufacturing volumes

and market shares or do sufficient market interventions exist to off-set any gaps?

Does the company have sufficient cash or plans to acquire it to fund ongoing operations until

self-sustainability (or a liquidation event) is achieved?


Ebola Test Use Case 1 of 10 for Grand Challenges Canada






Use Cases 3, 4, and 5 Story Boards:

CHW Tests Patient at Home TB POC for BMGF


Use Case 7 Story Board:

CHW Tests Patient at Other Permanent Health Facility


Target Product Profile

Target product profile (TPP): description of key product attributes, such as assay performance requirements, required for a Use Case or set of Use Cases

Usually given as

– Minimal

– Optimal

Minimal means that if all the minimum criteria are met, the product will be acceptable for the application

Optimal means that if any of the criteria are met, the product would be more better in some way (e.g., lower cost, better performance)

When is it time to begin product development versus waiting for an unmet specification to be met?

– Additional target, species ID, quantification

The TPP is technology independent

It describes what the product needs to do

It does not describe what the technology is to do it

It can be used to compare and contrast existing technologies and products

It is used to determine the product specifications for specific technologies


Risk and Mitigation Plan: Examples

Risk Mitigation Level

Management team has sufficient Dx

experience

Ensure CEO, VP R&D and head of commercial have 5+ years of

successful product development experience in related diagnostics

field. Replace members who don’t. High

Essential quality systems are in place

or properly planned for

Ensure experienced product development head has expertise

in design control Low

The team has experience to know

when to partner/how to partner with

experts (development/regulatory/

manufacturing, etc.) to introduce

appropriate products to market.

Put in place a plan to bring in appropriate advisors well in

advance of needing their help (e.g., OEM, clinical trial design,

regulatory affairs). Assure that the company does not hire too

many expensive people that are only needed part time at the

current stage.

Medium

Development and regulatory timelines

realistic

Require detailed development, clinical and commercial plans

well in advance of funding each stage; check with experts High

Detailed analysis of customer and key

stakeholder needs in place and a full

understanding of what they will buy

and who will pay

Require thorough market research that provides factual input

as to who the customer is and what they will buy. Ensure clear

path to reimbursement (e.g., tech assessment, coding) or other

forms of payment (e.g., self pay) is understood.

Medium

The product has been designed for

quality and scalable manufacturing.

Prepare detailed plans to get to prototype, first products, and

scale including investments, skills needed and timing Low

There is a return on investment for

each stakeholder sufficient to justify

the risk

Develop agreements to ensure each party will be able to

access funding, achieve ongoing operations scale,

partnerships, cash flow and sustainability High

Page 18


Risk and Mitigation Plan: Examples

Risk Risk L1Q18 2Q18 3Q18 4Q18 1Q19

Management team has sufficient Dx

experience High

Essential quality systems are in place

or properly planned for Low

The team has experience to know

when to partner/how to partner with

experts (development/regulatory/

manufacturing, etc) to introduce

appropriate products to market.

Medium

Development and regulatory timelines

realistic High

Detailed analysis of customer and key

stakeholder needs in place and a full

understanding of what they will buy

and who will pay

Medium

The product has been designed for

quality and scalable manufacturing. Low

There is a return on investment for

each stakeholder sufficient to justify

the risk High

Page 19


Halteres Has Applied its Business Modeling Approach to Many

Programs

Partial list of examples:

BMGF Point of Care Initiative

UNITAID HIV Viral Load and Early Infant

Diagnostics

CIFF HIV Self Testing

HIV Professional Testing

Malaria testing

TB ID and DST

Digital chest x-rays

Oncology Dx Products

Cardiac Testing

Internal market and financial modeling for

several diagnostic companies

Other diagnostic platforms (NAT, IA, clinical

chemistry, flow cytometry), applications and

settings in LMIC and HIC regions

Page 20

Improving

Clinic

Workflows

Partner

Self-

Testing

Cost

Effectiveness

of Digital

X-Rays


Impact of Increasing Number of Competitors in HIV-ST

If procurers want to maintain competition between blood-based and oral-fluid-based tests it would

be possible to maintain about 4 total companies with ~10MM units sold each

However, typically in most markets, without some form of control, at maturity only 1-2 players

would command the majority of the market

If the market at maturity is more like the lower total sales estimate (~20MM units), it is likely that

the maximum number of players would not exceed 2 without continuous subsidization

Note that the HIV RDT manufacturers maintain a sig unit volume advantage across all years

Page 21

Estimated HIVST Market Growth Scenarios Total Units per Year (millions, combined blood and oral)

Oral Fluid, 55%

Blood, 45%

30%

25%

15%

10%

20%

0%

20%

40%

60%

80%

100%

Type Company

Estimated Market Share by Type and Manufacturer

Others

Player 4

Player 3

2nd Oral

Orasure

13MM

9MM

4MM

7MM

11MM 17

26

34 37 39 42 44

9 13

18 19 20 21 22

81 79 77 79 83 86

91

0

10

20

30

40

50

60

70

80

90

100

2019 2020 2021 2022 2023 2024 2025

Halteres Aspirational HIV-ST Halteres Moderate HIV-ST

Halteres HIV RDT (Aspirational)

Based upon work for CIFF 2017


Thanks to my Halteres colleagues

Pat Arensdorf

Laura Mazzola

Laura Penny

Mike Richey

Rich Thayer

Martha Townsend

Kristi Whitfield

Page 22

Documents

CRITICAL SUCCESS ACTORS FOR DIAGNOSTICS COMPANIES ... · Multi-national companies Not-for-profit Global Health Mostly diagnostics, some medical devices and therapeutics Mix of LMIC