Dymedex Exec Overview 1 Brief
- 1. Executive Overview Dymedex Consulting Joseph Galatowitsch, President, Managing Partner Ross Meisner, Managing Partner www.dymedex.com Copyright Copyright 2010. Contents owned by and under license from Dymedex Consulting, LLC. © 2011 Dymedex Consulting, LLC. Contents are proprietary Dymedex information.
- 2. The value of investing in a Dymedex assessment A clear, data-driven understanding of the market opportunity: 1. To inform key early and expensive strategic decisions: • Regulatory, clinical, go-to-market, product development 2. To more effectively set and meet expectations with all stake-holders 3. To support future fund-raising activities 4. To help maintain control over the strategic direction of the business • Minimize arm-chair quarterbacks pulling leaders in multiple directions • Drive organizational alignment, enthusiasm and focus 5. To prevent “over-scaling” the business 6. To maximize and sustain early market success © Copyright 2011. Contents owned by and under license from Dymedex Consulting, LLC. 1/8/2011 2
- 3. Strategic Market Development is a key business discipline Market Development is a unique marketing discipline that focuses on understanding the realizable potential of an opportunity and then strategically applying resources to fully address the barriers to achieving that potential. Classic Product Marketing: Market Development: ▲ Focused on establishing superior ▲ Focused on establishing a customer value vs. competitive technology as a standard of care products ▲ Concerned with: ▲ Concerned with: – Total market opportunity – Competitive offerings – Adoption and penetration – Product positioning vs. competition – Reimbursement & coverage – Product performance & features – Evidence & benefit (clinical & econ.) – Product pipeline – Practice guidelines & metrics – Product mix and ASP – Technology readiness – Customer relationships – Customer economics – Customer service – Behavior change – Branding – Care pathways and networks ▲ Measured by relative price, market ▲ Measured by industry revenue and share, and company revenue growth growth vs. total industry potential © Copyright 2011. Contents owned by and under license from Dymedex Consulting, LLC. 1/8/2011 3
- 4. The scientific method has greatly improved success in nearly every field. Dymedex applies it to Market Development. ▲ Development of business accounting principles and measures in the early 1900s (balance sheet and P & L) revolutionized the management of business and facilitated the scaling of business size and complexity, which in turn revolutionized business productivity ▲ Development of the scientific method in applied science has dramatically accelerated the rate of discovery in every field of study ▲ Edwards Deming revolutionized manufacturing by the simple application of scientific method ▲ Every major sports team has leveraged the scientific method to improve their success ▲ The foundations of scientific methods are: – Standardization of measures and definitions – Development of tools to measure inputs and results – Gathering and synthesis of information – Developing an understanding of the ‘system’ that is targeted for control – Development of strategies to influence the system in desirable ways © Copyright 2011. Contents owned by and under license from Dymedex Consulting, LLC. 1/8/2011 4
- 5. Dymedex’s Constrained Dynamic Adoption (CDA) Model can help predict non-linearities in technology adoption ▲ Milestone 1 is the gateway to broad market adoption ▲ Milestone 2 is a strategic inflection point that can happen soon after Milestone 1 – Can be a significant decline in revenue based on how small incidence is in relation to prevalence ▲ Milestone 3 is the fully realized market - which can take many years to achieve ▲ R, I, and T must be defined for each milestone to make informed strategic decisions R3 R = Revenue ($ mil.) 3 I = Investment ($ mil.) I3 T = Time (years) I2 R2 2 M2: Penetration of “easily accessible” Rate of growth dictated by segments Indication Attractiveness I1 R1 1 M1: Completion of infrastructure and Technology barriers T1 T2 T3 © Copyright 2011. Contents owned by and under license from Dymedex Consulting, LLC. 1/8/2011 5
- 6. Dymedex analysis is typically an eye-opening assessment that brings the business vision to a defensible reality ▲ CDA model factors establish an ▲ Historical and future analysis of over 30 objective and rigorous basis for medical technologies accurate forecasting – Over 150 indications – Annual Revenue Potential (“ARP”) is – Over 30 countries a box that adoption and growth must ▲ Proven forecast accuracy operate within – Pacing market saturation in 2002 – Early majority is a hard gate – ICD market inflection in 2006 • 50% of people are slower to adopt – Spinal fusion market inflection in 2007 – Patient indications have very different – Diabetes pump market growth potentials – DBS and stim. for pain, UI, obesity, • Benefit, motivation & accessibility depression and others – Calculus of I & P and penetration – Coronary and peripheral stents, valves, constrains growth potential – Medtronic growth trajectory from 2005-2010 – Broad and rapid adoption is driven by ▲ Broad application many challenging factors – Diagnostics or therapeutics – Capital equipment, implantables, disposables, procedures – New technologies or mature products © Copyright 2011. Contents owned by and under license from Dymedex Consulting, LLC. 1/8/2011 6
- 7. Three major workflows inform the Dymedex CDA Model Market Size Annual Revenue Potential (ARP) Patient Indications Population Dynamics Net Sources of Revenue at each Milestone Penetration offorecast by Scenario Growth BPH Incidence by Scenario 120.0% 100.0% 2 80.0% Max-growth Scenario Attractiveness 60.0% 40.0% Baseline Growth Rates and 20.0% 1 Scenario Inflection Points 0.0% 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Accessibility by Segment Calculus of Penetration Barriers to Adoption Timing and Investments to Reach Milestones Behavior Change Sufficiency Analysis Pillars of Adoption © Copyright 2011. Contents owned by and under license from Dymedex Consulting, LLC. 1/8/2011 7
- 8. Our analysis is fact-based, rigorous, and transparent ▲ We simply use scientific method and rigorous, logical analysis and synthesis to: – Quantify the realizable size of the opportunity • Defining the ‘box’ and it’s various ‘compartments/segments’ provides valuable insights into both the possible and likely growth dynamics within the box – Quantify the barriers to broad adoption • It’s about human behavior, not the technology itself • We objectively assess all the factors that influence the likelihood of adoption by the ‘average’ user. The more factors that are favorably addressed the more likely broad adoption will occur • Informed by our analysis of many successful and unsuccessfully adopted medical technologies – Quantify how fast adoption can occur (relative and absolute) • Incremental benefit, ability to definitively diagnose, patient motivation, accessibility of patients ▲ From this foundational analysis and an understanding of the ‘calculus of penetration’ we can more confidently assess future revenue projections and strategic revenue milestones: – Time and investment to broad adoption – Major inflection points (magnitude and timing) © Copyright 2011. Contents owned by and under license from Dymedex Consulting, LLC. 1/8/2011 8
- 9. Broad adoption progresses through 5 distinct stages: this process can take decades! Validate Launch Foundation SOC 1 Assess 2 Develop 3 Build 4 Drive 5 Manage Sell Opportunity Product The Bridge Utilization Maturity BEHAVIOR INFRASTRUCTURE TECHNOLOGY SYSTEMS • Cost • Patient • Proof of CHANGE indications concept controls 1. Condition 1. Operational 1. Prescribers 1. Screening • Market • Marketing Management Preparation Tools • Pricing 2. Providers assessment plan discipline 2. Diagnostic Test 2. Procedure 2. Protocols 3. Primary • Technology • Design for Scalability Referrers 3. Expert Systems • Service & 3. Evidence support assessment manufacture 3. Ease of Use 4. Secondary 4. Core Metrics 4. Published • Iteration • IP strategy • Regulatory Referrers Guidelines 4. Maintenance 5. Pay for • Business • Reimburse 5. Allied Health Performance • Global 5. Reimbursement 5. Outcomes expansion plan Professionals • Clinical 6. Legal/Financial 6. Provider 6. Patient • New • Funding strategy 6. Patients and Incentives Economics Factors threats • Launch Patient Groups 7. Professional 7. Provider 7. Vendor planning 7. Other Sanctions Capacity Support Stakeholders © Copyright 2011. Contents owned by and under license from Dymedex Consulting, LLC. 1/8/2011 9
- 10. Roger provides well-established science to characterize physician behavior Early Majority (34%): • Comfortable with incremental improvements • Need references from reputable sources and peers (Guidelines) • Need to see the value/evidence • Don’t want to help fix the product • Will self-adopt if all their needs are being met Late Majority (34%): • No surprises • Will adopt to stay abreast of the new standard • Skeptical of what’s new (high bar for change) Innovators (3%): • Want change to be easy • Actively seeking to make change • Followers • Willing to work with technologies that are not perfected • Experimental, motivated to discover new technology limits Laggards (16%): • Will only change via threat – legal, Early Adopters (13%): professional • Opinion leaders, see the strategic benefit of new technology Of the physicians who inform • Looking for solutions to existing compromises your business decisions, which • Comfortable with change segment do they represent? • Can live with less than perfect results and tools © Copyright 2011. Contents owned by and under license from Dymedex Consulting, LLC. 1/8/2011 10
- 11. Adoption rates vary by patient segments ▲ Perfect Patients…. – That group for whom your technology/therapy will offer the greatest Disease Population benefit with the most consistency Less Clear benefit or evidence – Beachhead indication for standard of care Fourth Tier Candidates – Easiest to identify Third Tier Candidates ▲ Subsequent Indications Second Tier – Based on the logical sequencing of how Candidates physicians/clinicians would migrate the therapy/technology – Typically they have decreasing benefit Perfect Patients – May be less easy to identify – Will be slower adoption More difficult, more complex, older ▲ Indication decisions drives: – Clinical & regulatory strategy If you don’t define them, – Launch strategy physicians will – KOL strategies © Copyright 2011. Contents owned by and under license from Dymedex Consulting, LLC. 1/8/2011 11
- 12. Integration of Compelling R3 PATIENT SEGMENTS Non- Opportunity patient & physician segments informs R2 revenue milestones Opportunity Compelling and adoption < 50%? (growth) rates R1 Opportunity < 5%? Faster adopting Slower adopting PHYSICIAN SEGMENTS Perfect Patients with Early Adopters Adoption Incidence Rate time © Copyright 2011. Contents owned by and under license from Dymedex Consulting, LLC. 1/8/2011 12
- 13. Quantify the market potential based on the “dynamic calculus” of incidence and prevalence Diabetes Common Cold Inc. D = 50 yrs Annual Inc. Prev. D = 1 week Prev. © Copyright 2011. Contents owned by and under license from Dymedex Consulting, LLC. 1/8/2011 13
- 14. Calculating revenue at R1, R2 and R3 may reveal a net market potential far different than one might initially think Total Gross Prevalence = 1 million Incidence = 200k Traditional Exclusions = 250k Prev. ASP = $1,000 (Medical & Economic) view? $1 billion market Perfect Patients = 50k Secondary Patients = 300k “All the rest” Incidence = 10k Incidence = 60k Inc. = 80k At R3 = $10 million At R3 = $60 mil. R3 = $80 mil. Early Majority = R2 = $5 mil. Early Majority (R2) = $27 mil. R2 = ~$0 Early Adopters = R1 = $1.5 mil. Early Adopters = R1 = $9 mil. R1 = ~$0 R1 = $10.5 mil. R2 = $32 mil. R3 = $150 mil. (7%) (21%) (100%) © Copyright 2011. Contents owned by and under license from Dymedex Consulting, LLC. 1/8/2011 14
- 15. ABOUT DYMEDEX CONSULTING © Copyright 2011. Contents owned by and under license from Dymedex Consulting, LLC. 1/8/2011 15
- 16. Good decisions based on unreliable market information are not good decisions. Only 12% of med-tech ventures return significant returns to investors, and over 50% fail despite seasoned leadership and funding.(1) Dymedex synthesizes established science with proven proprietary tools to deliver unique market insights that inform critical decisions. Dymedex helps you: By providing unique insights: 1 Make a In-depth, research-based analysis of the market, compelling case perfect patients, target physicians, prioritized segments, for investment Annual Revenue Potential (ARP), and growth forecast 2 Accelerate Proven methods to identify critical strategic and or revive tactical barriers to full adoption, and investments revenue growth required to reach standard-of-care (maximum) volumes 3 Optimize Standard, objective, transparent framework that portfolio enables comparison, revenue forecasting, and performance strategic prioritization of a portfolio of investments (1) Patient Capital, National Venture Capital Association’s Medical Industry Group, at www.nvca.org © Copyright 2011. Contents owned by and under license from Dymedex Consulting, LLC. 1/8/2011 16
- 17. DMX Analytical Process 1 2 Client and physician 3 Gathering of relevant Distillation and input into current peer-reviewed published organization of data points treatment practices, papers from papers, client and indications and patient physicians stratification methods 4 5 6 Synthesis of data into Evaluation and Estimates for a quantified model of the quantification of trends in clinical and economic disease, condition and underlying incidence, exclusions relevant segments duration and prevalence 7 8 Integration of disease 9 Evaluation of outlier model and historical unit Sensitivity analysis data and an assessment volumes into a dynamic and integration into final of the overall confidence market model track and conclusions of the analysis project penetration © Copyright 2011. Contents owned by and under license from Dymedex Consulting, LLC. 1/8/2011 17
- 18. About Dymedex Consulting ▲ Established 2007 Sample Clients ▲ Based in Shoreview, MN AMS Medtronic CHF Solutions Piper Jaffray ▲ Founders have analyzed over 150 medical technologies, markets, Intricon SetPoint Med. and indications Mayo Clinic St. Jude Medical ▲ Joseph Galatowitsch, President & Managing Partner ▲ “I firmly believed we understood our market and our path for – Joe has 26 years in the global growth, but Dymedex provided such new insights into the medical technology industry at 3M’s market opportunity and the barriers to adoption that their medical supplies business and at analysis has become a foundation for our business strategy.” Medtronic. Joe pioneered the – CEO, CHF Solutions discipline and implementation of market development at Medtronic. ▲ “Your market assessment caused us to recast our go-to- market strategy, and now helps me present the true potential ▲ Ross Meisner, of our company to investors with complete confidence.” Managing Partner – CEO, Harbinger Medical – Ross has 20 years experience ▲ “Joe pioneered elegant new market and portfolio assessment building high-tech and med-tech methodologies at Medtronic. His new strategic insights companies. He has co-founded four dramatically improved our ability to objectively value and start-up companies, managed two effectively manage Medtronic's extensive therapy portfolio.” international joint ventures, and – Executive Vice President, Medtronic directed international market development at Medtronic. ▲ “It would have taken us a year to do this ourselves, and it would not have been nearly as actionable.” – Director of Market Research, St. Jude Medical © Copyright 2011. Contents owned by and under license from Dymedex Consulting, LLC. 1/8/2011 18