XXXX CASE STUDY:

2011 JHBCC BIOTECH CASE COMPETITION

Morassa Mohseni, PhD
Associate, PhD to Consulting, Johns Hopkins University Department of Human Genetics

Case Introduction

Our client, XXXX, has developed a new type of tube replacement for enteral feeding devices
Current Market Size

XXXX

Revenue Year 1 & First 5years at $120 Our Recommended Price Point

Recommendation

The current US market size is 260,000 enterally fed patients needing 200,000 feeding tube replacements per year Revenue at $120 per XXXX:
In

Year One

= $224,000

For

First Five Years

= $11,600,000

Our Recommended Price Point = $250

* Net present value, given 7% discount rate

Key Issues in Determining Our Recommendations

Which diseases may require enteral feeding?

Percentage of patients with disease who receive gastric feeding tubes Mortality rates associated with disease Duration of feeding tube use (Permanent vs. Short-term use)

2011/2012 Medicare reform can effect the market size Price point of competing replacement enteral feeding tubes

The Enteral Feeding Tube Replacement Market

Feeding Tube Replacement Market Breakdown % of Feeding Tube Replacements Per Disease
Advanced Dementia 7%

2.4 Million in the US with Diseases Potentially Needing Feeding Tubes

Parkinsons 260,000 Patients with Feeding Tubes

17%
200,000
Feeding Tube Replacements Per Year

Stroke 52%
Head/Neck Cancer 15%

ALS 3%

Esophogeal atresia 4%

Cystic Fibrosis 2%

Reference: 1,3,4,7,8,10-13,15, 16

Risk of Losing Market with Medicare/Medicaid Reform

Advanced Dementia 7%

Enteral feeding in the Advanced Dementia, ALS, and Parkinsons populations is being recognized as a non-beneficial procedure

Eventually covered by Cadillac insurance

Parkinsons

17% Stroke 52%

Head/Neck Cancer 15%

Overall cost of tube feeding is expensive ($31,832 per year in 2001) Currently, 26% Medicare expenditures occur in the last-year-of-life ($720 Billion)

ALS 3%

The 2011/2012 Medicare reform will remove the cost burden of palliative care in the last-year-of-life

Esophogeal atresia 4%

Cystic Fibrosis 2%

This may eliminate upwards of 27% of the Enteral Feeding Market

Revenue Predictions

Year 1 predicted revenue at $120 = $224,000* Predicted Total Revenue for first 5 years*:
$25,000,000

$23,000,000

$20,000,000

Net Present Value

$15,000,000

$11,600,000
$10,000,000

$5,000,000

$4,000,000 $224,000

$0 1% Market Share Worst Case (5% Market Share) Expected Case (15% Market Share) Best Case (30% Market Share)

Year 1

Year 5

* Net present value, given 7% discount rate

Revenue Adjusted for Medicare Reform

XXXX Expected Annual Revenue at $120/tube
$8,000,000 $7,000,000 $6,000,000

Total
$7,150,000

Adjusted

Revenue

$5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $0

27% Market size lost due to Medicare Reform

$3,600,000

$5,200,000

$2,600,000

$240,000 $173,000 1% Market Share

$1,200,000 $870,000

Worst Case (5% Market Share)

Expected Case (15% Market Share)

Best Case (30% Market Share)

Year 1

Year 5

Competitors in the Enteral Feeding Tube Market

Device
QuanTube Button Bumper Balloon

Lifespan
3 3 2 1

Risk of Pain of Max force Risk of BBS Ulceration Installation load

1 1 1 0 1 1 0 1 3 2 1 3 3 1 1 1

Time to Install
3 3 1 1

Non-specialist Installation
1 0 0 0

Enteral Feeding Device

Novartis Replacement Balloon Gastrostomy Tube Ross MAGNA Port Balloon Gastronomy Tube Nestle Compat Replacement Balloon Gastrostomy Tubes Kimberly Clark MIC-KEY Low-Profile Gastrostomy Balloon Feeding Tube Corpak Low Profile Gastrostomy Device Bard Button Replacement Gastrostomy Device

Avg Cost/Tube
$43.14 $44.99 $67.32 $109.62 $138.27 $311.30 Low and Mid Range Devices

Premium Device

Closest competitor to XXXX = Premium Device Longevity, Ease of use, Patient care (pain, ulceration)

BARD Button Replacement Device

Recommended Price Point: $250

$120 Price Point
$60,000,000

$250 Price Point

$50,000,000

How can we get to 30%?

$48,000,000

Net Present Value

$40,000,000

$30,000,000

Aggressively market advantages of XXXX vs. Bard (Competitors) Partnership with establish biomedical device company
$24,200,000 $23,000,000

$20,000,000

$10,000,000 $470,000 $224,000 1% Market Share

$8,400,000 $4,000,000 Worst Case (5% Market Share)

$11,600,000

$0

Expected Case (15% Market Share)

Best Case (30% Market Share)

Year 1

First 5 Years

* Net present value, given 7% discount rate

Summary

Enteral Feeding Tube Market Size:

260,000 patients 200,000 feeding tube replacements

Expected revenue at $120 for year 1 = $224,000* Total revenue for first 5 years at $120 = $11,600,000* Medicare reform in 2011/2012 expected to reduce market size by upwards of 27%
Our recommendation is to increase price point to $250

Price is competitive with most similar premium devices (Bard Button)

Price will off-set loss of revenue due to Medicare reform

Total revenue for first 5 years at $250 price point = $24,200,000*
* Net present value, given 7% discount rate

References
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16.
Alshekhlee, A., et al., National Institutes of Health stroke scale assists in predicting the need for percutaneous endoscopic gastrostomy tube placement in acute ischemic stroke. J Stroke Cerebrovasc Dis. 19(5): p. 347-52. Callahan, C.M., N.N. Buchanan, and T.E. Stump, Healthcare costs associated with percutaneous endoscopic gastrostomy among older adults in a defined community. J Am Geriatr Soc, 2001. 49(11): p. 1525-9. Dennis, M.S., S.C. Lewis, and C. Warlow, Effect of timing and method of enteral tube feeding for dysphagic stroke patients (FOOD): a multicentre randomised controlled trial. Lancet, 2005. 365(9461): p. 764-72. Erskine, J.M., C. Lingard, and M. Sontag, Update on enteral nutrition support for cystic fibrosis. Nutr Clin Pract, 2007. 22(2): p. 223-32. Grant, M.D., M.A. Rudberg, and J.A. Brody, Gastrostomy placement and mortality among hospitalized Medicare beneficiaries. Jama, 1998. 279(24): p. 1973-6. Kurien, M., et al., Percutaneous endoscopic gastrostomy (PEG) feeding. Bmj. 340: p. c2414. Nugent, B., S. Lewis, and J.M. O'Sullivan, Enteral feeding methods for nutritional management in patients with head and neck cancers being treated with radiotherapy and/or chemotherapy. Cochrane Database Syst Rev, (3): p. CD007904. Plassman, B.L., et al., Prevalence of dementia in the United States: the aging, demographics, and memory study. Neuroepidemiology, 2007. 29(12): p. 125-32. Potack, J.Z. and S. Chokhavatia, Complications of and controversies associated with percutaneous endoscopic gastrostomy: report of a case and literature review. Medscape J Med, 2008. 10(6): p. 142. Rabeneck, L., N.P. Wray, and N.J. Petersen, Long-term outcomes of patients receiving percutaneous endoscopic gastrostomy tubes. J Gen Intern Med, 1996. 11(5): p. 287-93. Raykher, A., et al., Enteral nutrition support of head and neck cancer patients. Nutr Clin Pract, 2007. 22(1): p. 68-73. Spataro, R., et al., Percutaneous endoscopic gastrostomy in amyotrophic lateral sclerosis: effect on survival. J Neurol Sci. 304(1-2): p. 44-8. Taniguchi, A., et al., [Analysis of application form for Parkinson's disease provided by the specific diseases treatment research program of Ministry of Health, Labour and Welfare of Japan]. Rinsho Shinkeigaku, 2008. 48(2): p. 106-13. Wicks, C., et al., Assessment of the percutaneous endoscopic gastrostomy feeding tube as part of an integrated approach to enteral feeding. Gut, 1992. 33(5): p. 613-6. Wijesekera, L.C. and P.N. Leigh, Amyotrophic lateral sclerosis. Orphanet J Rare Dis, 2009. 4: p. 3. Williams, S.G., et al., Percutaneous endoscopic gastrostomy feeding in patients with cystic fibrosis. Gut, 1999. 44(1): p. 87-90.

US Demographic Data of Enterally Fed Patients

Diseases that may require an Enteral Device

Advanced Dementia (Age & AD) Parkinsons ALS (NMD) Head/Neck Cancer Cystic Fibrosis Esophogeal atresia Stroke Total

US patients with Number of US patients disease using tube replacements per with this disease feeding year
600,000 497,600 15,550 500,000 30,000 78,000 700,000 2,421,150 33,960 32,842 6,376 50,000 3,900 7,800 123,200 258,077 14,942 32,842 6,376 30,000 3,900 7,800 102,667 198,526

Bard Access Systems

Bard Access Systems

Total

Revenue (2010) = $480 Million

30%

of Revenue from Oncology Division which include enteral feeding products Estimated Revenue for Enteral Feeding Products = $24 Million Number of Bard Button Devices sold = 77,000/year Approximately 30% of the Market Share

Hoover, Datamonitor 360