III.

Market Analysis
BME 440
Wei Yin
References: Biodesign by Zenios, Makower and Yock; Notes from Dr. Jonathan Liu
 Market analysis fundamentals
• Market analysis is performed early in the
biodesign innovation process to confirm
whether or not the need being considered is
associated with a commercially viable market.
 Two different approaches
• The need has to have a very large market… There’s
only so much time in the day, and it’s really just as
easy to develop a solution for a large market as it is
for a small market – Richard Stack, president of
Synecor, Inc.

• I’m a big fan of niches – of not trying to take on an

entire market at once – because there’s less
resistance to innovation when you do it on a smaller
scale – John Abele, cofounder of Boston Scientific
 Market segmentation
• Market segments divide patients, payers, and
providers into different groups that share
similar perceptions about a need.
• An effective market segmentation strategy
identifies subsets of the population with the
greatest similarity while maintaining
maximum differences between the groups.
• Begin with a relatively simple patient-based
analysis
• Layer in complex factors (payers and
providers, etc.)
• Try to account for as many stakeholders as
possible
 Market segmentation process
• Step 1, segment patients based on symptoms
and risk factors
• Step 2, segment patient subgroups (e.g. ESRD)
based on treatment
• Step 3, segment patient/treatment subgroups
based on providers
• Step 4, segment patient/treatment/provider
subgroups based on payers
 To differentiate between market segments

• Age
• Gender
• Ethnicity
• Treatments
• Disease (subtype, stage …)
• Provider type
• Consumer demographic (employment role,
salary…)
• Institutional profile (university, corporate,
government…)
 Market size
• How do you determine the size of each
segment
– Number of patients in each market segment
– Treatment options for each segment, who are the
providers, what is their market share
– Total cost of treatment for each market segment
– Epidemiologic growth pattern in each segment
(growth projection in the near, medium, and long
term)
 An example
• A top-down approach by Moshe Pinto, Dean
Hu and Kenton Fong $20 billion in annual health
costs in the US and $566 million
Need to promote chronic wound healing in wound care products

Diabetic ulcers Post trauma Venous Pressure burns

(resulting wound ulcers sores
amputations)

Aggregate daily cost of the lead product for venous ulcers - $150
Multiply by: duration of the therapy, prevalence of venous ulcers – $3.6 billion
from the time of study to 2009
Penetration rate is 30% - include market growth, the total value is $12 billion
 Market dynamics
• It is important to understand the competitive
dynamics within the market segments
• Two well-established frameworks
– Porter’s five forces
– SWOT analysis
 Porter’s five forces – developed by
Michael Porter
• The threat of new competitors to the market
(barriers that prevent them from entering)
• The bargaining power of suppliers
• The bargaining power of buyers
• Pressure from substitute products or services
• The intensity of rivalry among existing
competitors
 SWOT analysis – Albert Humphrey
• Strength – internal attributes that give a company
a competitive advantage
• Weakness – internal attributes that form barriers
• Opportunities – external conditions that are
helpful (intellectual property and regulatory
issues, partnerships, stakeholder satisfaction,
economic, social and technological factors)
• Threats – external conditions that are harmful
(including other competitors)
 Market needs
• The needs of each subgroup may vary slightly
from each other
• Are there any unique problems or needs that
exist within the segment
• How well the needs of customers within each
subgroup are currently being met
• Need to evaluate how expected outcomes
change the existing treatment options
Willingness to pay
 Willingness to pay?
• Comparables – evaluate the prices for similar
devices and existing treatment options
• Value analysis – assess the anticipated
financial gain to the user (provider, patient or
payer) for adopting the new technology
• Willingness to pay survey – collect information
directly from stakeholders regarding the
maximum payment they would be willing to
make
Market analysis considerations
 Target market
• The target market is the segment that scores
best
• Still need to consider
– Investor funding
– Accessibility of the market segment
– Likelihood of segment to adopt new technology
Working example: Market analysis for
chronic kidney disease
• Reason: Early effective diagnosis of CKD
reduces the incidence of hospitalization and
also diminishes the rate of disease progression
• There is a NEED for a device, method, or
system that would successfully diagnose
patients with CKD earlier in the cycle of care
to help prevent disease progression.
 Patient-based market segmentation
• Using markers of disease progression to
identify basic similarities and differences
among patient population
• Divide patients into five CKD stages:
– 1-2 mild
– 3 moderate
– 4 severe
– 5 end-stage renal disease (ESRD)
 Market segment - continued
• Determine
– The size of each segment (number of patients)
– Extent of the medical need in each segment
(mortality and morbidity rates, expenses per
patient)
– Segment growth rates
• Literature searches and public databases
– Nutrition examination survey (NHANES)
– Medical expenditure panel survey (MEPS)
Sample Market Size/Growth Analysis
(CKD)
 Ideal market segment
• Large total medical expense – all segments
satisfy
• High expenses per patient – the total number
of patients small and easy to access
• High growth rate
• ESRD and severe CKD segments are better
segments
 Target market
• NHANES survey – asked patients if they were
aware of altered kidney function
• 25% patients with serious CKD were aware of
it
– Diagnosed because of elevated albumin to
creatinine ratio (ACR)
• Target market: patients with severe CKD and
high ACR
 Market analysis, another example
• It is very challenging when the need is ground-
breaking with no proven market.
• Randy Scott (Genomic Health Inc.) – it would
become possible to analyze genomic
information on a patient-by-patient basis and
develop truly personalized regimes to treat
disease
• Segmentation analysis – diseases that could
potentially benefit from personalized
medicine
– Oncology
– Inflammation
– Cardiovascular
– infertility
• Clinical and market criteria used to rank them
– Market size
– Potential for genomic information to predict
disease progression
– Drug development pipelines (will they be
responsive to new drugs?)
– Patient involvement in treatment choices
– Physician willingness to adopt new treatments
 Focus area - cancer
• Cancer is mostly a genome-based disease
• Response to drugs are variable and uncertain
• Patients tend to drive the adoption of new
technologies
• Total market for oncology drugs – multibillion
 Narrow it down to breast cancer
• Prior experience
• Breast cancer is one of the top four prevalent
cancers
• Market accessibility
• Likelihood of adopting new technology
• Clinical knowledge
 Aha moment
• Predicting distant recurrence of breast cancer
for early-stage patients can help them make
better decisions about what treatment to
pursue
• One step further: target market segment
includes patients with early state, node-
negative (N-), estrogen receptor positive (ER+)
breast cancer.
 Need statement
• High value, information-rich diagnostics based
on patient-level (gene-expression) genomic
testing to predict the recurrence of early
stage, N-, ER+ breast cancer and enable
personalized treatment
• Market size: approximately 100,000 patients
per year
 Price analysis
• A genetic test available in the market: $3,000
per test
• Chemotherapy for early-stage breast cancer
patients = $15,000
• If the test helps to cut the number to 50% -
total savings to the healthcare system = $7,000
• Total potential market = $7,000 x 100,000 =
$ 700 million
• The test not only predicted the likelihood of
recurrence, but also a patient’s response to
chemotherapy
• Oncotype DX has been used by more than
40,000 patients by the end of 2007
• $3,650 per test, and it was covered for more
than 60% of insured patients