Market Analysis

Biotech Connection - Bay Area, Inc.

Stanford Innovation Farm Program
Sept 27th, 2016
 UCSF – UC Berkeley – Stanford

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Ben Cohn
Biotech Connection – Bay Area
b.cohn@biotechconnection-bay.org
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 Leadership Team

Ryan Jones Aishwarya Jayagopal TJ Hu Nisreen Hejab Daniel Lu

President VP Consulting VP Operations Project Manager Project Manager
UCSF UCSF UCSF Berkeley Stanford

Shabnam Ziaee Jennifer Liu Shalini Kumar Brynne Ulmschneider

Project Manager Events Professional Dev Communications
UCSF UCSF Berkeley UCSF

4
biotechconnection-bay.org
r.jones@biotechconnection-bay.org
Alumni Network

Finance Venture Capital Consulting Biotech Pharma

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 Executive Summary

1. Selecting a potentially successful product (idea,

technology, service)

2. Defining the market

3. Market analysis: leveraging primary and secondary

research to quantify value addition

4. Due diligence: market and industry, path to mass

production, substitutes, barriers to entry
 Successful Product
PRODUCT  Proprietary (Jack Daniels vs. whiskey)
 Few Substitutes (Pepsi vs. insulin)
 IP (patents, trademarks, licenses)
 Can be re-used widely in many applications (microprocessor)
 Improve user experience (more convenient dosing)

MARKET  Size + segment (vanilla vs. garlic ice-cream)

 Growth (streaming vs. cable TV)
 Competition (telecom satellites vs. mobile phones)
 Barriers to entry (FDA)
 Favorable industry drivers (legislation, regulation, publicity)
 Successful Product
CUSTOMERS  Who (researcher? clinician? patient?)
 Need (analytical assay vs. diagnostic tool?)
 Want (convenience? price?)
 Change in needs now vs. future? (tattoos, financial software)
 Ease of advertising (ads, shows, conferences, papers…)
 Customer loyalty/retention (customer service, improvements,
consumables, barriers to move)

OTHER  Costs to launch (R&D, regulations, infrastructure, marketing…)

 Profit margin (luxury car vs. pen)
 Infrastructure? (lab space? machinery?)
 Suppliers? (uranium vs. NaCl)
 Channels? (CVS vs. hospitals only)

Business Model Canvass (www.businessmodelgeneration.com)

Business Model Canvass (www.businessmodelgeneration.com)
Product: SWOT analysis
 Market
Market is a mechanism through which a business delivers value
proposition.

BUSINESS CUSTOMER
 Market
Market is a mechanism through which a business delivers value
proposition.

BUSINESS CUSTOMER SEGMENTS

REGULATION
COMPETITION
Porter’s 5 Forces Driving Industry Competition

Porter, Michael E. Competitive Strategy: Techniques for Analyzing Industries

and Competitors. New York: The Free Press, 1980.
 Porter’s 5 Forces: Next-Gen Sequencing
Suppliers of raw materials,
reagents, computational
resources, specialists
• http://www.quickmba.com/
strategy/porter.shtml
• http://hbr.org/video/359061
5226001/the-explainer-
porters-five-forces
Single-molecule,
new technology
454 (Roche), Illumina,
Ion Torrent, Sanger
Researchers, clinics, AMCs,
PCR-based analysis,
proteomics, epigenomics,
other assays
Porter, Michael E. Competitive Strategy: Techniques for Analyzing Industries
and Competitors. New York: The Free Press, 1980.
 Market

Estimating Market Size

• Quantifies the financial potential of your business

• Helps you refine business model hypotheses:
– Hypothesis: Very small market size may not be worth pursuing
– Hypothesis: May be difficult to gain traction in a gigantic market
• Two measurements:
– Money (usually USD)
– Units
• People
• Consumption (e.g. kits, washloads, room nights, kilowatt hours, etc.)
 Market
Total Addressable Market (TAM):
Value of all of the buyer/seller relationships
participating in the market
TAM
Served Addressable Market (SAM):
SAM The part of the TAM for which your business
model’s value proposition is strongest
Target
Target Market:
Market
(Usually) demographic segment of the SAM
with the most direct path to success

Target market should be proportionally larger

than cost of development!
 Market
PRODUCT:
Pediatric Oral insulin formulation Total Addressable Market (TAM):
Value of all of the buyer/seller relationships
Diabetes, need participating in the market
insulin
Served Addressable Market (SAM):
Afraid of needles The part of the TAM for which your business
model’s value proposition is strongest
Insurance
will cover Target Market:
(Usually) demographic segment of the SAM
with the most direct path to success

Target market should be proportionally larger

than cost of development!
 Identify Market Niche (Market Segmentation)

1. Key to understanding target market size and needs, as

well as product fit.

2. Help identify point of entry.

Teletubbies Children
Vampire Diaries Teenagers
The Big Bang Theory Grad students
 Market Valuation

target
customer
Number Penetration Volume and
value
SEGMENT

• US Bureau of • What • Final number

Economic Analysis percentage x price
• US Census will use your
• Hoovers product?
• Trade Associations
• Non-Profit Groups

Good overview: http://www.lek.com/sites/default/files/Volume_IV_Issue_2.pdf

 Market Analysis

Research Product/Market and Ensure Value Addition

1. Primary research (interviews and surveys):

• Expert opinion, KOLs, inventors, customers

2. Secondary research: public domain

• Benchmark against existing products and companies
• Compare with companies who have recently
succeeded and failed
• Sources: Publications, press releases, conference
proceedings, patents, public databases, market
reports, SEC filings/10k/annual reports
 Market Analysis

Primary Research

SURVEYS AND QUESTIONNAIRES

• Use Google Survey or Survey Monkey
• https://www.google.com/insights/consumersurveys/home
• https://www.surveymonkey.com
• Decide on questions and response matrix
• Should test specific hypotheses, not for general
information gathering
• Distribute in many ways (social media, emails,
word of mouth) to potential users – avoid bias!
 Market Analysis

Primary Research
INTERVIEWS
• Provide in-depth expert information
• In-person, emails, phone calls
• Key opinion leaders: internet, personal connections,
conferences, published literature
• Identify pain points! Ask why questions!

OUR ADVANTAGES
• Typical response rate: 5-10%
• Use academic email, network and reputation: ~15-17%

TO OBTAIN A REPRESENTATIVE SAMPLE: START ON DAY 1!!!

 Due Diligence

Stress-Test Your Hypothesis

1. Market and industry – Is there need? Target market

size? Growth? Volatile? Competitive response?

2. Path to mass production – Cost? Technical concerns?

3. Substitutes

4. Barriers to entry
 Due Diligence

1. Market and Industry

• Need: Judgement and experience, primary/secondary research.
Product Adoption Curve
Early majority Late majority
34% 34%

Early adopters 13.5% Laggards 16%

Innovators 2.5%

• Target Market Value: Calculate – important for investors (VCs,

business angels - ~$ 1bln)
• http://www.marsdd.com/mars-library/how-to-estimate-market-size-business-and-marketing-
planning-for-startups/
• http://analysights.wordpress.com/2009/05/01/8-steps-to-determining-market-size/
 Due Diligence

1. Market and Industry

• Growth: secondary research, judgement and experience
• Drivers: population data, sales in similar sectors,
technology
• Extrapolating historical data (imperfect)

• Competitive response: Players - consolidated, fragmented?

What will they do? Pre-emptive measures?
• http://www.mckinsey.com/insights/strategy/beating_the_odds_in_market_entry
• http://businomics.typepad.com/businomics_blog/2008/01/starbucks-strat.html
 Due Diligence

2. Path to Mass Production

• Total cost of development – must be a fraction of

target market size (less than 10% ideal)
• Financing

• Technical concerns:
• Testing (6 months? 5 years?)
• Suppliers (location, availability, price)
• Technology – proprietary? Regulated?
• Scaling up from prototype (automation, cost structure)
• Design (convenience?)
 Due Diligence

3. Substitutes
Quality

• What are they – barriers?

Threat ?
• Soda vs. sequencers
Price
Ignore?
?

• What drives customer choice – can you leverage these?

• Product quality and price
• Brand loyalty
• Switching costs (e.g. Apple and Google)
• Marketing campaigns
• Long-term commitment (customer service, contracts)
 Due Diligence

4. Barriers to entry
• Key for science, medicine, technology:
• Regulatory: FDA, EMA
• Intellectual Property (Freedom to Operate analysis)

http://en.wikipedia.org/wiki/Barriers_to_entry#Barriers_to_entry_for_firms_into_a_market
 Summary

Pick a Killer Idea

Understand and Size the Market

Address Risk

Develop a Business Plan

Have Fun!