1. Feasibility Analysis:
Species-specific Nucleic
Acid Detection Probe for
Fungi
JOHNS HOPKINS CAREY BUSINESS SCHOOL
NATIONAL INSTITUTES OF HEALTH
KELLY LEBRUN, NAZLI MEREY, TOLU OLORUNTOBA, GREGORY
PETROSSIAN, MEGAN WARD

2. Agenda
Overview
• Case Report
• Value Proposition
• Problem
Statement
Analysis
• Current Treatment
Outline
• Invention
Overview
• Competitive
Advantage
• 9 Market Forces
• Stakeholder
Analysis
Market
Strategy
• IP Status
• Potential
Licensees
• Out-licensing
Terms
• Licensing Funding
Needs
• Business Model
Financial
Strategy
• Market Size
• Price
• Revenue
Projection
• Milestones
• 5 Year Projection
Conclusions
• Patent
Considerations
• Recommendations
2OVERVIEW ANALYSIS STRATEGY FINANCIAL CONCLUSION

3. Case Report
Patient
C.D.
70-year-
old retiree
August 2015
Double lung transplant
at UPMC with
immune-suppressing
drugs
September,
2015
Acquired fungal
infection while
inpatient
Fall 2015
Several lung
surgeries for
infection control
January 2016
C.D. and family
file lawsuit
against UPMC
February 7th, 2016
C.D. dies
3OVERVIEW ANALYSIS STRATEGY FINANCIAL CONCLUSION

4. Value Proposition
A rapid diagnostic test for fungal infections that cause sepsis in
immunocompromised patients.
Detecting fungal infections quicker and more accurately
improves patient outcomes and reduces cost.
4OVERVIEW ANALYSIS STRATEGY FINANCIAL CONCLUSION

5. Problem Statement
5
Immunocompromised
patients susceptible to
infections
Fungal infections
are most
common in
hospital
High mortality
rate
(58-99%)
Delay in
diagnosis
increases
mortality
Late
diagnosis
increases
healthcare
costs
Cancer, trauma,
burns, HIV,
organ, BMT
Reference: Swu-Jane L, Schranz, J and Teutsch, S. Aspergillosis Case-Fatality Rate: Systematic Review of the Literature. Clinical Infectious Disease. (32) 3, p. 358-366.
OVERVIEW ANALYSIS STRATEGY FINANCIAL CONCLUSION

6. Current Treatment Timeline
6
Reference: 1. Kumar. Chest, Nov. 2009, p. 1237-1248
2. Kumar et al. Crit Care Med 2006 Jun 34(6):1589-96
OVERVIEW ANALYSIS STRATEGY FINANCIAL CONCLUSION

7. Invention Overview
• DNA-based probe that detects fungal infection in a patient’s
bloodstream
• Offers rapid diagnosis for targeted treatment
• Probe can be utilized with different methods:
• In Situ PCR
• In Situ Hybridization
• MR/Nano technology
7OVERVIEW ANALYSIS STRATEGY FINANCIAL CONCLUSION

8. Competitive Advantage
Higher
Sensitivity
(approx. ~
45% greater)
Rapid
Diagnostic
(4-10 hours
vs. 2-4 days)
Reduction in
Drug Toxicity
Reduction in
Drug
Resistance
Reduction in
Unnecessary
Treatment
Cost Savings:
$500 per
patient
Reduction in
Length of
Stay
(approx.~ 9
days less in
ICU/GW
Cost Savings:
$30,000
8
Reference: Bilir, S. P., Ferrufino, C. P., Pfaller, M. A., et al. (2015). The economic impact of rapid Candida species identification by T2Candida among high-risk patients. Future microbiology, (10) 7,1133-1144.
OVERVIEW ANALYSIS STRATEGY FINANCIAL CONCLUSION

9. 9 Market Forces
9OVERVIEW ANALYSIS STRATEGY FINANCIAL CONCLUSION

10. Stakeholder Analysis
Hospitals
•Patient care and cost
savings
Clinicians
•Patient outcomes and
safety
Inventors
•Time to horizon
NIH Patent Office
•Time /money consideration
Academic medical
institutions
•Could help or hurt related
to power to influence
Licensees
•Biotech companies (i.e.
Roche, Abbott, etc.)
Advocacy Groups
•For immunocompromised
patients
Insurance payors
•Reimbursement of testing
Investors
•Capital funding
10OVERVIEW ANALYSIS STRATEGY FINANCIAL CONCLUSION

11. Patent Landscape
Intellectual Property:
• U.S. Pat: 6,372,430 issued 2002-04-16
• U.S. Pat: 7,052,836 issued 2006-05-30
• US Application No. 09/423,233
• US Application No. 10/046,955
• Foreign Patent: 96/21741 July 1996
• Canada, Spain, UK, Germany, Austria,
• Japan (discontinued)
Inventors:
• Christine Morrison (CDC)
• Errol Reiss (CDC)
• Lilianna Aidorevich (CDC)
• Jong Soo Choi (CDC)
Current Assignee:
• Government of United States of America, ℅ CDC TTO
11
Reference: http://www.ott.nih.gov/technology/E-232-2013
OVERVIEW ANALYSIS STRATEGY FINANCIAL CONCLUSION

12. Intellectual Property Status
12
Nucleic acids for detecting
Aspergillus species and
other filamentous fungi
(US 6372430 B1)
Nucleic acids for detecting
fusarium species
(US 7052836 B2)
Compositions and methods
for the detection of Candida
species
(US 8119788 B2)
Methods for the
differentiation and
identification of medically
important endemic fungi
(US 7427472 B2)
Molecular identification of
Aspergillus species
(US 7384741 B2)
Molecular identification of
Aspergillus species
(US 7871779 B2)
1997 2001 2002 2005 2016 2017 2021 2022 2025
Patent Expiry: 2017
Reference: http://www.uspto.gov/
OVERVIEW ANALYSIS STRATEGY FINANCIAL CONCLUSION

13. Potential Licensees
13
Molecular Diagnostic
Biotech Companies
Molecular Diagnostic
Reagent Companies
Academic
Institutions
Biotech
Startups
*
*
JUSTIFICATION: Market Leaders in Diagnostic Testing, Reagents, and Academic Institutions
OVERVIEW ANALYSIS STRATEGY FINANCIAL CONCLUSION

14. Out-Licensing Terms
Apply for
exclusive license
or sub-license
Establish
performance
benchmarks
Submit business plan
Negotiate
licensing terms
Report
utilization
annually
14OVERVIEW ANALYSIS STRATEGY FINANCIAL CONCLUSION

15. Licensing Funding Needs
Royalty Rate of 1.5%
Sublicensing Royalty Rate of 15%
Tiered Execution Royalty
15OVERVIEW ANALYSIS STRATEGY FINANCIAL CONCLUSION

16. Business Model
Type of Model: Business-to-Business Licensing
Value Architecture: An Aspergillus DNA probe
available as a part of kit for a battery of
microbiological tests for high risk patients
Value Network: Network of suppliers and users of
medical diagnostic devices
Value Finance: Medicare & privately insured patients,
payment for the 3 reimbursable species of Aspergillus
16OVERVIEW ANALYSIS STRATEGY FINANCIAL CONCLUSION

17. US Market Size
Sepsis Cost
$20 B
Diagnostic
Market $5.2 B
Total Revenue
$900 M
Reimbursement
Opportunity
$285 M
17
Prevalence: 1.89 M patients
US hospitals
Reimbursement Price: $150
($50 for 3 species)
https://www.nigms.nih.gov/Education/pages/factsheet_sepsis.aspx
OVERVIEW ANALYSIS STRATEGY FINANCIAL CONCLUSION

18. Pricing Range
18
Reference: Masters, Ronald. Quest Diagnostics. Personal Interview. 21 March 2016.
Traditional
Diagnostics
Blood Culture
$40
Rapid
Diagnostics
PCR/bDG
$150
Rapid
Diagnostics
T2 test
$250
Reimbursement: $50-$150
CMS reimburses 3 of the 10 species under patent up to $50 each = $150 total
Recommendation: Price $150-$250 per test until further CPT codes developed for rapid diagnostics
OVERVIEW ANALYSIS STRATEGY FINANCIAL CONCLUSION

19. Potential Revenue Projection
($ Millions) 2016 2017 2018 2019 2020 Total
Revenue
Opportunity
$285.00 $324.05 $368.44 $418.92 $476.31 $1,872.71
Conservative Market
Capture
2% 4% 8% 10% 15%
Conservative
Projected Revenue
$5.70 $12.96 $29.48 $41.89 $71.45 $161.47
Aggressive Market
Capture
3% 6% 10% 15% 22.50%
Aggressive Projected
Revenue
$8.55 $19.44 $36.84 $62.84 $107.17 $234.84
19
Revenue Opportunity CAGR 13.7%
Projected Potential Revenue by Year 5: ($161.47 + $234.84)/ 2 = $198.16 Million
OVERVIEW ANALYSIS STRATEGY FINANCIAL CONCLUSION

20. Milestones: Commercialization
Raising Capital (private,
government, donors)
Sublicense to
Manufacturer
Collect Royalty Payments
from Manufacturer
Pay Royalties to NIH
20
• Seek FDA approval for a Part 866
(Microbiology) Class II device
• Premarketing notification 510(k)
submission to FDA
• Similarity to other fungal DNA
probes 90 days before marketing
• 510(k) assessment fee for small
businesses = $2,614
Product Development Milestones
OVERVIEW ANALYSIS STRATEGY FINANCIAL CONCLUSION

21. NIH Revenue 5-Year Projection
Projected Total
Revenue by Year 5:
$198.16 M
$10 cost per $50
species test = 20%
operational cost
$198.16 M - $39.63 M =
$158.53 M profit
Projected Total Profit
by Year 5 for Sub-
Licensee: $158.53 M
Projected Royalties from
Licensee (25%): $39.62 M
•Projected Royalties from Small
Business (15%):
$5.95 M
Projected Royalties from
Large Biotech (1.5%):
$2.38 M
21
Sub-license
Exclusive license
OVERVIEW ANALYSIS STRATEGY FINANCIAL CONCLUSION

22. Patent Considerations
Not a stand-alone product
Difficult to enforce IP (substitute products)
Patent protection horizon only 1 year
Unable to recoup R&D investment
22
Advise Non-Renewal of Patent
OVERVIEW ANALYSIS STRATEGY FINANCIAL CONCLUSION

23. Recommendations Moving Forward
Donate
intellectual
property
Research
institutions
Health-
related
nonprofits
Release
intellectual
property to
public domain
23OVERVIEW ANALYSIS STRATEGY FINANCIAL CONCLUSION

24. THANK YOU

25. References
25
• https://www.nigms.nih.gov/Education/pages/factsheet_sepsis.aspx
• http://www.world-sepsis-day.org/CONTENTPIC/2015_WSD_FactSheet_long_English.pdf
• http://www.bccresearch.com/market-research/biotechnology/molecular-diagnostics-technologies-
global-markets-report-bio063c.html, Molecular Diagnostics: Technologies and Global Markets
• Code - BIO063C, Published - June 2015, Analyst - Jon Evans, Category – Biotechnology
• IBIS World, accessed on April 13, 2016, at www.ibisworld.com/reports/us/industry/ataglance
• Raffery, M, A.(2007). Managing change in biotech: mergers and acquisitions. Nature Biotechnology 25,
689 (2007)
• Masters, Ronald. Quest Diagnostics. Personal Interview. 21 March 2016.
• Scaffer, D. In Licencing as Business Model. Retrieved from
http://www.nature.com/bioent/2003/030101/full/nbt0602supp-BE36.html
• Udemy Content Library, accessed on April 13, 2016, at blog.udemy.com/types-of-market-
segmentation

26. APPENDIX
26

27. Current Standard of Diagnosis
Current Standard: Blood Culture
• Blood volume: problematic for critically ill & pediatric
patients
• Low sensitivity: blood culture is 50-60% accurate
• Time to result: 2 - 6 days
Alternative Option: Biopsy
• Invasive procedure
27

28. Scope of Invention
Enabling
Technology
• Probe is used
with diagnostic
tools (can’t be
used otherwise)
Combination
Technology
• Reagent
companies could
license parts of
the diagnostic
tool
Sustaining
Technology
• Rapid/accurate
diagnosis
improving patient
outcomes,
decreasing
unnecessary
treatment and
costs
28

29. Scope of Invention
29
What is a DNA probe?
• Marker to identify a target within a
biological sample
What is our technology based on?
• Genetic engineering → process of
identifying DNA, and manipulating in the
laboratory for targeted results

30. Business Model
•Business-to-Business Licensing
Type of Model
•A fungal diagnostic component sold by licensee to hospitals with patients who are immunocompromised
•Rapid Diagnosis
•Improved patient outcomes
•Reduces cost
Value Proposition
•Making an Aspergillus DNA probe available as a part of kit for a battery of microbiological tests for at risk patients
Value Architecture
•Network of suppliers and users of medical diagnostic devices
Value Network
•For Medicare & insured patients, payment for the 3 reimbursable species of Aspergillus; out-of-pocket payers
Value Finance
30

31. Management Structure
31
Board of Directors
Management
Chief Executive Officer Chief Financial Officer Chief Operating Officer
Chief Scientific Officer Chief Medical Officer General Counsel
Corporate Development Engineering

32. Funding Source – Product Development
Impact Investment & Accelerator Programs
The Alvin and Fanny B. Thalheimer Foundation
McArthur Foundation
Abell Foundation
32

33. Milestones: Start Up Considerations
Legal
Incorporation
Tax and
Administrative
Formation of
Board
Formation of
Managing
Team
Strategic and
Marketing
Planning
Agreements
with
Manufacturers
Distribution
Arrangements
33

34. Commercialization Timeline
34
FDA PMA Filing
Stakeholder Outreach
Clinical Trials Mass Production
Hire Management TeamEstablish Board of DirectorsLicensing and Funding
Incorporation
2016 2017 2018 2019 2020 2021
Prototype
Now Patent Expiry

35. Start-Up Projected Revenue
Incorporation
Fixed Setup
Cost:
$200
FDA
Fixed
Regulatory
Costs:
$2,600
Admin &
Marketing
Annual Cost:
$500,000
Operating
Cost
Reimbursement
Cost: $150
Manufacturing
Cost: $48
NIH royalty: $15
Profit: $87
Prevalence
1.89 M
patients/year
Positive Cash
Flow
164 M
35
5 Year Revenue Forecast

36. Potential & Competitive Map
36

37. US Market Size
• PCR Molecular Diagnostics
Total Global Market
• $5.2 Billion
• Sepsis cost US hospitals $20
Billion in 2011
37
Total Revenue Opportunity = $900 M
Reimbursable Revenue Opportunity = $285 M
Reimbursable
Price: $150
Total Diagnostic
Price: $500
Prevalence
Primary 1.36 M +
Secondary .54 M
= 1.89 M

38. Global Market Size Overview
38
Oncology
21%
Identity/paternity
28%
Pre/postnatal
screening
6%
Infectious disease
45%
GLOBAL PCR MARKET SHARE FOR
MOLECULAR DIAGNOSTICS BY PCR (%)
0.00
5,000.00
10,000.00
15,000.00
20,000.00
25,000.00
2012 2013 2014 2015 2020
Global Market for Molecular Diagnostics by Technology ($ Million)
PCR Microarrays In Situ Hybridization Biochip Other
PCR
Application
2012 2013 2014 2015 2020
CAGR%
2015-
2020
Infectious
Disease
3,227.4 3,783.6 4,435.6 5,200.0 9,900.0 13.7

39. Appendix: Market Segmentation
39
Product Segment: Molecular diagnostics and pathology
DNA analysis for:
Infectious diseases, oncology, pre/post natal screening,
etc.
Industry Segment: Hospitals and laboratories
Patients, clinical care providers, and basic scientists
Considerations when Identifying Segments → measureable,
large, and stable
Udemy Content Library, accessed on April 13, 2016, at blog.udemy.com/types-of-market-segmentation

40. Appendix: Target Segment
40
Molecular Diagnostic
• Specific product to detect and identify fungal infections
• Clearly defined group of end-users
• Applicable to numerous pathology segments
• Clinical, general, and anatomic
IBIS World, accessed on April 13, 2016, at www.ibisworld.com/reports/us/industry/ataglance

41. Appendix: Buyers- End Users
41
Fungus Diagnostic Reagents/Biotech companies Hospital Labs Patients
Reagent/Biotech Companies Hospital Labs Patients
- Large Biotech and Reagents
Companies interested in
licencing or that want to
deveop product segments
(low risk, low cost )
Eg: Biogen, Agilent Technologies.
- Hospital Labs with limited
budget
- Hospital Labs in the
developing countries (India,
Africa, South East Asia)
- International NGOs that
offer healthcare services to
underserved populations
(eg: MSF, Project Hope,
Partners in Health)
- Immunocompromised
patients
- Pre/post natal
- Long stay at the hospitals

42. Appendix: Global Market
42
Technology 2012 2013 2014 2015 2020
CAGR%
2015-2020
PCR 7,794.3 8,861.7 10,082.6 11,480.0 19,450.0 11.1
Microarrays 3,712.2 4,310.7 5,007.8 5,820.0 10,330.0 12.2
In Situ
Hybridization
2,801.2 3,313.3 3,923.1 4,650.0 8,600.0 13.1
Biochip 1,697.6 2,053.1 2,485.0 3,010.0 6,470.0 16.5
Other 103.5 129.0 160.6 200.0 400.0 14.9
Total 16,108.8 18,667.8 21,659.1 25,160.0 45,250.0 12.5
GLOBAL MARKET FOR MOLECULAR DIAGNOSTICS BY TECHNOLOGY ($ MILLIONS)

43. Appendix: Price
• Prevalence of Sepsis in US 2015
• Primary = 1.36 Million
• Secondary = 0.54 Million
• Total Diagnostic Price $500
• $50 per species
• 10 total species under patent
• Reimbursable Price $150
• $50 per species
• only 3 species reimbursable
43