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  • 1. DEV. 2: Michael Harrison Michael Danty Dillon Kwiat Elisabeth Leeflang Matt Clark December 10, 2013 FINAL PRESENTATION Vision: A new way to create a magnetic compression anastomosis with improved outcomes. Interviews completed: 90
  • 2. THE TEAM • Michael Harrison, MD – Pediatric Surgeon • Michael Danty, MS – Business Development • Dillon Kwiat, BS – Medical Device Engineer • Elisabeth Leeflang, MD – General Surgery Resident • Matt Clark, BS – Business Development MAGNAMOSIS, Inc. 2
  • 3. INITIAL IDEA Anastomosis: A surgical connection between two tubular structures (like bowel). Hand Sewn Anastomosis: Stapled Anastomosis: • Variable Strength • Expensive • Time Consuming • Limited Indications We could make a device that is: – Better, Faster, Cheaper MAGNAMOSIS, Inc. 3
  • 4. PROJECT PROGRESS Magnamosis: A device to create a magnetic compression anastomosis. Milestones Achieved: • >60 Pigs implanted with 0 complications • FDA class 2 device (with human data) • FDA approved Investigational Device Exemption • UCSF CHR application for human trial pending (Mt. Zion) MAGNAMOSIS, Inc. 4
  • 5. WEEK 1 MAGNAMOSIS, Inc. 5
  • 6. WHO WE TALKED TO Surgeons Lee Swanstom, MD Minimally Invasive Surgery, Oregon Clinic John Cello, MD Gastroenterology, UCSF Stanley Rogers, MD GI Surgery, UCSF Madhulika Varma, MD Colorectal Surgery, UCSF John Stamos, MD Colorectal Surgery, UC Irvine Sonia Ramamoorthy, MD Colorectal Surgery, UC San Diego Laurence Yee, MD Colorectal Surgery, Sutter Health Jenny Yu, MD Colorectal Surgery, Private Practice Robert Khoo, MD Colorectal Surgery, Private Practice Hospital Administrators Svend Ryge, VP, Sutter Health Greg Eveland, Buyer, Sutter Health Alice Beltran, RN, Implant Coordinator, UCSF William Finley, MD, OR Director, St. Josephs Business Thomas Fogarty, MD, Fogarty Institute for Innovation Bob Brownell, Emergent Medical Partners MAGNAMOSIS, Inc. 6
  • 7. Initial Conception: Making an anastomosis that’s better, faster and cheaper will have surgeons fighting to the death to get ahold of our device Customers: Surgeons Value Proposition: Better, faster and cheaper than sutures and staplers MAGNAMOSIS, Inc. 7
  • 8. CUSTOMERS Surgeons Hospital Buyers Use the device Pay for the device Patients Have the device implanted MAGNAMOSIS, Inc. 8
  • 9. VALUE PROPOSITIONS Surgeons • Leak means poorer outcomes • Leak means another operation Patients Hospital Buyers • Increased morbidity • Dementia REDUCE LEAK • Leak means increased cost • Longer hospitalization MAGNAMOSIS, Inc. 9
  • 10. VALUE PROPOSITIONS $100,000 $80,000 $93,110 $60,000 $40,000 $51,413 Leak No Leak $20,000 $0 Cost 2 1.5 1.78 1 0.5 0.74 0 Mortality MAGNAMOSIS, Inc. 10
  • 11. VALUE PROPOSITIONS Procedure Leak Rate Acute sigmoid volvulus 16% Low Anterior Resection 12-14% Inflammatory Bowel Disease 7-9% Tumor Based Luminal Obstruction 7.5-8.1% Emergency Procedures 50% sutures 27% staples Value Proposition: Reduce leak rate by 50% compared to sutures and staples MAGNAMOSIS, Inc. 11
  • 12. Where that got us… MAGNAMOSIS, Inc. 12
  • 13. CHANNELS Initial Conception: If the device is FDA approved and the surgeon wants to use it, they use it. Channel: Sales directly to the surgeon MAGNAMOSIS, Inc. 13
  • 14. CHANNELS Insurance Provider Patient Hospital Purchasing/Billing Surgeon Magnamosis, Inc. MAGNAMOSIS, Inc. Product Money Patient 14
  • 15. CHANNELS Two different systems: 1. Academic Hospital (i.e. UCSF) 2. Large Hospital System (i.e. Kaiser or Sutter Health) • Adoption of new devices can be driven by a single surgeon • New devices must have support from multiple hospital groups • Must have large sales/support force MAGNAMOSIS, Inc. 15
  • 16. CHANNELS Early stage roll out: Focus on surgeons at academic institutions MAGNAMOSIS, Inc. 16
  • 17. REVENUE MODEL Initial Conception: Better, faster, cheaper • Cost based pricing – $250 for one size • Low cost for hospital and patient • Distribute to KOL’s for free MAGNAMOSIS, Inc. 17
  • 18. REVENUE MODEL Revenue Experiments – cost vs. value 1. Thomas Fogarty, MD – Fogarty Institute for Innovation • Look for value based price of device in all markets (CE mark), collect supporting data 2. Douglas Crawford – Mission Bay Capitol • $250 too low, need to start much higher and base sales on new market dynamic 3. Bob Brownell – Emergent Medical Partners • Cost based on success 4. Jay Watkins – LLP • Start price high, will only decrease with time • Other compression devices may not have failed due to price alone MAGNAMOSIS, Inc. 18
  • 19. PAYMENT FLOWS MAGNAMOSIS, Inc. 19
  • 20. REVENUE MODEL What We Learned: • Separate pricing for sizes • Value pricing – $1,200 for 23 mm size – Takes complications into account • Leaks, procedures, readmissions, morbidity / mortality – Specific to patient set & procedure Value based, variable pricing for different sizes MAGNAMOSIS, Inc. 20
  • 21. FINAL CANVAS MAGNAMOSIS, Inc. 21
  • 22. WHAT’S NEXT? This is more than just a research project, there’s a potential business here! MAGNAMOSIS, Inc. 22
  • 23. INVESTMENT READINESS LEVEL IRL 6 Plausible exit Cash to 1st inflection point Unit economics validated Reimbursement / other revenue Regulatory path certainty & difficulty IP freedom to operate & ability to block Attractive solution & ID of MVP Compelling clinical need + large market Effective team? MAGNAMOSIS, Inc. 23
  • 24. Thank You! Special thanks to: Jay Watkins Allan May George Taylor MAGNAMOSIS, Inc. 24
  • 25. INCOME STATEMENT Year 2015 2016 2017 2018 2019 Number of Magnamosis devices sold (/1000) 0 0 0.20 0.72 3.26 8.28 0 0 0.02 0.02 0.08 0.12 Gross Sales for Delivery Device 0 0 26 26 104 156 Gross Sales for Magnaosis Total Gross Sales COST OF GOODS SOLD ($k) 2014 Number of delivery devices sold (/1000) REVENUE ($k) 0 0 0 0 240 266 864 890 3,917 4,021 9,938 10,094 0 0 0 0 0 0 0.00 20 (20) 0 0 0 0 0 75 75 (150) 13 253 8 5 15 50 0.60 79 96 45 846 29 18 52 50 2.08 151 544 201 3,820 131 82 117 50 4.66 383 3,053 505 9,589 331 207 193 50 7.73 789 8,011 200 80 30 26 0 13 0 600 504 30 40 0 45 0 0 70 80 26 20 30 60 0 140 120 40 20 200 120 0 180 150 80 80 400 240 0 250 240 100 120 600 620 0 7 0 93 449 (469) 0 0 7 0 0 1,226 (1,376) 0 120 7 145 0 558 (463) (62) 240 14 325 0 1,219 (675) (90) 700 30 622 0 2,482 571 77 1,200 45 1,199 0 4,374 3,637 487 (489) (1,376) (401) (584) 494 3,149 Less: Sales Returns/Allowance (5%) NET SALES ($k) Parts Manufacturing Delivery Device Costs Testing Delivery Charges Total COGS GROSS SALES PROFIT (LOSS) GENERAL AND ADMINISTRATIVE ($k) Costs of procedures (trials) Project Managers Marketing Liability Insurance Professional Education Quality System VPs Executive Team (CEO, COO, CFO) IP Sales Costs CE Mark costs Total Expenses -- Net Operating Income Taxes MAGNAMOSIS, Inc. NET ANNUAL INCOME (LOSS) ($k) 25
  • 26. APPENDIX MAGNAMOSIS, Inc. 26
  • 27. WEEK 1 MAGNAMOSIS, Inc. 27
  • 28. WEEK 2 MAGNAMOSIS, Inc. 28
  • 29. WEEK 3 MAGNAMOSIS, Inc. 29
  • 30. WEEK 4 MAGNAMOSIS, Inc. 30
  • 31. WEEK 5 MAGNAMOSIS, Inc. 31
  • 32. WEEK 6 MAGNAMOSIS, Inc. 32
  • 33. WEEK 7 MAGNAMOSIS, Inc. 33
  • 34. WEEK 8 MAGNAMOSIS, Inc. 34
  • 35. FINAL MAGNAMOSIS, Inc. 35