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