Team:Sydney Australia/Entrepreneurship

Barriers to Entry

	Non-Financial Permeability /10	Expected Financial Cost ($US)	Scaling/Ongoing Cost?
Technical Barriers
Open-source creation of a biosynthetic organism	8	5000	No
Design and Engineering expertise required for fermentation/purification plant	8	10000	No
Open Source Development of an insulin pump	8	10000	No
Cost Barriers
Clinical Trials I-IV (for new analogue insulin)	8	~200 million	No
Biosimilar Clinical Trials (for new generic/generic analogue)	5	~100 million*	No
Fermentation/Purification Equipment and Testing (Small - Large Scale)	6	2 million - 200 million	Yes
Fermentation/Purification Plant (Small - Large Scale)	6	4 million - 400 million	Yes
	* Biosimilar clinical trials yet to have enough data to generate an average expense
Market Barriers
Enormous existing contracts between governments and pharmaceutical companies can be used to leverage significant pressure to use a certain product in PBS schemes.	5	USA, Europe, Australia; ~100m+ to disturb the status quo. For most developing nations, price/efficacy will be the major determining factor.	Yes
Economies of scale favours existing manufacturers. Any new market entrant would be vulnerable to a price war after investing significantly in setup.	6	^ See Fermentation/Purification Plant and Equipment Costs	Yes
Existing distribution systems are largely owned by competition	4	10 million + dependent upon strategic partnerships	Yes
Legal Barriers
Existing patents protecting analogue insulins	6	Litigation Risk	Possibly
Existing patents protecting insulin manufacturing optimisations	6	Litigation Risk	Possibly
Existing patents for insulin pump technologies	6	Litigation Risk	Possibly

 

Estimated Start Up Costs

		Company A		Company B		Company C
Building Related Expenses		4,000,000.00		200,000.00		1,800,000.00
Equipment + Installation		1,000,000.00		980,000.00		300,000.00
Engineering/Validation		1,000,000.00		250,000.00		900,000.00
Total ($CA)		6,000,000.00		1,430,000.00		3,000,000.00
Total ($US)		4,680,000.00		1,115,400.00		2,340,000.00
Annual GMP Compliance + Operating Expense ($CA)*		925,000.00		454,000.00		720,000.00
Annual GMP Compliance + Operating Expense ($US)*		721,500.00		354,120.00		561,600.00

 

Risk Assessment Matrix

Potential Risks for Our Model

Potential Risk	Risk Matrix
Price war from competitors	9
GMP failure, dangerous product	10
Escape/Release of GMO organism	2
Manufacturing Injuries	2
Insufficient Liquidity	8
Exclusionary contracts prevent entrance to certain markets	7
Cure for Diabetes	5
Superior Analogue enters market	6
Inefficient secretion pathway	6
Inefficient Purification	6
Local - High Australian Wages	2
Carbon Emissions Target	2
Nickel-Agarose Price Inflation	2
Electricity Inflation	2
Competitive advertising	2
Government overregulation	8
Economies of Scale	9
Natural Disaster	4
Manufactory Fire	4
Internal Corruption	4
Patent Infringement Lawsuits	3
High Employee Turnover	2
Export/Import Restrictions	8
Unforeseen Circumstances	5

 

 

An analysis of various business models that can profit from this industry without pricing individuals out of the market.

In response to our various talks with various professionals throughout our project, we thought it we should consider the possibility of continuing with a standard business model. Below you will read through some potential business models which summarise the information we processed in response to these conversations.

Open-Source Tools to Enable the Market

Open-source research and development has revolutionised the Technology Sector and is quickly making its impact known on the Deep Tech Sector. Just as novel financial tools like ‘Freemium’ changed the way consumers interact with online businesses, open-source research offers new and unique ways to approach monetisation of Intellectual Property (IP).

• Intellectual Property Tools - Platforms to empower individual researchers with the sharing and application of their work.
• Design + characterisation of genetic sequences for protein (e.g. insulin) manufacturing - Competitions like iGEM showcase the excellent talent of researchers, while businesses such as AddGene provide simple sharing of plasmids for a novel fee.
• Design + characterisation of expression systems for protein (e.g. insulin) manufacturing - Further focus on the downstream requirements to optimise protein expression is already entering the open-source market, expanding the options of small-time researchers to develop technologies with a big impact.
• Manufacturing plant design and optimisation - Often held as trade-secrets rather than patented, the secrets of high-efficiency protein manufacturing are rarely shared between agents in the market. Improved clarity within this industry would be to the benefit of all.

Financial Tools - Platforms to bring Open-Source technologies to market, allowing investors to contribute to the approval and manufacturing of essential medicines.

• Open-source Clinical Trials - Potential investors that wish their money to contribute to the development of essential medications and treatment are currently forced to purchase stock in a major pharmaceutical company. A financial platform can be designed that offers the chance to invest in the clinical trials of a new open-source drug, pledging money alongside other potential investors until sufficient capital is obtained to proceed with Stage I, II, III or IV clinical trials. Rather than the return on IP contributing to a single pharmaceutical company's profit margin, it can instead be divided between clinical trial investors and the developer of the IP.
• Return-on-Investment would have to scale with the relative risk of the drug not finishing clinical trials, however this could still be significantly less than the ROI expected by public corporations.
• Some legal protection would have to be established to prevent manufacturing of approved open-source drugs without contributing to the investors that helped get it approved.
• Open-source Manufacturing Investment - Like open-source clinical trials, this financial tool would allow investors to direct their capital towards necessary manufacturing facilities for setup and GMP approval of protein manufacturing facilities.
• Could be combined with public investment to better overcome the challenge of economies-of-scale.
• All about helping the market respond more effectively to supply shortages.

Small-Medium Business

• Utilising Open-Source tools to carve out a market niche: The open-source tools listed above have the potential to make a tidy profit to the business that facilitates their creation.
• Facilitating efficiency of distribution of Human Insulin and Analogues: [1]
• The global pharmaceutical distribution market is a maze of intermediaries, each adding a small profit margin to the final price. Remodelling this will require public and private entities operating at all stages of the supply chain.
• E.g. A click-and-mortar business that matches a diabetic’s insulin requirements to a specific wholesaler - cutting out all intermediaries and claiming a portion of the profit margin.

Corporations

The sheer scale of the insulin market (600m+ potential patients) allows economies of scale to play a major role in the competitiveness of individual players. Without enormous investment capital, any new manufacturing facility will be too small to make a significant impact on the insulin market and may be unable to produce at a low enough cost to survive a price war.* As such, new market entrants will most likely be large pharmaceutical corporations looking to share in this industry’s profits.

• Large-scale Manufacturing Facilities
• Expected cost: Minimum of US$100m for a medium-scale facility [2]
• Research and Development of Single-Chain Insulin Analogues:
• xpected cost: Upwards of $US50m for initial approval. Ongoing expense of 20-25% annual operating costs to ensure compliance. [3] Expense here can scale infinitely with risk aversion.

Public Firms and Investment

Governments provide a functional alternative to corporate manufacturing, as they can justify investment in research and manufacturing that offers a lower potential profit margin (or even a loss). Analysis of trends and forces within the international ‘Active Pharmaceutical Ingredient’ (API) manufacturing market exemplifies two nations already investing heavily in expanding local insulin manufacturing;

• ndia - The brands ‘Biocon’ and ‘Wockhardt’ already hold a larger portion of the global market share than any other brands outside the ‘Big 3’ and are poised to take greater advantage of economies of scale. If the Indian government were to implement a ‘maximum price’ on insulin, these two could operate locally without fear of competition.
• China - Companies with close ties to the national government such as “Tonghua Dongbao Pharmaceutical” and “Zhuhai United Laboratories” are building enormous manufacturing facilities which could majorly restructure the current market layout.

References

1. Tsai, A. (2016). The Rising Cost of Insulin. [online] Diabetes Forecast. Available at: http://www.diabetesforecast.org/2016/mar-apr/rising-costs-insulin.html?referrer=https://www.google.com.au/ [Accessed 25 Oct. 2017].
2. Basu, P., Joglekar, G. and Rai, S. (2008). Analysis of Manufacturing Costs in Pharmaceutical Companies. [online] Available at: http://moodle.univ-lille2.fr/pluginfile.php/28162/mod_resource/content/0/Analysis%20of%20Manufacturing%20Costs%20in%20pharma%202008.pdf [Accessed 25 Oct. 2017].
3. Bruttin, F. and Dean, D. (2017). Managing the Cost of Compliance in PharmaceuticalOperations. [online] Available at: https://www.scribd.com/document/137906487/Managing-the-Cost-of-Compliance-in-Pharmaceutical-Operations [Accessed 25 Oct. 2017].

Strength, Weakness, Opportunity and Threat Analysis

S.W.O.T Analysis

Click on the Segments in the Pie Chart to learn about the Strengths, Weaknesses, Opportunities and Threats to the Insulin Market!

Strengths

• Reduces technological barrier to entry for new manufacturers.
• Able to disrupt the insulin supply market – new suppliers will not have to mitigate R&D expenses and can focus on lower prices than the established brands.
• Open-source registration of Single-Chain Analogue prevents patent hoarding by large corporations.

Weaknesses

• Does not generate a revenue stream by itself.
• Requires willing manufacturers to invest in equipment.
• Complete success requires public support and legislative changes, which are notoriously hard to achieve.

Opportunities

• Chance to expand open-source protein manufacturing beyond insulin to other expensive biopharmaceuticals.
• Plenty of generic manufacturers that would willingly enter the insulin market if it was ‘easy’.
• The Indian and Chinese governments stand to gain a lot from this business model – increasing the chance of public support!

Threats

• New manufacturers using our bacteria will still be vulnerable to a price war after setup.
• ‘Big 3’ pharmaceutical companies may be forced to attempt to shut down distribution if it threatens their profit margin.
• FDA/EMA biosimilar approval is extremely expensive and can be drawn out for years.