NIH Centers for Accelerated Innovations Webinar Series Market sizing and Competitive Landscaping

Prof. Vish Krishnan

Sheryl and Harvey White Endowed Chair

University of California, San Diego

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Outline for this Markets and Competition Webinar

First, we’ll look at what and why the UC CAI Technology Development

Award application asks about Market sizing and Competitive

Landscaping (Questions 4 and 5)

Second, we’ll discuss how to supply information about market size, target

price, and growth rates.

Third and Finally, we’ll consider what information you might provide on

competition – both current and future!

Along the way we will refer to an example from UC San Diego, called

Topera.

Question #4 and Question #5 in CAI Grant Application

4. Market Size: Define the total and addressable market size, and target

price of the technology. Support your market size and descriptions with evidence about current technologies or approaches to address this indication. Define a specific patient segment of those suffering from the specific targeted disease. What are the market population trends and projections?

5. Competitive Landscape: Define the competition mix (companies, products, substitutes and shifting landscape) for the technology. Think particularly about how the disease will be treated when the technology/product gets to market. How is the landscape shifting or projected to shift?

Why Start with Markets and Competition? Commercialization Success depends on matching seeds to needs

Market

Needs

Seeds

(IP-Protected

Science/Technology)

A recent UC San Diego venture, Topera targeted Atrial

Fibrilation (AFIB), the most common heart rhythm disorder that increases individuals’ risks to strokes or blood clot formation; Poor efficacy of current AFIB treatment, Pulmonary Vein Isolation (PVI), led to reoccurring AF episodes.

Seed: Topera’s Heartbeat mapping technology called Focal Impulse and Rotor Modulation (FIRM) offering powerful 3D imaging of electrical sources within the heart , helping to pinpoint the causes

Result: Increased treatment success rates, reduced need for repeat procedures, permanent relief from AFIB; Topera recently bought by Abbott for $250M

Value Creation

Market Sizing and Pricing => Total Revenue Opportunity Defining the total and addressable market size, and target price of the technology.

• Your chances of securing funding and hiring talented personnel often depends

on the total revenue opportunity you are pursuing with your idea. • Revenue opportunity = Multiple of Market size and target price

• Market Size naturally builds on your responses to the previous two questions in the application: Unmet Need and Proposed Product/Solution

• The clinical need you are targeting defines your Total Available Market (TAM).

• However, as a start-up venture or due to the nature of your product/solution, you may not be able to address the entire available market. For example, you may target a specific patient subset (like advanced stage cardiac patients).This is what defines the Served Available Market (SAM).

• Further, you may initially target patients in the US who are a better fit for your solution, this defines your Target Market (TM) who will be the most likely initial customers.

Prof. Dr. Vish Krishnan, University of California 6

If this market has entrenched competitors, you are not likely to win a big chunk of the market.

The Share of Market (SOM) you aim for is the final variable of interest.

Source: Wikipedia SAM is also sometimes referred to as the Addressible Market.

Total

population

with this

clinical need

(TAM)

Served

Available

(SAM) Target

Market

(TM)

Unreachable

market

Application of secondary

market research from

sources such as industry

trade associations,

private companies,

competitor news releases

Topera estimated that

over six million people in

the US alone suffered

from AF;

Top-Down Market Sizing Using Secondary Market Data

Unattractive

Market segment

Share of

Market

(SOM)

Competitor

Market

share

A quick Google search shows: “The global market for atrial fibrillation

procedures and products is expected to reach USD 16.17 billion by 2020”

Source: GrandviewResearch.com

Top-down techniques

(total and addressed market)

Benchmarking techniques

(Based on one or

more competitors)

Build-up techniques

(e.g. starting from individual

customers or segments)

Market

Sizing

Triangulation Triangulation

Triangulation

Market Sizing Is Not a Precise Science, But we can be Rigorous About it using Triangulation

Firm 1 11 50% 6

Firm 2 25 25% 6

Firm 3 38 50% 19

Firm 4 220 15% 33

Firm 5 165 20% 33

Firm 5 48 20% 19

Firm 5 50 33% 16

Firm 7 42 10% 4

Firm 8 12 50% 6

Total 142

Example of a customer build-up methodology

(Calculation of daily sales for a diagnostic reagent used by scientists)

Firm No. scientists Estimated share Forecast

Example of Triangulation at a Study Company

Forecast based on competitor sales: 50,000 units

Forecast based on top-down analysis: 72,000 units

Forecast based on build-up method, e.g. sales per segment: 45,000 units

Triangulated forecast: 56,000 units

‘Triangulated forecast’ may not be the mean of the three forecasts, but judgment-driven weighted mean.

Target Pricing Guidance

• Reimbursement-codes are key to pricing • Seek out Reimbursement Coding and Pricing data for CMS

(Centers for Medicare & Medicaid Services) • CMS’s Healthcare Common Procedure Coding System (HCPCS) contains drug

codes – such as J, A, B, C, K, P, Q, S.

• Also relevant are AMA developed Common Procedural Terminology (CPT) codes for vaccines, immune globulins, etc.

• Sometimes your procedure may need to obtain a new code, and you may start with comparable codes in other areas.

• Competitor Pricing • If you have established competitors, the prices they charge offers some

guideline for pricing - based on the additional value you offer.

Market growth rate is stated as Compounded Annual Growth Rate (CAGR) – Excel can calculate it easily.

Market Growth Trends Also Need to Be Understood!

“The global market for atrial fibrillation procedures and products is expected

to grow at a CAGR of 13.2%” - Source: GrandviewResearch.com

Investors like a large, growing market! Market growth can make it attractive, even if it is currently small!

Question #5 Competitive Landscape: Define the competition mix (companies, products, substitutes and shifting landscape) for the technology. Think particularly about how the

disease will be treated. How is the landscape shifting or projected to shift?

Being aware of current and potential competitors is essential to the success of your venture!

One should not be paralyzed by competitors, even when they are giants;

Giants can be converted into Goliaths with ingenuity and focus.

Competitors validate your market. They also force you to differentiate, and execute.

List the following types of competitors:

(1) Existing Broad-based Competitors;

(2) Existing Specialized Competitors

(3) Potential Competitors (likely to enter) and

(4) Other Indirect Substitutes

Landscape is shifting – current rivals are evolving, new alternatives emerging!

Tables, 2-D Plots and Venn Diagrams are Useful For Competitive Landscaping

Feature 1 Feature 2 Feature n

Your Company

Company 1

Company 2

Company n

Source: UC Davis Pitch Deck

Discuss what makes your solution effective,

unique, defensible from rivals?

Summary of the Webinar

• Market sizing and competitive landscaping can greatly improve the credibility of your proposal, and your chances of securing funding.

• A large and/or growing market with healthy pricing trends is a dream combination!

• Market Sizing is best accomplished by triangulating top-down, bottom-up and competitor information.

• Begin with information on the Total Available Market (TAM).

• The nature of your product/solution defines the Served Available Market (SAM).

• Business/economic considerations define your Target Market (TM)

• In the short-term, your Share of Market (SOM) will definitely be factor

• Pricing requires good understanding of Reimbursement trends for your clinical need.

• Competition can help sharpen your focus and product definition!

NIH Centers for Accelerated Innovations Webinar Series Market sizing and Competitive Landscaping

For questions, please contact:

Prof. Vish Krishnan, UC, San Diego

Email: vk@ucsd.edu

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