theranos biz model
TRANSCRIPT
MT5016 TEAM MEMBERS:
Lua Xiang Lian A0110240J
Ong Hong Ping Samuel A0147203R
Yew Hong Kee A0117916B
Zhuo Jun Long A0147192A
BUSINESS MODEL ANALYSIS
Overview Introduction
Value Proposition
Customer Segmentation
Scope of Activities
Market Competitors
Value Capture
Strategic Control
Future Potential Development
Conclusion
Introduction of Theranos Provider of diagnostic testing, information services to
enable patients, physicians make better healthcare decisions
Founded by Elizabeth Holmes in 2003, Theranosoriginated from integration of therapy and diagnosis
Company valued at $9 billion
Mission: To make actionable health information accessible to people everywhere at the time it matters
No manual handling of samples, reduce errors associated to pre-analytical phase Questions are being raised on the accuracy of the results,
more details will be furnished later
Introduction of Theranos Proprietary micro-fluidics technology
Theranos Wellness Centers - Partnership with Walgreens for in-store sample-collection centers to reach out to patients
Other wellness centers set up in hospital, US military
Introduction of Theranos
Incumbent Laboratory Testing Process
Source: Clinical Laboratory Tests: Which, Why, and What Do The Results Mean? Frank H Wians Jr PhD, MT(ASCP), DABCC, FACB
Patient goes to the doctor
Doctor orders lab
test
Specimen taken
Specimen transferred to
lab
Specimen analyzed
Results conveyed to
doctor
Doctorinterprets
results
Clinical response to
results
Laboratory Testing Process
Pre-analytical phasePost-analytical
phase
Analytical phase
Sources of Laboratory errors
Source: Carraro P, Plebani M. Errors in a stat laboratory: Types and frequencies 10 years later. Clin Chem. 2007;53:1338–1342
Analytical, 15%
Post-analytical, 23%Pre-analytical,
62%
Laboratory Errors
Top Pre-analytical Errors (62%)• Specimen collection tube not filled
properly – 13%• Patient ID error – 9%• Inappropriate specimen collection
tube/container – 8%• Test request error – 7%• Empty collection tube – 7%• Others – 18%
Theranos Eliminates Many StepsPatients fills up test order
form or submits online via PC or mobile apps
Specimen taken at Walgreens using a
fingerstick
Specimen transferred to lab
Specimen analyzed using micro-fluidics technology
Results sent to patients via
website or mobile apps
Technology Comparison (Pre-Analytical)
Steps Incumbent Theranos
Specimentaking
Vials of blood drawn from antecubitalvein
Small sample collected by fingerstickand fed into nanotainer
Specimentransfer and preparation
• Pre-centrifugation Handling • Blood Sample Centrifugation
Microfludic testing platform with microchips (lab on a chip) in proprietary hardware, allows minute volume of blood flow in microfluidic lanes
Technology Comparison (Analytical)Steps Incumbent Theranos
Specimenanalysis
Test methods using automated analysers and equipment from external manufacturers
Micro-fluidics technology in complex laboratory system
Step-by-step procedures to test for particular analyte
Optimized laboratory methods based on established scientific principles involving biology, chemistry, and physics
Technology Comparison (Post-Analytical)
Steps Incumbent Theranos
Delivery of test results
To healthcare providers by common computer system (Laboratory Information System or LIS)
To patients directly or healthcare providers via Theranos website or smartphone apps
Value Proposition Value Proposition for Consumers
Value Proposition
Small Blood Sample
Sample size 0.18 ml
Run 30 tests
Use of Micro fluidic Testing
Platform
VS
Nanotainer
Value Proposition
Painless
Finger prick blood sample
collection
By using an array of
needles 20nm in length
Fingerstick
Value Proposition
Speed
Fast turnaround time for test
result (24 – 48 hours)
Streamlined processes
required for Blood Test
Use of Micro fluidic Testing
Platform
Value Proposition Speed in Healthcare & in Theranos
Use of Micro fluidic Testing
Platform
Use of Online Services
Cut down time needed for Doctor’s Authorization (Direct
Test)
Cut down time needed for Blood Test Appointment (Self
Check in)
Cut down time needed for Blood Testing (30 tests can be run with tiny blood sample)
Cut down time needed for delivery of Blood Test report (Online delivery of Report)
Collaboration with Walgreen
Value Proposition
Accessible
Online ordering menu
Specimen can be taken in
pharmacy (Walgreen)
Smartphone Apps available
Value Proposition
Inexpensive
Affordable pricing (>50% cheaper
than incumbent)
Use of Micro fluidic Testing
Platform
A much simpler processes
https://www.theranos.com
Value Proposition Comparison between Theranos with Incumbent
Typical Blood Test Process
Theranos Incumbent
Appointment for specimen collection
Not applicable Before blood testWaiting List
Waiting Time for specimen collection
Not applicable Average 15 to 45 mins
Blood Sample Size 0.18ml 5ml to 10ml or more
Price for Test Report Cholesterol = $2.99 Cholesterol = $17.00
Order/Purchasing of Tests
Online menu Clinical written authorization letter
Waiting Time for TestResults
1 to 2 days 1 to 30 days
Collection of Test Report
Online via email Appointment for self collection or via mail
Strategy Canvas
Inexpensive CompactnessOf Blood Sample
Speed of Service
BloodTestSelection
Accuracy
Low
High
Accessible
Incumbent
Comfort
Customer Needs & Segmentation Maslow’s Hierarchy of Needs
2nd Most Important Level
Healthcare Services $3.8 Trillion spending in United States
$75 Billion Blood Testing Industry
$7.3 Billion spending in Singapore
http://www.forbes.com/sites/danmunro/2014/02/02/annual-u-s-healthcare-spending-hits-3-8-trillion/
https://www.moh.gov.sg/content/moh_web/home/statistics/Health_Facts_Singapore/Healthcare_Financing.html
http://www.wsj.com/articles/theranos-has-struggled-with-blood-tests-1444881901
Customer Needs & Segmentation Healthcare & Market Segmentation
Customer Needs & Segmentation Direct Users (throughout ages)
Infants
Young Children
Elderly
Working Adults
Customer Needs & Segmentation Customer Needs (Faster, Cheaper, Better)
Small Blood Sample
Painless
Speed
Accessibility
Inexpensive
Customer Needs & Segmentation Importance of Blood Testing
“Theranos works under the assumption that a single drop of blood can provide enough information for a complete, inexpensive blood test. Blood tests are used in around 70% of medical decisions, but the way they are carried out hasn’t changed in decades.” –Business Insider
Customer Needs & Segmentation Who is the first customer?
Patients with Chronic Disease (Diabetes/Cancer/HIV) Diabetes
Cancer
HIV
And other dieases
People who are health conscious Cholesterol Level
Fitness, Nutrition and Anti-Aging
Customer Needs & Segmentation Patients with Chronic Diseases (Diabetes)
29.121
8.1
0 10 20 30 40
Diabetes(USA2012…
Undiagnosed
Diagnosed
Total
In Millions
Customer Needs & Segmentation Patients with Chronic Diseases (Cancer)
Customer Needs & Segmentation Patients with Chronic Diseases (HIV/AIDS)
http://www.healthline.com/health/hiv-aids/facts-statistics-infographic
Customer Needs & Segmentation People who are health conscious (Trend in USA)
http://www.ers.usda.gov/media/1259670/err161.pdf
Customer Needs & Segmentation Indirect Users
Doctors or Physicians For early diagnosis of medical symptoms
Insurance Agencies New policy assurance
Hospital and Clinics Blood Testing for other illnesses
Pharmaceutical Companies Research & Development in new drugs
What Type Blood Test Report to Order?
Via Health Care Provider Doctor’s or Physician’s recommendation
Direct Testing via Walgreen (Without Clinical Authorization Letter) Direct testing form Arrange with health care provider for consultation and
interpretation of test results
Patients Who know their diagnosis and want to monitor health
Recommendation in Theranos website
What Type Blood Test Report to Order?
fdfd
Scope of Activities
Theranos
WalgreensHealthy Individuals
Theranos send the test results back to the Healthy Individuals and information of further steps to take are also provided in the report
Healthy Individuals’ blood samples are drawn using fingerstick and the order form of the tests to be done are submitted together with payment made to Walgreens
Blood samples collected are transferred to a nanotainer in a cartridge and dispatched to Theranos to do analysis and the payment collected is passed back to Theranos
Research & Development (R&D)
• Proprietary technology – micro-fluidic testing platform
• Most notable patent is “Medical device for analyte monitoring and drug delivery -US 8101402 B2” filed in August 2005
Manufacturing
• In-house manufacturing and testing facility
• Validated by Clinical & Laboratory Standards Institute (CLSI) & Food and Drug Administration (FDA)
Distribution Channel
• Theranos Wellness Centre –Walgreens (Exclusive Partnership)
• Theranos Application (available in Apple Store & Android Play Store)
Marketing Strategy
• Advocate early detection and prevention of disease
• Accessible health care services for all
• Make actionable information accessible to everyone at the time it matters
Scope of Activities
Source:https://covalentdata.com/company/theranos , http://www.ipfolio.com/10-patents-that-launched-billion-dollar-empires/, https://www.google.com/patents/US8101402
Scope of Activities Theranos’ Advantages
New Paradigm to Testing
Low cost with transparent pricing
Smaller samples
Faster results
Accessible testing
In-house proprietary
in-vitro diagnostics
(IVD) equipment –
Edison Machine
Theranos’ proprietary Edison Machine is linchpin to its strategy compared to incumbent diagnostics lab of purchasing traditional diagnostics equipment from external companies like Siemens AG
Scope of Activities Theranos’ differentiation from traditional incumbent
diagnostics laboratories• Goal: All tests can be done by blood drawn from just a finger
prick and placed in a nanotainer – finger-stick test
• Current Situation:1. Nanotainers used commercially for 1 test that has received FDA approval – Herpes Simplex 1 Virus 2. Majority of test done using both finger-stick and traditional venous blood draws but with smaller needles
Blood Draw
• Two labs to process samples drawn from Theranos Wellness Centre
• “High-complexity” lab with proprietary “Edison” blood analysis technology & “Medium-complexity” lab with traditional technology
Transportation to Lab
• Obtaining an accurate results by processing a tiny amount of fluid using micro-fluidics technology
• Quick process of all kinds of blood samples using both “Edison” and traditional blood analysis machines via dilution of sample
Analysis
Source: http://www.techinsider.io/how-theranos-revolutionary-technology-works-2015-10https://www.theranos.com/news/posts/custom/theranos-facts
Scope of ActivitiesPotential Problem of Tests: Doubt on accuracy and precision of results
Possible Solutions: Getting accreditations to ensure tests results are accurate
1) Getting accredited in Clinical Laboratory Improvement Amendments (CLIA-88) by the credentialing regulatory authority –Centers for Medicare and Medicaid Services (CMS)
2) Enroll and participate in a Proficiency Testing (PT) program administered by CMS by developing a transparent system for regulators to assess the comparison of Theranos’ PT results compared to standard PT results for the same analyte
Source: http://www.wsj.com/articles/theranos-has-struggled-with-blood-tests-1444881901
Quest Diagnostics,
26%
LabCorp, 20%Small
Independent Labs, 37%
Niche Labs, 9%
Tier 2 Labs , 8%
Independent Lab Segment - USD25 Billion
Market Competitors
Incumbent Diagnostics Lab
Laboratory Corporation of America (LabCorp)
Quest Diagnostics
Theranos
New Diagnostics Lab
Independent Labs, 53%
Hospital Outreach, 35%
Physician Office Laboratory (POL), 6%
Others, 6%
Outside the Hospital Segment - USD46 Billion
Outside the Hospital,
62%
Hospital Outpatient,
17%
Hospital Inpatient,
21%
Total U.S. Lab Market -USD75 Billion
Source: Quest Diagnostics, Jefferies Healthcare Conference, 2 June 2015, Website: http://ir.questdiagnostics.com/phoenix.zhtml?c=82068&p=irol-irhome
Market Competitors
Source:http://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=20334531http://www.bloomberg.com/quote/LH:UShttp://www.bloomberg.com/quote/DGX:US
• Founded in 1978
• Offers clinical laboratory tests used by the medical profession in routine testing, patient diagnosis, and in the monitoring and treatment of disease
• Develops specialty testing operations, diagnostic genetics and clinical trials
LabCorp
• Founded in 1967
• Provides diagnostic testing, information, and services
• Operates a national network of full-service laboratories, rapid response laboratories, and patient service centres
• Provides esoteric testing, routine medical testing, drugs of abuse testing, and non-hospital-based anatomic pathology testing
Quest Diagnostics
• Founded in 2003
• Operates as a consumer healthcare technology company with specializations in oncology, paediatrics, and geriatrics
• Designs, develops, and manufactures systems that provide access to health information for the early detection and intervention of diseases; and conducts laboratory tests from blood, urine, fluid, solid, and other samples
• Provides a suite of tools for patients and doctors ranging from websites to mobile applications
Theranos
Market Competitors Price Comparison of Theranos vs Incumbent
Diagnostics Lab
Theranos LabCorp Quest Diagnostics
Complete Blood Count
$5.35 $24.05 $19.99
Blood Glucose (check for prediabetes / diabetes)
$5.82 $27.73 $28.99
Lipoprotein Panel (check for coronary heart disease)
$9.21 $29.40 $20.37
Source:https://www.nhlbi.nih.gov/health/health-topics/topics/bdt/showhttps://www.health-tests-direct.com/ordering-page/ https://www.theranos.com/test-menu
Overall savings of approx 50-80%
Market Competitors
Strength
• Low cost
• Ease of use
• Innovative platform that enable standard blood based diagnostics to be run using only a fraction of traditional testing volumes
Weakness
• Overcome regulations and laws on direct consumer lab testing
• Objections by medical practitioners on the test results compared to standard lab test
Opportunities
• One of the first company on verge of building a scaled Point-of-Care (POC) or near POC diagnostic solution
• Tapping into consumer-lab-testing market
Threats
• Overcoming market share of incumbent diagnostics lab
• Trigger price war with incumbent diagnostics lab
SWOT Analysis
Value Capture-Current Revenue Model
Direct sale of health lab tests to customers through Walgreens
Subscriptions of advance or more comprehensive lab
tests
Blood testing services at clinical trials
Current Value Network
money
Walgreens
money
service
product
service
Healthy Individuals
product
money
Clinical trials
money
service
money
Value Capture-Proposed Revenue Model
Partnering with private and public hospitals to use Theranos lab tests
Partnership with insurance companies to provide better health insurance for consumers
Sales of innovative user-friendly finger stick devices and other wearables
Constantly monitoring patients’ data and make recommendations to patients through mobile apps
Proposed Value Network
Hospital and Clinics
Healthy Individual
product
money
Subscription
money
Apps
Insurance Company
Historical Data
money
money
InsuranceInsurance
money
Subscription
Apps
Walgreens
serviceproduct
Patients
Strategic Control
Sustainable Profit
Intellectual Property
Complementary Asset
Intellectual Property (IP)
Patent
Tacit Knowledge
Complementary Asset (CA)
Ecosystem
Distribution Channel
Partnership
Marketing
Strategic Control – Intellectual Property
Intellectual Property serves as a barrier of entrants to potential competitors.
Tacit Knowledge
- Complete knowledge of how their testing methods works and how to get several tests from single drop of blood.
- Tacit knowledge only reside in key R&D personnel (CTO, R&D manager, key R&D engineers with non-disclosure agreement)
Patent
- As of July 2015, Theranos held more than 26 issued patents, including patents on wearable blood monitors and influenza virus detection
- Theranos test blood in its proprietary technology-microfluidic technology (US 8101402 B2) with Theranos Edison blood testing device
- Filing law suits against Intellectual Property thief
Strategic Control – Complementary Asset
Capabilities or assets needed to commercialize an innovation
Ecosystem
Ecosystem of users, doctors, researchers, pharmaceutical and insurance companies
- User data attracts pharmaceutical companies for drug development opportunities
- Insurances companies uses data for creation of targeted insurance policies for patients
Distribution Channel
Theranos services to be make easily available through pharmacy like Walgreens
Tied up with hospitals and clinics to use Theranos services
Strategic Control – Complementary Asset
Capabilities or assets needed to commercialize an innovation
Partnership
-Establish tie ups with reputational pharmaceutical companies such Pfizer
- Partnership with technology company to develop apps or external devices that can do blood test on mobile phones
Marketing
-Advertising in commercial medias
-Sponsor health forums
- Hold free public testing
Future Potential Developments
Conclusion Theranos, has seized the public imagination with a vision
of replacing traditional blood tests with a cheaper, faster, and less painful alternative
Theranos is offering tests for less money, and at a faster turnaround time, than giants like Laboratory Corp. of America or Quest Diagnostics
Value capture of Theranos lab tests revolve around making personal health monitoring a breeze and being cheaper
Profitability in the long run involved exercising of patents and tacit knowledge as well as various complementary assets