The following is a transcript from a talk I gave at the medical device development course, Brigham and Women’s Hospital (Boston, MA) on May 12, 2016.
Due to length, I have broken the talk up into seven parts:
- Part 1: Why do this?
- Part 2: What you need to do before you start
- Part 3: Identifying milestones
- Part 4: Execution strategy
- Part 5: Leaving academia
- Part 6: Questions and answers 1
- Part 7: Questions and answers 2
[In Part 1 I described the pros and cons of engaging in a translational research venture. It is definitely not for everybody.]
In Part 2 I am going to assume that we are all interested in pursuing science translation through entrepreneurship. We now want to think about how best to start. First, you need to understand the market that you’re trying to disrupt or get into. For the purpose of this series, the real life example is going to be my own startup company. It’s not going to look anything like your company, but I’m hoping the context will help you better understand the concepts that I will be describing.
Step one is identifying the problem. You need to ask yourself:
- What is the total addressable market?
- What is the primary market driver?
It is critical that you talk to your customers. Now, when I say “total addressable market,” most people like to begin this process by taking what’s called a “top down” approach, which is – and I’m using cancer as an example here – cancer in the world is a billions of dollars a year market. That may be true, but that’s not your market. Say you’ve got a cancer treatment, like a small molecule or drug. Now that drug is not curing all cancer; it’s probably targeting a type of cancer, so it’s a fraction of the total cancer market. It’s also not targeting all of that type of cancer – it’s probably targeting a particular patient-base, and within that particular patient-base, it’s not a drug [presumably – in this example] you are going to give them forever. It’s a drug you will probably give them during a select period in their treatment. You’re probably going to price that drug at a certain level and it’s going to cost you a certain amount to produce the drug so that there’s a profit margin that’s being made. That is your market. So, when you’re trying to figure out what your actual market is, what tends to work a little bit better is called a “bottom up” approach, where you start working through all of these individual details to figure out the size of the market you’re trying to solve.
Case Study: Platelet BioGenesis
I’m going to give you a contextual example using my own company. The problem we were trying to solve is unmet platelet demand. Platelets are very much the band-aids of the bloodstream. They are the cells in your blood that stop you from bleeding. The problem is that platelets come inherently, uniquely, from human volunteer donors and they can’t be stored in the cold like other blood cell products, so they have a five day shelf life. Within that five day shelf life, platelets are – because they are coming from donors – inherently at risk of bacterial and viral contamination, so you spend two days screening platelets for bacteria, and a third day transporting them.
So you’ve got a product that we all know is critically important, that’s got an inventory shelf life of about two days. You can imagine how that’s a huge problem during long weekends, civic holidays, hot days, and days when people just don’t come out to the clinic to donate blood, and ironically during emergencies when they’re needed most. So, what is the primary market driver?
Recognize the problem by correctly identifying your customer
First of all, the customer is not the platelet recipient, which is something that was interesting to discover. It’s not even the hospital. It turns out to be the blood banker that purchases the platelet units for the hospital to then be distributed amongst physicians. Once you understand who the customer is, you start to understand what the primary market driver is. The primary market driver, I would have assumed would have been safety. Safety is number one, but what’s also number one and actually the primary market driver is cost. Platelet units cost about $1,000 [for] an apheresis unit, and hospitals are under a lot of pressure to provide their therapies or their treatments at lower cost points, and so the problem we are trying to solve is not actually producing safe platelets or producing platelets in general. It’s producing platelets at a cost point that’s lower, or at least on parity with donor-derived platelets. So we have to beat that $1,000-unit marker.
Refine your solution into a value proposition
Once you’ve understood your problem, the next step is to start working on the solution. This is when you need to begin identifying what your value proposition is, what your business plan is and how your investors exit.
First I’ll start with our solution. Our solution was to see if we could bypass the donor entirely by manufacturing platelets from pluripotent stem cells. We would begin with induced pluripotent stem cells, and differentiate them to the parent platelet cells, which are megakaryocytes. We would then trigger those megakaryocytes to produce platelets and we would do so at a number or level that would allow us to make our platelets at a cost point that’s lower that donor-derived platelets, allowing us to compete with donor-derived platelets.
Now the value proposition, is that we’re able to produce platelets that are cheaper. There are other values that are inherent to the product as well. If you’re starting from a cGMP-compliant stem cell line, under [a] rigorous manufacturing processes, you can produce a platelet that should be, inherently, sterile. So you eliminate the risk of bacterial or viral contamination. Having a manufacturing process for platelets also allows you to make platelets on demand and addresses that critical unmet need, particularly during emergencies.
Understanding the solution drives your business plan. Our business plan turns out to be: take stem cells, turn them into platelets, package those platelets and then sell those platelets directly to blood bankers for a profit.