Download - Final Presentation 41 McKinsey Cup
CENTER FOR PRECLINICAL STUDIES
Student Consulting Team
Diana Cugliari
Joshua Trach
Natalie Garda
Chikara Yoshida
Opportunity:Commercialization of a University Facility
The McGowan Institute for Regenerative Medicine is seeking to commercialize their Center for Preclinical Studies, and has requested a complete analysis for this commercialization.
McGowan Institute for Regenerative Medicine
Center for Preclinical Studies (CPCS)
Background
Jonathan Sacker
Core Recommendations
Viability
Shift Mindset
Modify Processes
Commercialization Recommendations Generate $7.59 million per year in revenues
Results in $300,000 per year in profit
Startup funds need ~ $1.6 million over 3 years
Achieve positive cash flow within 4th year
Focus service on small, short-term, preclinical studies
Target small to medium sized medical device companies
Modify to an entrepreneurial, customer focused mindset
Align processes to be customer service focused
Invest in additional staff, equipment and marketing efforts
M-B-A Plan Market Orientation in a University Setting
Business Model Alignment with Target Markets
Alignment of Systems and Processes to Market Demands
Methods Conducted 36 interviews
Customers, Competitors, Other Universities, University of Pittsburgh, McGowan Institute Staff Members
Researched 6 data sourcesIBIS World, Hoovers, Frost & Sullivan, Federal Drug Administration,
National Institute of Health, Clinicaltrials.gov
Conducted an Analysis
Developed a Strategic Plan
Forecasted Projections
Market Orientation in a University Setting
Identify the Market Competitor Analysis Entrepreneurial Opportunities
U.S. Contract Research Organization (CRO)
Industry Market • $15-$17 Billion Revenue • 6%-10% CAGR (-2020) • $2 Billion Profit (~12.8%)• $4 Billion Wages (~25%)• 3,000 – 3,300 Companies
Target Market
$100M Preclinical Medical Device CPCS Specialties
$200M Preclinical Medical Device
Key Corridors
31.8% West 20.1% Southeast14.3% Mid-Atlantic
Key Players
• 3,000 – 3,300 Companies • Concentration is Low• Fragmented market
$16.9B Rev
• Research– Interviewed 6 Preclinical medical device Contract
Research Organizations
• Average size and activity – $12M in revenue– 40 people on staff– 350 pre-clinical studies annually
Competitor Analysis
• Pricing– Hybrid of cost-plus and market based pricing– Prices vary 20% to 30%
• Revenue goals– Annual, monthly and daily
• Value chain activities
Competitor Analysis
Entrepreneurial Opportunities
• Viable opportunity to operate a commercialized preclinical laboratory– Process – adopt processes that align with
competitors and core capabilities– Resource – utilize resources under university
umbrella– Knowledge – focus on competitive advantage,
which is knowledge of niche areas
Core Recommendations
Viability
Shift Mindset
Modify Processes
Business Model Alignment with Target Markets
Vision and Mission Statement Target Customer Value Proposition Value Chain Profit Mechanism Marketing Channels
VisionTo support regenerative medicine development, science, researchers, and clinicians in the pursuit of bench to bedside translation of technologies.
MissionTo be an expert research facility in Quality Management Systems that advances regenerative medicine innovation by combining our niche expert knowledge, collaborators, and clinicians to further customers’ innovations.
Vision and Mission
Business Model
Value proposition
Profit Mechanism
Who?
Value Chain
What?
How?Why?Gassmann, Frankenberger and Csik, 2014
• Medical device companies– Small to medium sized
• Early stage researchers
Target Customer: Who?
• FDA Good Laboratory Practice Compliant• “One Stop Shop” for animal studies• High Tech Facility• Intellectual Powerhouse• Extensive and Influential Network
Value Proposition: What?
Key
Reso
urce
s • Management• Human capital• Capital
investment
Key
Activ
ities • Good Laboratory Practices compliant
• Equipment upgrades and purchases
• Modify mindset• Align processes
with industry• Marketing
Key
Part
ners • Clinicians
• Investigators• FDA & NIH• University
departments• UPMC• Foundations
Value Chain: How?
Profit Mechanism: Why?
• Small, short-term, large animal studies• Pricing model• Will be in positive cash flow by Year 4
Marketing Channels
Core Recommendations
Viability
Shift Mindset
Modify Processes
Alignment of Systems and Processes to Market Demands
Process Flow Pricing Strategy Capacity
Financial Projection Capital Investment Implementation Plan
Critical AreasTimeliness
Pricing and Pricing
Structure
Organizational StructureStandardization
Customer Handling
Process Flow
Process Flow
CPCS Flow
Customer Management
StudyDevelopment
Conduct Study
Produce FindingsRender Opinion
Recommend Next Phase
Process Flow
Customer ManagementStandardization: • Forms and contracts• Notifications• Pricing
Organizational Structure:• Empower executive
management
Study DevelopmentCustomer Management:• Communication
Organizational Structure:• Improve relationships
Recommended Modifications
Pricing
• Profit Margin must be considered
• Impact and perception of Indirect Cost
Pricing
Customer Focused Pricing$80,800 Price quote for a small study+ 61.5% Indirect cost~$130,500 Total cost of study to customer
Bottleneck
Infrastructure• 1 Operating Room• 3 Intensive Care Units
Recommendation Focus on small short-term studies• High Volume • Low Duration
Capacity Breakdown• Conservative Maximum Revenue
3 Rooms x 26 weeks = 78 small studies/year25% vacancy factor = 58 small studies/year58 x $130,500 (price of small study) = $7.596 M
• Aggressive Maximum Revenue78 x $130,500 = $10.179 M
Core Recommendations
Viability
Shift Mindset
Modify Processes
Financial Projections
Startup Funds
Investment towards:
• Increase staff to 16 people by year five.
• Purchase new high tech equipment
• Start marketing and promotion efforts
Credits
Current University credit back to CPCS $238,000
Increase creditNegotiate credit at 30% of indirect costs starting in yr. 2• Capital Investment decreases to $1.285 million• Achieves positive cash flow early in year 3
Implementation PlanYear 0Determine who you are and what you are going to be.
• Raise $865,000• Standardize process to handle study requests• Under costs (variable and fixed)• Develop pricing model• Standardize documents• Standardized execution of documents• Negotiate IC credit• Start search process to hire managers
Implementation Plan
Year 1Start the business
• Raise $548,000 to support year 2 activity• Hire program and marketing managers• Purchase and install most lucrative equipment• Train staff according to developed processes • Begin marketing efforts• Start on-boarding new study requests
Implementation Plan
Year 2-5In operation• Raise $240,000 to support year 3 activity• Continue to hire and train• Continue to purchase and install equipment• Continue marketing efforts• Negotiate improved terms with vendor costs
Year 4Review• Stop and review results• Plan for the next 5 years
Commercialization Recommendations Generate $7.59 million per year in revenues
Results in $300,000 per year in profit
Startup funds needed ~ $1.6 million over 3 years
Achieve positive cash flow within 4th year
Focus service on small, short-term, preclinical studies
Target small to medium sized medical device companies
Modify to an entrepreneurial, customer focused mindset
Align processes to be customer service focused
Invest in additional staff, equipment and marketing efforts
Core Recommendations
Viability
Shift Mindset
Modify Processes
Jonathan Sacker
Thank you