midterm business plan

7/27/2019 Midterm Business Plan

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F L E X i b l e

i n s U L I N, L L CTM


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xecutive Summary

bjectives

ackground & Trends

ompany

roduct

pportunity

hreats

rowth Plan

ssumptions

come Statement

arketing Strategy

Table of Contents


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Vision:to empower diabetics

o continue their pursuof an active lifestyle.


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Executive summaryAs of 2011, there were 25.8 million people diagnosed with diabetes and 1.9 million Americans

are added to this number each year.One of the largest components of diabetic therapy is

exercise, but the pursuit of an active lifestyle can be difficult due to conventional glucosemanagement. Flexulin is the innovative solution to this problem.

Flexulin is the first lightweight patch that, unlike traditional pumps, administers both insulin

and glucose to maintain blood-glucose homeostasis. This product is primarily targeted towards

diabetics who desire to be more active. Flexulin is a revolutionary way to manage diabetes,

taking into account the physiological demands of athletic training and competition. Active

diabetics must be conscious of their blood glucose levels and aware of how quickly they can

change during physical activity, but with Flexulin they no longer have these concerns.

This device is both wireless and flexible, keeping active individuals in mind. It adheres to the

individuals body without introducing noticeable bulk. The design allows diabetics to move

freely without any worry of discomfort. Flexulin continuously collects and transmits data to an

app to provide the users with information about their blood glucose history.

The revenue from the insulin pump market is expected to grow 9% each year, providing

Flexulin with an opportunity to capture 5% of the market share. The company expects to be

profitable in year 2016, only the second full year of sales. The loss of capital incurred in the firstthree years of operations is expected to be fully recaptured by year 2018.

Given the large market size and the ingenuity of the product, Flexulin has been approached by

multiple insulin pump manufacturers and distributors. Most notable of these offers is from

Medtronic, a giant in the industry. Moving forward, Flexulin intends to negotiate an agreement

with Medtronic in regards to the distribution and marketing of the product.

Flexulin is seeking an investment in order to create a prototype and launch this product. Withthe use of cutting-edge technology, Flexulins team is redefining diabetes management.

Sincerely,

Julian Richter

Chief Executive Officer

FlexulinTM

Julian R.M. Richter


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Background

TYPE I

Type 2 diabetes occurs

when a persons glucose

levels rise higher than

normal and the body

can no longer use insulinproperly.

TYPE IIDIABETES DIABETES

Individuals no longer have

the ability to produce insulin

on their own and require

insulin therapy. Insulin

deficiency can occur at any

age and is the main type of

diabetes found in children

and adolescents.

25.8 MILLION AMERICAN

HAVE DIABETES

1.9 Million

diagnosedeach year


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Insulin PumpsCurrent insulin pumps are convenient in some respects and

burden in another.

The convenience is that the person does not have t

constantly test his or her blood glucose levels and can b

ensured that his or her insulin levels will remain fairly constant

On the other hand, pumps can be inconvenient because thperson must always be hooked up to it. The computer portio

of the device can be bulky and a burden when the perso

does not have pockets.

Insulet Corporation has tried to address this problem with

wireless pod that sticks to the skin and is managed with

separate handheld monitor.

1998

2010

Users of insulin therapy

70,000

300,000


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Current issues1.Painful when bumped into

2.Bulky and noticeable ; causes a person to be self-conscious

3.Can get caught on chairs and desks

4.Complicated for children to use

5.Can easily be removed, fall off, etc with lots of

activity6.Not fully waterproof

7.Multiple devices to manage diabetes

8.Constant manual regulation of pump

9.Failure to recognize different kinds of sugars in

bloodstream


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CompanyChief Executive Officer

Chief Operations Officer

Chief Technology Officer

Chief Marketing Officer

Chief Finance Officer

Julian Richter graduated from the Business University of Vienna with a

degree in Finance and Entrepreneurship. He worked at Volksbank

Raiffaisenbank Rosenheim Bank as a financial consultant and then was

involved in the start-up Hellofresh on the supply chain and sales side.

Lizzie Farquhar, after receiving her BBA in Marketing at the College of

William & Mary, began her career at APT Test & Learn as a marketing analyst.

She then moved to Johnson & Johnson to be an assistant product manager.

When Julia approached Lizzie with a proposal to create a revolutionary device

that would change the way active diabetics live, she could not turn it down.

Meghana Indurti worked at Leo Burnett with various Health insurance

accounts and eventually became Account Executive. She holds an

MBA in brand management from Stanford and has been a Marketing

Manager at Tylenol for the past five years.

Jake Marshall received his BBA and Masters in Accounting at the College of

William & Mary. Following graduation, he began working at Ernst & Young LLP.

Following years of service in public accounting, Jake welcomed the opportunity

to work for a company invested in improving the lives of diabetics.

Julia Swalchick graduated from Virginia Tech with a degree in Computer

Engineering. She was a former technology consultant for Accucheck. She

contributed to the creation of the first CGM device that allowed for

continuous blood-glucose monitoring.


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Board of AdvisorsRick Spatz

Spatz began his 30-year career in advertising with Leo Burnett Company,

moving to internationally acclaimed D'Arcy, Masius, and Benton &

Bowles for a 21-year run in management that included several overseas

assignments. He led strategic and advertising development for agency

clients that included Procter & Gamble, Mars Inc., Nestle, Roche,

Cadbury, Heinz, Union Carbide, and Chi Chi's Mexican Restaurants.

Richard AshCurrently a professor at the College of William & Mary, Ash had previously

founded Dilon Technologies, Inc., a medical device company. He has also

contributed to the success of several venture capital firms, most notably

Mentech Advisors, Inc. and Mentor Technology Ventures, LLC.

Dean KamenKamen has extensive experience in the creation of new technologies, mostnotably the Segway. While an undergraduate, he developed the first portable

infusion device, which delivers drug treatments that once required round-the-

clock hospital care. Through his DEKA Research and Development, which he

co-founded in 1982, he developed a portable dialysis machine, a vascular

stent, and the iBOT -- a motorized wheelchair that climbs stairs.

Dr. Mohan PeterMohan was a Cardiothoracic surgeon having trained and worked at the Clevelan

Clinic in Cleveland, Ohio and the Mayo Clinic in Rochester, Minnesota. His pa

titles include Assistant Professor of Surgery at the Dartmouth Medical School

New Hampshire; Chief of Cardiothoracic Surgery at York Hospital, Yo

Pennsylvania; and Founder and Principal Cardiothoracic surgeon at Mer

Medical Center in Oshkosh, Wisconsin. He has served as a visiting surgeon

both Rockhampton, Australia and on the island of Grand Cayman.


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PRODUCT: HRemove cap and fill Flexulin pouch with insulin and glucose

-Cap covers internal needles

-Use of complementary syringes

-Inject through fill ports located on base of pouch1

2

Three devices offered: 100 units, 200 units, 300 units

Adhere pouch to skin

Recommended adhesion sites:

The pouch is designed for compatibility with U-100 rapid-acting insulin (100

units of insulin per milliliter of fluid). The following U-100 rapid-acting insulin

analogues have been tested and found to be safe for use in the Patch:

NovoRapid, Humalog, or Apidra

3Latch Flexulin device to pouch

4Click OK to initiate insulin release-Auto insertion of both Teflon cannulas at 45 degree angle (depth of 6.5mm 13 or

17mm)

-Auto insertion of glucose sensor

-Omnipod- 6.5mm cannula depth, 60 degree insertion angle

It is proven that manual record keeping techniques, such as a food and exercise diary, still

represent the gold standard. Patients starting insulin pump therapy should be encouraged, at

a minimum, to record blood glucose levels, boluses and basal rate adjustments. A food diaryis also useful for assessing carbohydrate consumption and overall nutritional intake. If the

food diary can be correlated to glucose levels, it can enable the patient and his or her

healthcare team to detect and address behaviors and/or physiological phenomena impairing

tight glucose control. Given that the entire customer base will not have a smart phone, a

complimentary portable device will be included that emulates the app. This device can also

be used by those who hold an app int the event of an emergency.

The Pump

The App


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OW IT WORKS-Recommended injection sites: top

of thigh, stomach, outer arm, butt,

sides of lower back

-Flexible Teflon cannula with thin

plastic tubing (lasts 72 hours- 3

days)

-Gradually releases the established

basal rate injections, program the

bolus doses to cover meals

Features:-Flexible, able to mold to your figure

-Different sizes for different users- hold various amouts of insulin and glucose

-detachable insulin pouch, glucose cartridge and adhesive patch (consistent device)-stores and injects both insulin and glucose

-reads blood glucose levels

-recognizes and reacts to patterns and trends of blood glucose levels based on users histor

-transmits all data to phone app via the cloud

-fully waterproof


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FLEXULIN

I

FE

G H

B

C

A

D

Glucose Storage

-$615.00-$499.99 per 10 sets

-Roughly 290 readings per day

A tiny electrode called a glucose

sensor is inserted under the skin to

measure glucose levels in tissue fluid.

It is connected to a transmitter that

sends the information via wireless

radio frequency to a monitoring and

display device. The device can detect

and notify you if your glucose is reacha high or low limit.

C

CGMI

Patch

$195.00 per 10 sets (approx. 1

month)

n a study of 25 volunteers, a

ubcutaneous dose of 1 mg

lucagon resulted in a mean peaklucose concentration of 136 mg/

L 30 minutes after injection

Figure B). No difference in

maximum blood glucose

oncentration between animal-

ourced and rDNA Glucagon was

bserved after subcutaneous and

ntramuscular injection.


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THE APP1234567

Storage of all dat

Personalizednotifications

Blood GlucoseTrend Graph

Calendar/Schedu

Sport specificprogramming

Nutrition Log

Index ofCarbohydrates

Accessible by individualsendocrinologist via patenlogin

Dismissible alertsLoud alert when low oninsulin & high in bloodglucose

7, 14, 30-day historyBreakdown of specificaverages for certain timeday over long period

Daily activitiesSmart pump recognizesaverage times for exercismeals, and alcohol

Glucose regulation reactprogrammed exerciseAnaerobic vs aerobic opt

Manual entry f dietPie chart of daily calorieconsumption broken up food group

Barcode scanning capabStorage of scanning histAbility to drag from histonutrition log

FLEXible

insULIN

mage provided by Glucose Buddy, Inc.


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OPPORTUNITIES &

The insulin pump market volume in 2009 was $453 million and is expected to

grow to $843 million in 2016 in the US. Within this market, Flexulin unites the

two components of quality and comfort in a unique product. Although there

are big competitors, there is a great possibility to enter the market fo

Flexulin because of the huge size of the diabetic market and the diabetics

need for improved products. Flexulins anticipated deal with Medtronicwould mean that the Flexulin pump would penetrate Medtronics already

existing market and distribution channels.

DIRECT COMPETITION Flexulin competes directly with diabetes pump and

pod manufacturers Medtronic, Roche Disetronic, Animas Corporation and

Insulet Corporation. The biggest active player in this field is Medtronic,

followed by Roche. Flexulins other competitors are relatively small and worktogether with strategic partners in the field of diabetes and medical

technology.

The pump distributors are at an advantage, having pre existing relations wit

their customers. However, there is not one pump on the market that faoutcompetes any others. Therefore, other direct competitors like the Startu

Asante Solutions which received funding by more than 7 venture capitalists o

Insulet Corporation entered the market comparably late.

For instance, Insulet Corporation was founded in 2000 and only specializes i

pods. Their focal product, The Omnipod, includes 2 pods, works wirelessly

is waterproofed for one hour and has a retail price of approximately $1700Insulin pumps are priced between $4500 and $6000. The pods must b

exchanged every three days. This translates into monthly costs o

approximately $300 - $450 by consumers, ordering pods in standard 10 piec

sets. The separate continuous glucose monitoring device costs another $700

$900. In comparison, Flexulin combines these 2 parts into one product for th

reasonable cost of $4500 and the replaceables for $700.


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THREATS.

All in all, the leading companies have some of these good characteristics l

waterproofness, wifi-ability, alerts, painless insertion and lightness but Flexu

combines several of these characteristics more effectively and has ex

features like maintaining blood-glucose levels and a phone app. In addition

that, Flexulin is the only pump provider for athletes who do sports for m

than an hour without limitations.

Indirect competitors mostly include companies that sell insulin injections (e.g

syringes). Using syringes is generally the least expensive method. For

example, 100 syringes (each 1ml of insulin) costs $20 to $30. In addition to

that, wearing no pump is more comfortable and there are fewer dangers wh

participating in contact sports. Those people do not have the risk of allergie

or malfunctioning of the pump, as well. However, these people are less flexiand have worse control of their diabetes.

Moreover, having a pod leads to fewer injections and is important to the

reduction of long-term complications and better predictability. Although,there are advantages and disadvantages for each side, for most people the

advantages of the Flexulin pump outweigh disadvantages and costs.

Threats One threat is represented by a product which cures diabetes. Sin

diabetes has many different causes, there is not one medicine which can cu

diabetes. Recently stem cell research has shown that diabetic cells in t

pancreas can be retrained to behave normally when placed with non-diabecells. These cells can then be transplanted into the pancreas and essentia

stop the manifestation of diabetes in a person. However, the results only la

for about 9 months. This method is not price sustainable, as the patient wou

have to get a transplant about once a year and pay for transplant drugs so th

their body does not reject the transplant. Because researchers are far off fro

developing a cure for diabetes, this threat is minimal.


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58%

12%

11%

10%

6%3%

Medtronic Roche (Disetronic) Animas (J&J)

Insulet Corporation Deltec (Smiths Medical) Others

Company share of the global insulin pump market (% by revenue), 2009


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Positioning

Flexulin will provide a high-end diabetes pump including the maintenance o

the blood-glucose levels for Type 1 diabetics. Flexulin will not compete wit

the other manufacturers in low-cost products, but rather concentrate o

quality. It is a competitive, high-quality product for active people and th

characteristics of Flexulin are unique. By positioning it in the high-qualit

sector, the competition will be huge, but the possible share for Flexulin i

market volume will be large. A small market share is enough to be profitable

Furthermore, being positioned with a competitive, high-tech product will b

most attractive to possible buyers like Medtronic.

Exercise is recommended for most diabetes patients as an important tool of

therapy. Experts recommend moderate-intensity physical activity for at least

30 minutes for five or more days of the week. Although light exercise can be

effectively managed, when it comes to competitive athletics, diabetes

patients often have trouble with effective treatment plans. Flexulin can be

positioned for active diabetics who prioritize exercise.


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Price$5500

$1000 $4500Disposable Patch- Insulin cartridge- Glucose cartridge- Glucose sensor- Adhesive patch- 2 Needles with Cannulas- Compents are sold in sets of 10

(last a month)

- Electronic device- Collects and transmits data- Regulates glucose and insu

levels- Rechargable Lithium batter- Syncs with the App

Tech Device


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Target Market

1.3% of all people above the age of 20 years are diagnosed wiabetes. Thats 25.6 million people. Additionally, 0.26% of all peoounger than age 20 have diabetes. Thats about 215,eople. Since Insulin is a product with inelastic demaviable option is to straddle different age groulexulin targets active customers from the af 14 to 65. Since most kids enter high school aro

his age and begin seriously becoming involveports, the product can be most useful to the

Prospective pump users or theircaregivers must be able to change

nfusion sets, fill pump cartridges and program the

pump, and must demonstrate willingness to collaborate w

healthcare providers in achieving the goals of insulin pump

herapy. In general, patients likely to succeed on insulin pump

herapy will have had sufficient education and support while

using other forms of insulin therapy so that they are alrecompetent in assessing the nutritional value of meals an

monitoring blood glucose levels frequently (minimum four ti

a da , referabl 6-8 times).


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Distribution &

Distribution and marketing will be be taken care of by Medtronic, a company that ha

already established relationships with doctors and high-quality retailers. Over the fir

three years, Flexulin will take care of distribution and marketing strategy with Medtron

serving as a consultant. Afterward, the services will be outsourced.

It would be viable for Flexulin to be recommended by pediatricians and doctors first

and foremost because patients often will not heed medical advice that doesnt correlat

with the doctor they have built a personal relationship with. Leveraging Medtronics

brand name will be necessary in order to be recommended. Additionally, it is often

more convenient for customers to purchase from big-box retailers like Wal-Mart, Kroge

CVS, and Walgreens. Therefore, Flexulin components will also be provided there.


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Advertising

It is important to emphasize the flexibility and durability of the product above all else.

Print ads will be published in leading Diabetes magazines, including but not limited to

Diabetes Self-Management, Diabetes Forecast, and Diabetes Health. Partnering wit

the magazines will enable Flexulin to be seen by both customers and those wh

research diabetes on a scholarly basis. A 12-month subscription to Diabetes Forecacomes automatically with membership into the American Diabetes Association, whic

as of now holds over 16,000 members.

Typical readers of these trade magazines share certain characteristics:

They are proactive with treatment, have done substantial research, and like brande

subscription. With Medtronics brand equity, Flexulin will be able to have an easier initi

entry into the market.

They are responsive and engaged with the community at whole. They trust authoritie

about research. They share an easier reach because of how in-tune they must be.

They are influential customers. They are persuasive and good advice regarding

health to not only their own family but also other diabetics.They also engage onlinewith user feedback and will self-promote Flexulin.


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TV Spots will also additionally run in the first year and will eventually be faded away.

They will first air at the ADA Trade shows. Extensive advertising isnt necessary since

Flexulin will be associated with Medtronic and most Diabetes product sales are

increased through word of mouth and patient-led experimentation with products.

However, in order to introduce the product particularly to active and competitive

diabetic patients, Flexulin will be positioned with athletes and sports. Here is a sample

TV storyboard.

Flexulin. Let nothing stop you.


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F L E X U L I NLet nothing stop you


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Exit & GrowthFlexulin is in negotiations with Medtronic and is currently awaiting the development of

a prototype. Medtronic is a medical technology firm, which specializes in the

manufacturing and distribution of medical supplies. Amongst other products,

Medtronic produces insulin pumps, heart valves, and pacemakers. Medtronic is a

leader in the medical technology market generating over $16 billion in sales in 2012.

The Medtronic brand name should result in increased exposure and demand for theFlexulin insulin pump. The core goals and values of Medtronic align with those of

Flexulins management team resulting in a relatively easy relationship to maintain.

Medtronic is committed to bettering human welfare, and is emphasizes expansion into

foreign markets to better serve universal health care needs.

Under the terms of the agreement, Medtronic will agree to purchase a fixed amount of

Flexulin units (1000 units), and Flexulin will provide additional units each year at the

discretion of Medtronic. Per the terms of the agreement, Flexulin agrees to supply

their insulin pumps and replaceable parts solely to Medtronic at a fixed cost over a ten

year period.

Assuming that no deal can be made with Medtronic, Flexulin will approach various

other medical technology companies such as Insulet, Animas, and Roche to discuss a

potential purchase agreement.

Flexulin plans to maintain high levels of research and development expenses with the

intention of developing more innovative medical technology solutions. Additionally,

Flexulin plans to decrease the marginal costs of production by taking advantage of

economies of scale as the level of production increases.


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StrategyWorst Case: If Flexulin cannot come to an agreement with any of the above medical

technology companies, there is still a strong likelihood that Flexulin will be able to

recoup their investment. Flexulin has received strong interest in purchasing the patent

for their insulin pumps. Management has determined that should the sale of patent

and trade secrets occur, the proceeds from that sale should be sufficient enough to

cover the research and product development expenses.

Exit Strategy: Flexulin plans to offer investors a put option which takes effect in the

seventh year of business. This option guarantees that Flexulin will repurchase the

investors interest, and provide a minimum return of 25%. For the investors who

choose to hold their interest with Flexulin, they can expect to recoup their investment

with dividend payments beginning in 2016, the third full sales year.

Terms of Agreement:

Flexulin requires an initial investment of $4,

000,000 in return for 40% equity in the company

in order to create a prototype and cover start-up

costs for the first year of operations.


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Assumptions1. Each year, 15% of previous Tech Device owners no longer use the product and/or have to

repurchase it.

2. Initial profit margin is 15% based off of the margins of currently established companies, such asMedtronic, Insulet, Animas and Roche,

3. Units of adhesive patches sold based upon the number of tech strips sold

4. Due to relatively low sales volume in the first year, profit margins will not be as large as competitors

5. The growth in sales is more than 2% and continues to increase up and after 2019.

6. Legal expenses also cover patent and trademark costs.

7. The market for insulin pump therapy will continue to grow at an increasing rate. This is based off of

ADA growth projections.

8. The return on sales of insulin pumps is 2% of sales revenue.

9. Selling begins in January of 2015.

10. Liability Insurance cost is included in SG&A Expenses

11. Shipping costs are based on competitive shipping prices.

12. Rent expense for the office is $3000.00 per month. Utilities expenses are assumed to be constant at

$10,000 a year.

13. Dividend payments are 40% which is based on their equity ownership in the company.

14. The worst case scenario was based off of sales volume is reduced by 50% holding all fixed costs

equal. The best case scenario will be an increase in 25% of the sales volume of the projected sales.

This based on the assumption that Flexulin will be operating at the forefront of Medtronics sales.15. Each partner in the executive team has contributed $200,000.

16. R&D is lower than competitors because of the low amount of start-up capital and focus on a single

product in. The ratio of R&D to sales revenue is higher than that of Flexulins competitors.

17. Price is based off of competitive insulin pump prices as well as glucose monitoring systems.

18. Medtronic has agreed to a purchase floor of 1000 units. Additionally, the total units sold is based off

of the percentage of market share Flexulin is positioned to capture.

19. Glucose storage is assumed to be feasible in a wireless insulin pump. This is based off of current

research by Medtronic.

20. There can be three automated insertions that coexist in one device.

21. The device will be completely water-proof.

22. The data will be transmittable via cloud storage.

23. Flexulin will be covered by insurance.


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References

midterm business plan

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