XXXXXX
Common Stocks $3,000,000
This Document is a Business Plan and does not constitute an offer to sell or a solicitation to purchase. This Business Plan, "the plan", is confidential and contains proprietary information including trade secrets of XXXXXX, LTD. Neither the Plan nor any of the information contained in the plan may be reproduced or disclosed to any person under any circumstances without the express written permission of XXXXXX, LTD.
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1 EXECUTIVE SUMMARY ................................................................................................................. 4 2 PROBLEM .......................................................................................................................................... 5 Challenging working environment for new doctors ......................................................... . 5 Pharmaceutical industry’s marketing is not relevant anymore ................................... 7 3 SOLUTION ........................................................................................................................................ 8 WEB2.0 application (SEE ANNEXE B) .................................................................................... 8 Highly targeted ad placement, together with a powerful tracking system ........... 1 1 Expected difficulties and risks ................................................................................................ 3 1 4 BUSINESS MODEL ....................................................................................................................... 4 1 Advertising revenues ................................................................................................................. 4 1 Dashboard service accessible through subscription ...................................................... 4 1 Sponsorship agreements for areas/functions of the website ..................................... 5 1 5 UNDERLYING MAGIC .................................................................................................................. 6 1 Convergence of technologies, pharmaceutical marketing and physician demographic ................................................................................................................................. 6 . 1 Offer will be extended in allied health services and other countries ...................... 8 1 6 SALES AND MARKETING ........................................................................................................... 9 1 Utilizing residency programs .................................................................................................. 9 . 1 Evangelism with nationally prominent physicians (advisory board) ....................... 0 2 Marketing and sales campaigns ............................................................................................ 1 . 2 7 COMPETITION ............................................................................................................................... 2 2 8 FINANCIALS AND KEY METRICS ............................................................................................ 4 2 ASSUMPTIONS .............................................................................................................................. 4 2 INCOME STATEMENT ................................................................................................................. 5 2 BALANCE SHEET .......................................................................................................................... 7 2 CASH FLOWS ................................................................................................................................ 8 . 2 9 MANAGEMENT TEAM .................................................................................................................. 9 2
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1 EXECUTIVE SUMMARY
XXXXXX had been created to solve problems currently plaguing young physicians as well as the pharmaceutical industry. They are both challenged by new regulations. Physicians in the residency program are facing hour restrictions. According to the new regulations, their workweek has been limited to just 80 hours. This means they have to switch from on‐the‐spot training to self‐learning. After completing their residency, they feel the burden of the healthcare system further constraining the time available to them for learning. While physicians cope with these restrictions, pharmaceutical companies are imposing new marketing standards to clean up the culture of “gift giving”. We, at XXXXXX, will offer a one‐stop experience for those physicians, together with an ability for pharmaceutical companies to develop highly relevant communication campaigns. XXXXXX platforms will target this new breed of physicians who are technology savvy, very comfortable with social networking as well as mobile devices. Primarily based on the Internet, it will also feature mobile interconnectivity. Content provided, for instance videos or PowerPoint presentations featuring medical practice tutorials will be decided upon by physicians already enrolled in training programs. These platforms will also feature a social network as well as medical management tools. Main revenue streams will come from advertisements and sponsoring of areas on the website. Moreover, physician activity on the platform will generate data in high demand by financial institutions that want to test trading patterns. Those statistics will be accessible through a subscription. Our aim is to target residency programs in order to promote these applications. We want that physicians in these programs be early adopters of XXXXXX solutions, and go on to propagate the platform’s use to hundreds and thousands of others. Chris Y, the CEO of XXXXXX, is Medical Director with a strong background of experience in dealing with the professional development of young physicians. He will be supported by a team of experienced professionals and an advisory board that will open the doors to several such relevant and revolutionary residency programs.
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We need $ 3,000,000 to start up the business, and are planning to break even within two years. Right issue proceeds will be mainly used for development of the web and mobile platforms. We also plan to set up an IPO in five years or be bought out by one of our competitors.
2 PROBLEM
Challenging working environment for new doctors
Physicians’ classical way of learning . . .
After having received a medical degree or diploma, physicians in the United States enter postgraduate medical training and/or a certification in a primary care or referral specialty. This is a residency program, which is composed almost entirely of the care of hospitalized or clinic patients, mostly with direct supervision by more senior physicians. Now, a residency may follow the internship year or include the internship year as the first year of residency. The residency can also be followed by a fellowship, during which the physician is trained in a sub‐specialty. The most effective training tool for a residency program is to have the experience of managing patients with on‐the‐spot tutorials. This kind of learning which we also refer to as ‘bedside learning’, is done by people close to the action – like the chief residents, fellows, and the younger faculty. While medical school teaches doctors a broad range of medical knowledge and basic clinical skills, it provides very limited experience in practicing medicine. On the other hand, a medical residency gives in‐depth training within a specific branch of medicine. A doctor may choose a specialty (like dermatology or radiology) in his residency program.
. . . Is challenged by new
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A new rule, which has been applied since 2004, limits the number of hours that resident physicians can work for in a week1. With this restriction in resident hours, there are widespread concerns that
The Accreditation Council for Graduate Medical Education (ACGME) had formalized changes in 2004: ‐ only 80 hours per week over a four‐week period; ‐ Take a full day off per week and at least 10 hours off between shifts; ‐ Cannot work more than a 30‐hour shift with the last 6 hours not devoted to clinical care. The Accreditation Council for Graduate Medical Education (ACGME) had formalized changes in 2004
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regulations…
physicians are not getting enough cases to learn from. Cumulative operative experience decreasing during general surgery residency is a worrisome trend for surgical trainees. With the new 80‐hour workweek, attending physicians feel both resident care to patients as well as the education of training physicians suffers2 majorly. Consequently, they are now having to rely more and more on themselves to get the compulsory knowledge to practice medicine. Meaning that the learning process is increasingly being performed independently.
… daily work burden
Besides the glaring changes that have occurred in residency programs, there is also an increase in the workload of physicians, which is in turn constraining their time available for learning. This is largely due to increasing burdens on the healthcare system: ‐Less reimbursement which results in fewer physicians handling more of the patient load. Since there is lesser reimbursement on each visit by insurance companies as well as the government, more patients need to be seen to break even. We see this especially in pediatrics, where doctors now see as many as 5‐7 children per hour in comparison to just 2‐3 per hour earlier. And this is all because of poor re‐imbursement rates and the need to break even. ‐A tremendous amount of paper work due to insurance billing and legal justifications: insurance companies have very complex forms that requires a physician to have a full‐time staff to file these claims for payment. Many of the claims are denied as a stalling tactic and require the physician to call the company directly to justify the bill, which in turn takes even more time and eats into the physician’s clinical duties. ‐Not a standardized electronic medical record: There are many electronic medical records (EMR) out there but none talk to one another as nothing is synchronized yet. At best, the EMR can fax a hard copy to another office in an emergency situation or if it needs
Winslow ER, Berger L and Klingen smith in “Has the 80‐hour work week increased faculty hours?” Curr Surg. 2004 Nov‐Dec
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to be included in a paper file. Each hospital and medical group operates somewhat differently than the other. Where the larger universities try for best practices in a specialty, there is a tremendous amount of variation clinically. Training materials are not standardized or shared. Each hospital may, if you are fortunate, have a database of material. But in most cases, they do not. The material is kept solely by those doctors that produce it. ‐Scattered Continuing Medical Education (CME) options: outside of training programs there are multiple areas for CME. The problem is the undetermined quality‐ there is no way to judge if a lecture is good until you attend it. Conferences tend to be spotty and usually a boondoggle. Thus the education of residents may be very biased since it is based on an individual hospital’s clinical preferences. For instance, some hospitals may use one drug over another).
Pharmaceutical industry’s marketing is not relevant anymore
Traditional pharmaceutical marketing and its limits
The pharmaceutical industry currently spends an estimated $13 billion annually on marketing to physicians, and yet it has difficulties in reaching the targeted audience. The current strategy adopted by various pharmaceutical companies is to send drug representatives to the physician’s office in order to give a soft sell on the product. Not only does this work out to be costly for the company but it isn’t even appreciated by the doctors. That is even truer for younger physicians. Residency programs have been averse to the pharmaceutical industry marketing to residents for fear of undue influence on these new physicians. But this is not all that plagues the pharmaceutical companies. Their legacy of marketing infrastructure and resources is woefully inadequate when it comes to effectively reaching young physicians. Their available marketing techniques have led to, what some feel, is industry gift giving. This has created entitlements and obligations for doctors as well as possible conflicts with their primary obligation to their patients.
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Moreover, conferences and traditional trade advertising are no longer cost effective or practical, given the time demands and media usage of today’s younger doctor.
Changes in the pharmaceutical industry regulation
The Pharmaceutical industry has self‐imposed regulatory standards3, cleaning up these marketing practices: ‐Limited amount of external perks to physicians; ‐Focus on education ; ‐Limited amount of interaction in training programs with some hospitals leading the way to ban access4.
. . 8 FINANCIALS AND KEY METRICS
ASSUMPTIONS
Assumptions on Revenues
Pharmaceutical companies’ advertisements on both the web as well as mobile platforms will be the main stream of revenue. Figures on the Income Statement have been computed using the following method: ‐We first compute an estimated number of ad impressions on the website, based on the number of client requests. Number of users start with 2000 in year 1 to increase progressively to 15,000 in year 5, with an average number of requests per user per day being around 20. ‐Then the total number of ad impressions is multiplied by a percentage of clicks. This figure is at 3% for the first year and then at
PhRMA code (2002), born out of some serious marketing abuses in the US generating Federal probes and fines
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Coleman DL, Kazdin AE, Miller LA, Morrow JS, Udelsman R. in “Guidelines for interactions between clinical faculty and the pharmaceutical industry: one medical school's approach” (Acad Med. 2006 Feb;81(2):154‐60)
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12 % for the following years. ‐This total number of clicks is then multiplied by a Cost Per Click. We apply a premium on XXXXXX CPC vs. Google’s CPC of 30 % for more than 5 years. This means an XXXXXX CPC of $0.78. Moreover, 50 % of the revenues generated by those advertisements will be given back to physicians who have provided the content. Subscribers to the dashboard service begin at 1000, increase progressively until 1700 with a constant annual fee of $99. We have made the assumption that most of those subscriptions will be made through an affiliate program, and so 40 % of the revenue will be given back to affiliate companies. The number of sponsors begins at 5, then reaches 15 for the next 4 years. Sponsoring fee per year begins at $5000 for the first year to $10,000 for the next 4 years. 40% of this revenue is retroceded to sales people.
Assumptions on expenses and asset purchase
Most of the operating expenses are made of salaries and spending on communication campaigns. Most significant salaries are for the CEO and CTO (respectively $100,000 and $90,000 annually). Budget on the communication campaign starts at $400,000 for the first year and is then $300,000 for the next 4 years. The yearly cost for development of the web and mobile platforms has been set up at an average of $50,000 and $80,000 respectively for the whole period.
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INCOME STATEMENT
We have explained in the Assumption part of the table how revenues – particularly those coming from advertising ‐ have been calculated. Cost of Goods Sold or COGS is directly linked to those three streams of revenues: payment to the provider of content for advertising, to the affiliates for subscription
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revenues, and commission to sales people for sponsoring of areas on the web and mobile applications. From those revenue projections, we particularly notice that figures in the first two years will be largely negative, but will increase progressively to reach around $2,000,000 in the 3rd year. Proceeds of the capital raising will be mainly affected to cover those initial expenses.
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BALANCE SHEET
The balance sheet structure is mainly made of Common Stock from the fund raising, as well as Earnings and Cash from the company activity.
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CASH FLOWS
First we will have negative cash flow, covered by the fund raising. Then cash will come mainly from the operational activity with income turning positive in the 3rd year.
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