The core of ISM's marketing plan is to have a product of superior quality and a corporate reputation for honesty and reliability . Sales will focus on the benefits to the diabetes management team as well as the diabetic, and product improvements that will track improvements to the technology. Product pricing of the islet sheet should be readily accepted by the market, and the margins will permit healthy profits.
Islet Sheet Medical's accomplishments and plans are summarized in the following table.
When ISM fabricates sheets that can cure diabetes we believe that we will be selling the most practical therapy for diabetes providing euglycemia without risk of hypoglycemia. Although "first-generation" microcapsules will function, the advanced safety features of the "second-generation" sheet make them obsolete. For the diabetic, the daily burden of carefully monitoring food intake, exercise and insulin, along with the ever-present fear of hypoglycemia, will disappear. Life will be much like life without diabetes. For doctors and diabetes health delivery specialists the costs of tight control, hospitalization, morbidity and mortality associated with diabetes will all disappear. The payers will save money.
ISM's product is uniquely and literally alive. The use of the product will require postimplantation patient monitoring and perhaps product upgrades. Sheets will be distributed directly to qualified surgeons. The patient's diabetes will be monitored and managed carefully before implantation. Careful control after implantation will permit gradual reduction of insulin injections as the sheet accepts the burden of diabetes control. Regular follow-up will evaluate the sheet's performance.
The decision to perform a sheet implant will be made between the patient, the diabetologist/endocrinologist and the payer. The nature of the product permits a sales force that is more accurately described as a bridge between the diabetologist and ISM's medical staff. A surgeon will perform the implantation. The likelihood of significant improvement in sheet design and performance, and the desirability to "upgrade" the sheets in diabetics, means ISM sales will function somewhat like sales of software.
As a proprietary product, the Islet Sheet will be priced by the value of the therapy rather than by the cost of manufacture. The current direct annual cost to the health care system averages $20,000 per diabetic. Adding in lost work and premature mortality, the value of a cure to the disease is arguably several times that.
The most similar therapy, naked islet transplantation, cannot be directly compared because a market in human organs is forbidden, but we estimate the current direct costs for procurement of a human pancreas and processing to make human islets at more than $20,000, and the total cost of the procedure (excluding physicians' fees and follow-up) at $70,000.
We anticipate a price for sheets needed for a single implant of approximately $20,000 will be readily accepted by the market.
Introduction of the Islet Sheet will probably take place in phases. When the device is proven in allograft animal models of diabetes, clinical studies of sheets containing human islets will begin. During this first phase cooperation with human islet transplant centers will be necessary, and the company will be able to charge for sheet fabrication only. The second phase will see Islet Sheet Medical selling bio-artificial pancreases made from xenogeneic islets, perhaps porcine islets. Later generation products will incorporate cells from cell lines made through genetic engineering.
Projected direct costs of xenograft Islet Sheet manufacture (incorporating significant economies of scale) are estimated as follows.
The margin at a selling price of $20,000 would be 65%.
ISM's plan is to have a product so superior in safety and performance as to dominate the market. Marketing will focus on building loyalty from diabetics and diabetologists, with a reputation for honesty and quality. (The directness of our web site -designed to inform and educate anyone interested in the progress of devices being designed and developed to cure diabetes- is an example.) The number of insulin-requiring diabetics in the United States is more than 3,000,000 and is growing at more than 4% annually. Our initial target will be the 700,000 diabetics with IDDM (or juvenile diabetes), all of whom are insulin requiring. At a price of $20,000 the market size in the United States alone is $14 billion. The worldwide market is more than 2.5 times that.
Our competition are working mostly on a first generation product, individually encapsulated islets of Langerhans. Our second generation product, the Islet Sheet, has compelling advantages, principally the advantage of retrievability. We believe that the first and second generation products will reach the market at about the same time. Thus, we anticipate that we will dominate the market.