lolit business plan presentation

11600 young soldiers return without arms

2Stick and Hook Solutions

LOLIT LOST LIMB REPLACEMENT TECHNOLOGIES

ADVANCED MYOELECTRIC ARM

ASHWIN AGRAWALMATTHEW BUCKLEJEROME GOHSAURABH PALANWENDY TAY

™

Like’n Arm

4

FUNCTIONALITY, COMFORT & TOUCH

5

Like’n Arm – The most unique Functionality

6

Like’n Arm – The most comfortable Arm

7

Like’n Arm – We Bring Back Touch

8

Like’n Arm – The World’s Most Unique Arm

LoLiT’s Management Team

•Ashwin Agrawal – CEO•Matthew Buckle – CFO•Jerome Goh – CTO•Saurabh Palan – COO•Wendy Tay – CMO

9

Overview

•Market Analysis•Customer Analysis•Operations•Financial Highlights

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Overview Customer Operations

Finances Conclusion

Industry

Existing Arms with Less Functionality & Comfort


Finances Conclusion

Market

11

Touch, Better Functionality & Comfort

Like’n Arm is the only prosthetic that provides sense of touch and the best functionality and comfort.


Finances Conclusion

Market

12

Factors

Best

Like’n Arm iLimb Hand Utah Arm Otto Bock

Functionality

Comfort

Sense of Touch


Finances Conclusion

Industry

13

Growing Market for Entire Arm Prosthetics

Targeted 1,800 around 2% of the existing market

• 100,000 existing individuals requiring an entire arm• 6,000 new cases every year

Existing 100,000 amputees, with an additional of 6,000 new cases in the next year

106,000

6,000 new cases in the next year

Targeted 1,800 (30%) out of the new cases every year

Active and Insured Amputees

• Active Trans-humeral (entire arm) Amputees covered by Insurance

- Age in the range of 18-55 - Fulfill existing unmet need for

functionality

• Target Insurance Providers Network: - Veterans Affairs - Preferred Providers Organizations (PPOs)

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Finances Conclusion

Industry

Prosthetic Arm Fitting Process

15


Finances Conclusion

Industry

Physician Prosthetist

Pre-approval

Payment to Supplier

Insurance Claim from PPO Network

Physician Prosthetist

PPO

LoLiT’s Primary customer: Prosthetists

16

“Our decisions are based on the opinions of the medical professionals that we go to… No matter how much I read up about a prosthesis…”

- Nishan, Prosthetic Arm User, Wharton Rugby Team Assistant.


Finances Conclusion

Industry

Main Concerns of our Customers

17

Prosthetists:• Amputee Satisfaction• Reduce hassle of entering claims electronically

Insurance Companies (PPO’s):• Reduce the markups in the industry to reduce payouts


Finances Conclusion

Industry

Reducing Markups in the supply and distribution of Like’n Arm

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Finances Conclusion

Industry

Prosthetic Arm

Producers

DME Suppliers

Prosthetists

Markup 1 Markup 3Markup 2

“Follow the trend!” – CEO Independence Blue Cross Blue Shield

Prosthetists

Markup 1

Markup 2

Benefits from Following the Trend

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For LoLiT:• “Preference to someone who is in the network.”• Access to all Prosthetists under PPO


Finances Conclusion

Industry

For Prosthetists:• Amputee Satisfaction

Comfort, Functionality and Sense of touch

• Less hassle

Generating Demand for Like’n Arm

AWARENESS & INTEREST: Creating awareness through websites and magazines targeted at Amputees.

EVALUATION & TRIAL: Like’n Arm evaluated by Prosthetist and tried on some potential customers.

PURCHASE & USE: Like’n Arms user training, customization and Insurance coverage. 20


Finances Conclusion

Industry

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Capturing the Target Market


Finances Conclusion

Industry

Phase I

• Prototype Development• FDA Approval 510(k)

Phase II

• Acquire U.S. GSA Schedule• Target : 300 units to VA

Phase III

• Reach Private sector via PPO Networks• Target: 1800 units

2 Years 1 Year 2 YearsTimeline:

22

LoLiT’s Operation Strategy

In-house Processes Outsourced Production

• Assembly• R&D

• Advantage:▫ Quality Control▫ Protection of IP

• Mechanical Structure • Electronics Circuits and

Actuators

• Advantage:▫ Reduces set-up cost▫ Flexibility of supplier


Finances Conclusion

Industry

1 2 3 4 5$0

$20,000,000

$40,000,000

$60,000,000

$80,000,000

$100,000,000

$120,000,000

$140,000,000

$160,000,000

LoLiT’s Sales Forecast & Revenue Projections

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$80,000 per arm with 1800 units sold in Year 5 = $144 MM in Revenue

0 units 0 units

300 units

900 units

1800 units

200 veterans already on waiting list

100,000 existing amputees6000 new amputees per year


Finances Conclusion

Industry

LoLiT’s Net Earnings over 5 years

24Increase in Net Earnings to $83 MM over 5

years Overview Customer Operation

sFinances Conclusio

nIndustry

1 2 3 4 5

($10,000,000)

$0

$10,000,000

$20,000,000

$30,000,000

$40,000,000

$50,000,000

$60,000,000

$70,000,000

$80,000,000

$90,000,000

($4,571,857)

($2,096,000)

$14,506,539

$40,447,465

$83,295,468

1 2 3 4 5

($20,000,000)

($10,000,000)

$0

$10,000,000

$20,000,000

$30,000,000

$40,000,000

$50,000,000

$60,000,000

$70,000,000

$80,000,000

($5,239,161)($7,222,875)

($1,868,408)

$19,835,896

$74,846,673

LoLiT’s 5 Year Cash Flow (in $)

25

Licensing costs and facilities costs

Development and FDA approval

PPO networks (900 units)

GSA schedule (300 units)

Full production (1800 units)

Break-even after 163 units sold in Year 3


Finances Conclusion

Industry

Funding to cover Start-up Costs

• Start-up costs ~ $13 million

• Licensing, Prototype, Clinical Trials, Operations = $7.5

million

• Accounts Receivable ~ 60 days

• $5.5 million for units sold in Month 1 & 2 of Year 3

• Federal grants from DARPA program of $3 million

• Single round of VC funding for $10 million

26

Looking for a total of $13 million in funding


Finances Conclusion

Industry

LoLiT’s Investment Benefits

• Return on Equity = 63% at end of Year 5

• Exit Strategy

• Acquisition by Hanger or Otto Bock

27


Finances Conclusion

Industry

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QUESTIONS? “The mission of LoLiT is to make a positive difference in the lives of individuals with lost upper limbs by assisting them in achieving functionality, comfort and a sense of touch through the development, integration and distribution of the industry’s most advanced myoelectric prosthetic systems.”


Finances Conclusion

Industry

Back-up Slides

29

Licensing Costs and Related IP


Finances Conclusion

Industry

Assignee: DARPA Defense Advanced Research Projects Agency, Partnership, John Hopkins University (US)

Assignee: DARPA Defense Advanced Research Projects Agency, Partnership, John Hopkins University (US)

Assignee: DEKA Products Limited, Partnership, Manchester University NH (US)

Heather Curran, Office of Technology Transfer. (John’s Hopkins University.

• $3.3 MM required for licensing costs.

Highly Profitable Prosthetic Market


Finances Conclusion

Industry

Products Functionality Comfort Sense of Touch

LoLiT Like’n Arm

Control by Thinking, Movement of

shoulder, elbow, wrist and individual

fingers

Pneumatic pump

Yes

Touch Bionics

i-Limb Hand Movement of wrist and

individual fingersStrap-On No

Motion Control

Utah ArmMovement of elbow, wrist and individual

fingersStrap-On No

Otto Bock

Electrohands & Transcarpal-

Hand

Movement of the 3 fingers

Strap-On No

Highly Profitable Prosthetic Market


Finances Conclusion

Industry

32

• Under Surgical Appliance and Supplies Industry ~ $32 BILLION

Prosthetics Marketplace

Governmental Healthcare Policies &

Regulation

Targeted Military

Systems and PPOs

Incumbents

32

LoLiT’s solution for its customers

33

“Follow the trend!” –Joseph A. Frick, CEO IBX

Independence Blue Cross Blue Shield

PPO – Orthopedics and Prosthetics

Prosthetists

DME Suppliers Arm Prosthetic Producers

Suppliers


Finances Conclusion

Industry

Time taken to process and payout all claims

34


Finances Conclusion

Industry

Year 2002 Year 2006 Year 20120%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Within 7 days8 - 14 days1 month2 monthsMore than 2 months

Source. AHIP Center for research and policy. Survey in Healthcare Claims receipt, processing and payout times.

• In 2002, 57% of all claims filed and paid out within 7 days

• In 2012, 92% of all claims filed and paid out within 7 days.

Time taken to Process and Payout all Claims

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Finances Conclusion

Industry


• 2008: All claims paid out within 3 months. No more than 3 months delay

• Sources of delay1. Incorrect information keyed in. e.g. Invalid Insurance Code2. Incomplete information, not enough for processing. e.g. Wrong Address,

phone. etc3. Duplicate Claims

• The hassle is data entry. Entering and Monitoring data to ensure correct information is submitted.

LoLiT takes on responsibility and reduce hassle to enter claims

36


Finances Conclusion

Industry

Time taken to enter a claim, 2006

5-15 mins15- 30 mins30 - 45 mins1 hour or more


• Needs experienced Professionals to reduce the claim submission times.

• Able to understand claim submission requirements and submit automated batch claims.

• Handled by LoLiT’s CTO and Director of Medical Affairs.

Insurance Companies: Looking for Discounts

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Finances Conclusion

Industry

• Insurance Companies are concerned about more Premiums and Payouts.

• Premiums are determined by “market rate” - What you pay the prosthetist if you do not have Insurance.

I. Medical HistoryII. Current Medical ConditionIII. UnderwritingIV. ActuariesV. Other rating Techniques

• Payouts are determined by Insurance Companies.

• Traditionally, payouts are decreased by leveraging discounts on prosthetists in their network. Prosthetists do not charge as much as they would for a customer who has Insurance.

Effect of decreasing markups

38


Finances Conclusion

Industry

Source: Independence Blue Cross Blue Shield Annual Report 2008

• Cost Savings go into increasing 1% profit margin and shared with LoLiT.

• Premiums are not decreased.

Absolute Cost to Insurance Companies

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Finances Conclusion

Industry

• Like’n Arm is an expensive product.

• Rates for determining premiums for high-tech, high cost prosthetics and orthopedics are already set high (Medicare Fee Schedule POS00)

• Government together with Amputee Coalition of America introduced Prosthetic Parity Measures. Premiums remain the high regardless of product. Co-payments and deductibles will vary for individual prostheses.

• 1 way: Medicare Rates + Varying Co-payments and Deductibles.

Source. Amputee Coalition of America. Prosthetics Parity Bills and Effects

This is how we stay in business. The challenge for us is to be flexible.

-CEO Independence Blue Cross Blue Shield

40

LoLiT’s COGS over 5 years

1 2 3 4 5$0

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

$12,000,000

$14,000,000

$279,357 $288,500

$3,023,643

$7,177,854

$12,949,376

10% of Revenue

12.6% of Revenue

9% of Revenue

COGS decreases as LoLiT benefits from economies of scale

lolit business plan presentation

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