Eye Surgery Equipment Maker Business Plan

The key element in NovOculi’s strategy is to market its technology to both those performing the procedure as well as to those on which the procedure will be performed. Once research data and publicity have been generated, the sales force will step in to encourage the initial investment in the laser required for the procedure, creating a “demand push.” After this investment has been made, a “demand pull” will be generated for the components required for institutions to perform the procedure.

Ophthalmologist training for the NICS procedure will be available at six sites throughout the U.S.: San Francisco, Boston, Atlanta, Philadelphia, Kansas City and Durham, NC. Each site will have in-depth training sessions led by a prominent ophthalmic surgeon.

The sales team will begin with six seasoned sales personnel and swell to forty-four members by Year 5. The sales team will work closely with laser manufacturers in order to promote the technology to patients and surgeons.

Those performing the procedure will be able to charge a premium for providing patients with access to this superior technology. NovOculi will extract approximately half of the nearly $1,000 premium through licensing fees associated with its patented procedure and sales of the individual components.

6.1 Value Proposition

The true value proposition for NovOculi’s technology lies with the patient. The patient stands to gain permanently increased visual acuity with a greatly decreased risk of complications. As vision is of paramount importance for the general patient population, they will be willing to pay a hefty premium in order to access the superior technology.

The value proposition for institutions and ophthalmologists to adopt the technology is two-fold: 1) Economic profit will be able to be sustained as NovOculi intends to charge approximately 50% of the total price increase associated with NovOculi’s procedure, and 2) Use of this procedure will constitute superior patient care for those providers to whom this matters.

6.2 Marketing Strategy

Promotion of NovOculi’s technology will involve targeting two different populations: 1) Ophthalmologists Performing Laser Refractive Surgery and 2) Patients with Refractive Errors. NovOculi’s success is dependent upon acceptance of its technology by both groups and its promotional strategies will be reflective of this fact. Of course, acceptance by either group will be helpful in obtaining acceptance by the other.

6.2.1 Promotion Strategy

NovOculi’s technology will be marketed using different tactics to target its two different target populations: 1) Ophthalmologists Performing Laser Refractive Surgery and 2) Patients with Refractive Errors.

Ophthalmologists Performing Laser Refractive Surgery
Acceptance amongst the nearly 3,400, and growing, ophthalmologists who perform refractive surgery will be one of the keys to NovOculi’s success. Even with strong patient demand, if the ophthalmologists are not willing to perform the procedure, then the market will remain untapped. Furthermore, ophthalmologists frequently have a privileged position in consulting patients concerning procedures and those that have embraced NovOculi’s technology will be powerful advocates.

In marketing the procedure to ophthalmologists, the main consideration will be the effectiveness of the procedure and its superiority over existing technology. The most important factor in promoting NovOculi’s technology will be concrete research results displaying its superiority over existing technologies. Once these studies have been completed, three main channels will need to be utilized to target ophthalmologists: 1) Publication in highly visible and reputable medical journals, 2) Advertising in these same medical journals, and 3) Presentations at national conventions. Using these channels, along with the free publicity associated with the introduction of a novel, superior technology, ophthalmologists performing refractive procedures will be effectively targeted and a demand “push” will be generated for patients to choose NovOculi’s procedure over existing options.

Patients with Refractive Errors
As with the ophthalmologist population, the most important factor in promoting NovOculi’s technology to the patient population will be concrete research results displaying its superiority over existing technologies. Once this has been established, NovOculi will embark on a large-scale, national advertising campaign focusing on television and printed media. Using these channels, along with as much free press as possible, NovOculi will be able to create a demand “pull” for its technology to complement the demand “push” which will arise from acceptance amongst ophthalmologists.

6.2.2 Pricing Strategy

As was mentioned in the topic on Market Segmentation, NovOculi will target the Outcome-Conscious Patient population and will not concern itself with the Cost-Conscious Patient population. In analyzing the results of the market survey, it was found that the Outcome-Conscious Patient population constituted 90% of the market. Also, this patient population was found to be much more price inelastic, willing, on average, to pay $500-$1,000 more for a procedure with significantly less complications.

NovOculi intends to charge a total of $200 per eye licensing fee for use of NovOculi’s patented procedure, then another $40 for each dye impregnated lens. Not including the reversible inotophoretic plate, NovOculi will charge approximately $480 per patient, assuming that both eyes will be corrected. Assuming that the ophthalmologists will be able to charge $1,000 more than the average current charge for LASIK, as was indicated in the survey results, this will leave over $500 per patient as the incentive for the ophthalmologists and institutions to make the investment and adopt NovOculi’s technology.

Considering that the average price for the LASIK procedure is currently $3,300 for both eyes (“Laser Eye Centers Wage an All-Out Price War,” New York Times, December 9, 2000), the price for NovOculi’s procedure is expected to be approximately $4,300 for both eyes. This is still well under the upper end of current prices for LASIK surgery which totals $6,000 for both eyes (“Laser Eye Centers Wage an All-Out Price War,” New York Times, December 9, 2000). Institutions using NovOculi’s technology will be able to charge this amount, even in the current increasingly price-competitive environment, due to the superiority of NovOculi’s technology.

The iontophoretic device will be a high margin, low volume item as this component of NICS will not need to be purchased with each additional procedure. Due to this fact, the iontophoretic device will be priced at $3,500.

6.3 Sales Strategy

NovOculi’s sales strategy will tie in with the sales strategy of the laser manufacturer. The key step in sales will be to initiate the investment in NovOculi’s technology by purchasing the laser to be used in the procedure. As with LASIK, the laser is a major investment, and the combined efforts of both NovOculi’s and the laser manufacturer’s sales forces will be required to encourage the initial investment. Once this investment has been made, the sales effort required from NovOculi will be decreased as the institutions performing the procedures will require the additional components sold by NovOculi in order to perform the refractive surgery. Therefore, the sales force will be relied on heavily for the initial demand push for the laser, then to a much lesser extent for the additional components for the procedure.

NovOculi’s sales force will initially consist of 6 sales personnel in Year 2. This number is expected to swell to 44 by Year 5 with expected dramatic increases in sales.

6.3.1 Sales Forecast

NovOculi’s technology is an improvement over LASIK, much the same as LASIK was an improvement over PRK. In fact, a poll of 10 Duke University and Stanford University ophthalmologists revealed that, on average, they felt that NovOculi’s technology was an improvement over LASIK of the same magnitude and caliber as LASIK was over PRK. Using this fact along with historical LASIK diffusion data (“Expanding the Horizons of Surgical Correction,” Review of Optometry, May, 1998) and the assumption that the diffusion constants will be similar between the two technologies, the following sales forecasts were compiled.

These forecasts do not take into account the fact that the market has become more receptive to ophthalmic laser surgery with the successes of LASIK and PRK and that the diffusion rate would probably be accelerated due to this increased acceptance of precedent technologies.

In developing the Sales Forecasts, it was modestly assumed that only 1/3 of all patients will require refractive correction bilaterally (both eyes). Current available data indicate that the actual fraction of patients requiring bilateral correction is closer to 2/3.

6.4 Strategic Alliances

NovOculi will initially try to encourage strategic alliances in three different arenas: laser manufacturers, refractive surgery providers, and research institutions.

Laser Manufacturers
As NovOculi will provide all the components necessary to perform its patented procedure except for the laser, developing a strategic alliance with a laser manufacturer will be an important step. Existing laser manufacturers, including VISX and Alcon, are currently being approached as a prelude to this partnership.

Refractive Surgery Providers
Possibilities for strategic alliances abound in the current refractive surgery industry. Due to the increasingly fierce competition, LASIK providers are expected to be very receptive to a strategic alliance that would allow them access to a proprietary technology with which they could charge a sustainable premium. As was noted in section 4.2.1, 48% of all LASIK surgery is being done by corporate chains. A large corporate chain would be an ideal initial strategic alliance as it would provide excellent exposure and access to its well-established patient base and distribution networks.

Research Institutions
As the bulk of research on the procedure has already been arranged to be done in collaboration with Stanford University, this strategic alliance is already well-formed. NovOculi is open to further collaboration as well, and expects to utilize five additional institutions as NICS training sites, including research institutions in: Boston, Atlanta, Philadelphia, Kansas City, and Durham, NC.

6.5 Milestones

The following are the key milestones for the first year of operations:

1. Completion of strategic business plan by March 1, 2001.
2. Research Grants will be applied for by May 1, 2001.
3. All patents, domestic and foreign, will be applied for by July 1, 2001.
4. Animal trials initiated by October 1, 2001.
5. Start-up capital will be raised by January 1, 2002.
6. All other first year milestones are currently on schedule in accordance to the business plan.