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Introduction

Antibody issue

PAST

Process

Results

Practices

What is Next

"Alberto is an expert in the disposal business." - Alejandro Sosa: Scarface

Business

Figure 1: Business model canvas for PAST.

We in PAST believe that our product is a valuable addition to the toolbox of researchers and educators. But believing is not knowing, and therefore an investigation was conducted to conclude whether this presumption is wrong. This evaluation consists of a business canvas, a market analysis based on iGEM teams from 2014 and a cost analysis, allowing us to assess if profit margins are large enough to verify our assumption.

A market analysis was conducted to determine how many batches PAST should be able to produce per year. The analysis is based on the competitors of iGEM 2014. These teams are at the forefront of synthetic biology and therefore it is assumed, that they represent the future of the field. Every team who has succeeded in making their wiki has been considered. The results can be viewed in the following pdf (Market analysis iGEM 2014).

Team distribution

Figure 2: Chart of the global distribution of teams

The market is presumed to be worldwide. The distribution of teams, which can be viewed in figure 2, shows an even distribution in all but one region. This underrepresentation by Latin America can be caused by several factors, but for now it is considered a future market, and no correlations will be made.

Teams using antibodies

Figure 3: Chart of teams using antibodies distributed in regions

We have investigated how many teams according to regions that have used antibodies in their project. The results are depicted in figure 3. Though Europe only represents 28 % of the total teams, these teams use 55% of the totale usage of antibodies, whereas North American teams used antibodies half as much as they are represented. Several reasons can be responsible for this under- and overrepresentation. If it is assumed, that all teams producing proteins could potentially use antibodies, it is a possibility that projects on this subject is more common in Europe than in North America. This will be investigated next.

Teams producing proteins

Figure 4: Chart of teams producing protein in regards to regions

Figure 4 shows that the teams producing proteins follow the general distribution globally, therefore there is no correlation between protein production and the uneven distribution of antibody usage. It has not been possible to determine if resources is the cause of the bias, but this does not seem unreasonable. If that is the case, teams will benefit from PAST’s product globally.

Teams producing proteins and teams using antibodies has been compared in figure 4. This shows that only a few actually use antibodies. This could be due to teams not reaching a point, where assays using antibodies are necessary, rather than a lack of resources. However, it has been decided to ignore this as a reason, since it must be assumed, that research projects generally have more time to evolve. Therefore it has been decided to base the estimate of production size on the protein production rather than antibody usage.

Figure 5:comparison of protein production and antibody usage

Using the assumption an estimate can be made. A total of 123 teams where involved in projects producing proteins, and on average the teams used two types of antibodies per project. Therefore a production of approximately 250 varieties of peptide aptamers is presumed appropriate. Though this estimates the number of batches per year, each project will only buy a small amount of the production. Therefore it should be evaluated if, it is reasonable to assume that the rest of the production can be sold as well. To reach a conservative estimate the European market has been evaluated, as this is the region where most antibodies where used. 63 universities were represented at iGEM 2014 out of approximately 4000 academic institutions in Europe. Reference: European Union. The role of universities in the Europe of knowledge. (Link) (Accessed August 21^st 2015). Taking these numbers into consideration, iGEM 2014 represents 1.6 % of the market. Assuming only one research project per university is using antibodies, which is unlikely, this evaluation reinforces the assumption, that the remaining product can be sold. In some instances this will not be the case, due to the specialized nature of production or property rights. Therefore it is estimated that 30 % of the production will be lost.

A cost analysis is key in estimating profitability, and determining if this project should be carried on after iGEM. These estimates shows if our presumption of the competitiveness are wrong rather than right. The analysis is used to approximate the pricing of the product, since it does not exist on the market as of yet. The aim is to reduce prices by half in comparison to the price of mAbs, which leaves an acceptable margin between reality and estimates.

Capital Investment

To estimate how much capital is needed to build the plant, the Busche model (1995) with modifications has been used. Reference: Seider, Seader, Lewin and Widagoo. Product and Process Design Principles - Synthesis, Analysis, and Evaluation; Third Edition - International Student Version; John Wiley & Sons, Inc.; 2010 The size of the factory has to be estimated before costs can be calculated, and therefore it is necessary to evaluate the number of units needed. As established under entrepreneurship it has been decided to produce several small batches, and the market analysis estimated the amount of batches to be 250 per year. According to the timeline a batch cycle is 63.5 [h], and the next batch can begin after a flash sterilization of the fermenter, 42.5 [h] from the start of the batch. This implies, that the cycle time of two batches is 106 [h]. It is assumed that the plant is closed for 4 [weeks/yr] and a work week consists of 5 days (120 [h]). Which means that 3 set-ups are needed. This assumption leaves a time buffer in case of unforeseen maintenance or orders.

**Table 1: Estimate of the total capital investment**
	Result [million USD]	Source:
Total bare-module investment	7.6	Reference: Seider, Seader, Lewin and Widagoo. Product and Process Design Principles - Synthesis, Analysis, and Evaluation; Third Edition - International Student Version; John Wiley & Sons, Inc.; 2010 chapter 22.3 Simulation Aspen Plus, method BK10 Reference: E-mail from GE lifescienses linear extrapolation of price development
Cost of site preparation	1.1	Reference: Seider, Seader, Lewin and Widagoo. Product and Process Design Principles - Synthesis, Analysis, and Evaluation; Third Edition - International Student Version; John Wiley & Sons, Inc.; 2010 chapter 22.3
Cost of service facilities	0.6	Reference: Seider, Seader, Lewin and Widagoo. Product and Process Design Principles - Synthesis, Analysis, and Evaluation; Third Edition - International Student Version; John Wiley & Sons, Inc.; 2010 chapter 22.3
Allocated costs for utility plants and related facilities	2.9	Reference: Seider, Seader, Lewin and Widagoo. Product and Process Design Principles - Synthesis, Analysis, and Evaluation; Third Edition - International Student Version; John Wiley & Sons, Inc.; 2010 chapter 22.3; table 22.12 Simulation Aspen Plus, method BK10
Total direct permanent investment	12.2	Reference: Seider, Seader, Lewin and Widagoo. Product and Process Design Principles - Synthesis, Analysis, and Evaluation; Third Edition - International Student Version; John Wiley & Sons, Inc.; 2010 chapter 22.3
Cost of contingencies and contractor’s fee	2.2	Reference: Seider, Seader, Lewin and Widagoo. Product and Process Design Principles - Synthesis, Analysis, and Evaluation; Third Edition - International Student Version; John Wiley & Sons, Inc.; 2010 chapter 22.3
Total depreciable capital	14.4	Reference: Seider, Seader, Lewin and Widagoo. Product and Process Design Principles - Synthesis, Analysis, and Evaluation; Third Edition - International Student Version; John Wiley & Sons, Inc.; 2010 chapter 22.3
Cost of land	0.3	Reference: Seider, Seader, Lewin and Widagoo. Product and Process Design Principles - Synthesis, Analysis, and Evaluation; Third Edition - International Student Version; John Wiley & Sons, Inc.; 2010 chapter 22.3
Cost of plant startup	3.6	Reference: Seider, Seader, Lewin and Widagoo. Product and Process Design Principles - Synthesis, Analysis, and Evaluation; Third Edition - International Student Version; John Wiley & Sons, Inc.; 2010 chapter 22.3
Total permanent investment	21.6	Reference: Seider, Seader, Lewin and Widagoo. Product and Process Design Principles - Synthesis, Analysis, and Evaluation; Third Edition - International Student Version; John Wiley & Sons, Inc.; 2010 chapter 22.3
Working capital	3.2	Reference: Seider, Seader, Lewin and Widagoo. Product and Process Design Principles - Synthesis, Analysis, and Evaluation; Third Edition - International Student Version; John Wiley & Sons, Inc.; 2010 chapter 22.3
Total captital investment	24.9	Reference: Seider, Seader, Lewin and Widagoo. Product and Process Design Principles - Synthesis, Analysis, and Evaluation; Third Edition - International Student Version; John Wiley & Sons, Inc.; 2010 chapter 22.3

Note: several minor cost calculations such as that of pumps has been ignored.

This calculation shows that an investment of 24.9 [million USD] is needed to get the plant up and running.

Cost of Production

An approximation on the annual production cost needs to be estimated, this is achieved by usage of the Busche model (1995) with modifications. Reference: Seider, Seader, Lewin and Widagoo. Product and Process Design Principles - Synthesis, Analysis, and Evaluation; Third Edition - International Student Version; John Wiley & Sons, Inc.; 2010

**Table 3:**
	Result [million USD/yr]	Source:
Total Feedstock	3.5	Entrepreneurship Reference: Available from: [Sigma-Aldrich] (accessed: 10.09.2015) Sigma-Aldrich Reference: Available at: [NEB] (accessed: 13.09.2015) NEB
Electricity	0.3	Simulation Aspen Plus, methods BK10 and Water
Cooling water	0.00004	Simulation Aspen Plus, methods BK10 and Water
Process water	0.003	Entrepreneurship
Total utilities	0.32	Reference: Seider, Seader, Lewin and Widagoo. Product and Process Design Principles - Synthesis, Analysis, and Evaluation; Third Edition - International Student Version; John Wiley & Sons, Inc.; 2010 Chapter 23.2
Direct wages and benefits	1.09	Reference: Seider, Seader, Lewin and Widagoo. Product and Process Design Principles - Synthesis, Analysis, and Evaluation; Third Edition - International Student Version; John Wiley & Sons, Inc.; 2010 Equation 23.2 and table 23.3
Direct salaries and benefits	0.16	Reference: Seider, Seader, Lewin and Widagoo. Product and Process Design Principles - Synthesis, Analysis, and Evaluation; Third Edition - International Student Version; John Wiley & Sons, Inc.; 2010 Chapter 23.2
Operating supplies and services	0.07	Reference: Seider, Seader, Lewin and Widagoo. Product and Process Design Principles - Synthesis, Analysis, and Evaluation; Third Edition - International Student Version; John Wiley & Sons, Inc.; 2010 Chapter 23.2
Technical assistance to manufacturing	0.02	Reference: Seider, Seader, Lewin and Widagoo. Product and Process Design Principles - Synthesis, Analysis, and Evaluation; Third Edition - International Student Version; John Wiley & Sons, Inc.; 2010 Chapter 23.2
Control laboratory	0.02	Reference: Seider, Seader, Lewin and Widagoo. Product and Process Design Principles - Synthesis, Analysis, and Evaluation; Third Edition - International Student Version; John Wiley & Sons, Inc.; 2010 Chapter 23.2
Total labor-related Operations	1.4	Reference: Seider, Seader, Lewin and Widagoo. Product and Process Design Principles - Synthesis, Analysis, and Evaluation; Third Edition - International Student Version; John Wiley & Sons, Inc.; 2010 Chapter 23.2
Wages and benefits	0.6	Reference: Seider, Seader, Lewin and Widagoo. Product and Process Design Principles - Synthesis, Analysis, and Evaluation; Third Edition - International Student Version; John Wiley & Sons, Inc.; 2010 Chapter 23.2
Salaries and benefits	0.2	Reference: Seider, Seader, Lewin and Widagoo. Product and Process Design Principles - Synthesis, Analysis, and Evaluation; Third Edition - International Student Version; John Wiley & Sons, Inc.; 2010 Chapter 23.2
Materials and services	0.6	Reference: Seider, Seader, Lewin and Widagoo. Product and Process Design Principles - Synthesis, Analysis, and Evaluation; Third Edition - International Student Version; John Wiley & Sons, Inc.; 2010 Chapter 23.2
Maintenance overhead	0.03	Reference: Seider, Seader, Lewin and Widagoo. Product and Process Design Principles - Synthesis, Analysis, and Evaluation; Third Edition - International Student Version; John Wiley & Sons, Inc.; 2010 Chapter 23.2
Total Maintenance	1.5	Reference: Seider, Seader, Lewin and Widagoo. Product and Process Design Principles - Synthesis, Analysis, and Evaluation; Third Edition - International Student Version; John Wiley & Sons, Inc.; 2010 Chapter 23.2
General plant overhead	0.1	Reference: Seider, Seader, Lewin and Widagoo. Product and Process Design Principles - Synthesis, Analysis, and Evaluation; Third Edition - International Student Version; John Wiley & Sons, Inc.; 2010 Chapter 23.2
Mechanical department services	0.05	Reference: Seider, Seader, Lewin and Widagoo. Product and Process Design Principles - Synthesis, Analysis, and Evaluation; Third Edition - International Student Version; John Wiley & Sons, Inc.; 2010 Chapter 23.2
Employee relations department	0.1	Reference: Seider, Seader, Lewin and Widagoo. Product and Process Design Principles - Synthesis, Analysis, and Evaluation; Third Edition - International Student Version; John Wiley & Sons, Inc.; 2010 Chapter 23.2
Business services	0.2	Reference: Seider, Seader, Lewin and Widagoo. Product and Process Design Principles - Synthesis, Analysis, and Evaluation; Third Edition - International Student Version; John Wiley & Sons, Inc.; 2010 Chapter 23.2
Total operation overhead	0.47	Reference: Seider, Seader, Lewin and Widagoo. Product and Process Design Principles - Synthesis, Analysis, and Evaluation; Third Edition - International Student Version; John Wiley & Sons, Inc.; 2010 Chapter 23.2
Property taxes and insurance	0.3	Reference: Seider, Seader, Lewin and Widagoo. Product and Process Design Principles - Synthesis, Analysis, and Evaluation; Third Edition - International Student Version; John Wiley & Sons, Inc.; 2010 Chapter 23.2
Direct plant	0.88	Reference: Seider, Seader, Lewin and Widagoo. Product and Process Design Principles - Synthesis, Analysis, and Evaluation; Third Edition - International Student Version; John Wiley & Sons, Inc.; 2010 Chapter 23.2
Allocated plant	0.21	Reference: Seider, Seader, Lewin and Widagoo. Product and Process Design Principles - Synthesis, Analysis, and Evaluation; Third Edition - International Student Version; John Wiley & Sons, Inc.; 2010 Chapter 23.2
Total depreciation	1.08	Reference: Seider, Seader, Lewin and Widagoo. Product and Process Design Principles - Synthesis, Analysis, and Evaluation; Third Edition - International Student Version; John Wiley & Sons, Inc.; 2010 Chapter 23.2
Total cost of manufacturing	8.6	Reference: Seider, Seader, Lewin and Widagoo. Product and Process Design Principles - Synthesis, Analysis, and Evaluation; Third Edition - International Student Version; John Wiley & Sons, Inc.; 2010 Chapter 23.2
Total general expenses	0.2	Reference: Available at: (accessed: 15.09.2015) Rand Corporation
Total cost of production	8.8	Reference: Seider, Seader, Lewin and Widagoo. Product and Process Design Principles - Synthesis, Analysis, and Evaluation; Third Edition - International Student Version; John Wiley & Sons, Inc.; 2010 Chapter 23.2

This concludes that according to the model, it will cost 8.8 [million USD/yr] for PAST to produce 250 batches.

Pricing and Profitability

The challenge of biotech companies is to price a product that is of yet not on the market. This has to be an evaluation of the costs estimated above and the investments needed for maturing the concept on one hand, and how much customers are willing to pay on the other. PAST aims to replace mAbs, and it must be assumed that though there are concerns of animal welfare, the customers will be inclined to keep using mAbs, if the price of the peptide aptamers are not considerably lower. Therefore an average of the price of mAbs has been estimated by 50 products from Sigma-Aldrich, details can be viewed in the following pdf (Sigma-Aldrich antibodies). Assessment of the pricing shows an average price of 1.7 [million USD/g]. This method of pricing presupposed that the peptide aptamers have the same affinity and specificity as mAbs. The definition of sales can be viewed in equation 1, and it should be noted that it is assumed that 30 % of production is lost. Reference: Seider, Seader, Lewin and Widagoo. Product and Process Design Principles - Synthesis, Analysis, and Evaluation; Third Edition - International Student Version; John Wiley & Sons, Inc.; 2010

S=Price x 0.70Production (1)

In figure 5 net earnings can be viewed. Net earnings has been calculated from equation 2. Reference: Seider, Seader, Lewin and Widagoo. Product and Process Design Principles - Synthesis, Analysis, and Evaluation; Third Edition - International Student Version; John Wiley & Sons, Inc.; 2010

Net earnings = (1 - t)(S - C) (2)

where C=Cost of production

and t=Property taxes and insurance

The goal of PAST is to sell the product at least 50% cheaper than of mAbs. Figure 5 shows that PAST will render positive net earnings and achieve this goal at prices in the range of 1.5-50% of mAbs.These calculations does not take into account the investments in the plant. Therefore three different methods were used for estimating the profitability, see table 3. They cannot be compared directly, but if all shows profitability, it must be assumed, that grounds to work further with the idea is established. Reference: Seider, Seader, Lewin and Widagoo. Product and Process Design Principles - Synthesis, Analysis, and Evaluation; Third Edition - International Student Version; John Wiley & Sons, Inc.; 2010

Figure 6: Net earnings compared to the price of mAbs, it is noted that within the range of 1.5-50% of the price of mAbs, the net earnings are positive.

**Table 3:** methods of evaluating profitability
Method	Equation	Source
Return of investment	ROI=(1-t)(S-C)/C_TCI	Reference: Seider, Seader, Lewin and Widagoo. Product and Process Design Principles - Synthesis, Analysis, and Evaluation; Third Edition - International Student Version; John Wiley & Sons, Inc.; 2010 table 22.5
	C_{TCI=Total capital investment}
Payback period	PBP=C_TDC/((1-t)(S-C)+D)	Reference: Seider, Seader, Lewin and Widagoo. Product and Process Design Principles - Synthesis, Analysis, and Evaluation; Third Edition - International Student Version; John Wiley & Sons, Inc.; 2010 table 22.5
	C_{TDC=Total depriciable cost}
	D=Depriciation
Venture profit	VP=(1-t)(S-C)-i_min C_TCI	Reference: Seider, Seader, Lewin and Widagoo. Product and Process Design Principles - Synthesis, Analysis, and Evaluation; Third Edition - International Student Version; John Wiley & Sons, Inc.; 2010 table 22.5

Figure 7: Evaluation of profitability

The goal is to sell the peptide aptamers at least at 50 % of the price of mAbs, therefore the methods are used for a price range between 1-50 %. Parameters for profitability of the three methods are: ROI>0 %, PBP<2 [yr] and VP>0 [million/yr]. Results can viewed in figure. Reference: Seider, Seader, Lewin and Widagoo. Product and Process Design Principles - Synthesis, Analysis, and Evaluation; Third Edition - International Student Version; John Wiley & Sons, Inc.; 2010

The evaluation shows, that PAST will be profitable at a price above 4 % that of mAbs, which corresponds to a price of 0.07 [million USD/g]. It is most unlikely that investors can be paid back at this price, and should be taken as an indication of the margin in pricing. In this estimate it will be possible to raise prices by 44 % before exceeding the goal. Another uncertainty is the validity of the estimate, since this is only an approximation of reality. Therefore the same calculations were done, if the cost turns out to be double. This showed profitability at a price set at 8 % that of mAbs, which corresponds to a price of 0.13 [million USD/g]. This leads to the conclusion, that there is a good possibility of making a profitable enterprise, and it should be encourage to keep working towards more accurate estimates and finally the realization of PAST.

Team:SDU-Denmark/Tour33

Business