Running Head: LYMETRAP - A PARADIGM SHIFT FOR LYME DISEASE DIAGNOSTICS 1
LymeTrap
A Paradigm Shift for Lyme Disease Diagnostics
Thomas M. Dunlap
LYMETRAP - A PARADIGM SHIFT FOR LYME DISEASE DIAGNOSTICS 2
Table of Contents
Table of Contents Executive Summary: ...................................................................................................................................... 3 Company ....................................................................................................................................................... 4 Product .......................................................................................................................................................... 5 Market ........................................................................................................................................................... 7
Current Test & Background ....................................................................................................................... 7 Market Need & Projections ...................................................................................................................... 9 Competition .............................................................................................................................................. 9 Secondary Market & Fringe Tests ........................................................................................................... 10 Novel Techniques on the Hoizon ............................................................................................................ 11 Summary of Current Market, Technology and Competition .................................................................. 12 Ceres LymeTrapTM Offering ..................................................................................................................... 12 Competitive Market Analysis .................................................................................................................. 13
Supplier Power .................................................................................................................................... 13 Buyer Power ........................................................................................................................................ 13 Competitive Rivalry ............................................................................................................................. 14 Threat of Substitution ......................................................................................................................... 14 Threat of New Market Entrants .......................................................................................................... 14
Customer/Consumer Analysis – the 6Ws ............................................................................................... 15 SWOT Analysis......................................................................................................................................... 16
Strengths ............................................................................................................................................. 16 Weaknesses ........................................................................................................................................ 16 Opportunities ...................................................................................................................................... 16 Threats ................................................................................................................................................ 17
Promotion ............................................................................................................................................... 17 Logistics ....................................................................................................................................................... 18
Evaluation and Control ........................................................................................................................... 19 Goals ........................................................................................................................................................... 19 References .................................................................................................................................................. 21 Appendices (Charts/Tables/Data/Supporting materials) ........................................................................... 23
Table 1. Antibody Testing Analysis for Lyme Disease .......................................................................... 24 Chart 1. Reported Cases of Lyme Disease by Year, United States, 1994-2008 ....................................... 25 Chart 2. Ceres (Internal) US Lyme Disease Testing Projections* ............................................................ 26 Chart 3. Ceres (Internal) Revenue Projections* ...................................................................................... 27 Table 1. Ceres Projected Testing Revenues ............................................................................................ 28 Diagram 1. Porter’s Five Forces Analysis of Ceres Lyme Disease Application ........................................ 29 Diagram 2. Ceres SWOT Analysis of LymeTrap ....................................................................................... 30
LYMETRAP - A PARADIGM SHIFT FOR LYME DISEASE DIAGNOSTICS 3
Executive Summary: The purpose of this paper is to describe the market potential, define the issues and assist
with the strategic planning and management of the Nanotrap® diagnostic product developed by
Ceres Nanosciences, LLLP to detect Lyme disease in urine. The paper reviews the background
of current techniques which focus on antibody methods and differentiates the Nanotrap® product
as an antigen detection test describing the market position, potential and promotion of the
product. The LymeTrap presents a single step solution to reduce the major problems associated
with current Lyme disease testing techniques, including false readings, invasive procedures and
sample degradation in transportation of the specimens. Ceres believes its best path to market is
through these existing suppliers by obtaining FDA and CDC approval and consequently approval
by insurance providers. The LymeTrap can be integrated into existing assay tests conducted by
major laboratory testing corporations, simultaneously creating the first FDA approved laboratory
test for Lyme disease, decreasing the laboratory testing cost and providing a more accurate and
timely medical diagnostic result. The marketplace for this particular diagnostic test is growing
rapidly as incidents of Lyme disease increase dramatically, increasing to at least 7 million annual
tests per year by 2016, which could result in significant revenue to Ceres.
LYMETRAP - A PARADIGM SHIFT FOR LYME DISEASE DIAGNOSTICS 4
Company
Ceres Nanosciences (“Ceres”) is a start-up company, founded in 2007, which has out-
licensed a number of very promising patents from George Mason University. The original
founders, Tom Dunlap, Dr. Lance Liotta and Dr. Emmanuel Petricoin met at George Mason
University’s Center for Applied Proteomics in late 2007. Shortly thereafter they jointly founded
the company in January of 2008 along with Dr. Barney Bishop and Dr. Alessandra Luchini.
George Mason University and the Italy’s ISS are large stakeholders in the venture. The founder’s
provide a lot of market credibility to the product. Dr. Liotta is the former Deputy Director of
NIH and former Chief of Pathology for the National Cancer Institute (NCI). While working as a
full professor and Co-Director of the Center for Applied Proteomics he is also a practicing
medical doctor who is presently is conducting a number of cancer studies utilizing the
company’s technology at INOVA Medical Center in Fairfax, Virginia. Emanuel Petricoin is the
former Senior Cell Tissue Investigator for the Food & Drug Administration (FDA) and is
presently a full professor and Co-Director of the Center for Applied Proteomics. Tom Dunlap is
a practicing attorney in the field of intellectual property law, a former Army officer, former local
bar president and Virginia SuperLawyer with a number of political and strategic contacts. Ross
Dunlap, the President and COO, who joined the company shortly after formation, is currently the
major personality leading the company. He has over 12 years of relevant experience as a
principal in a defense industry consulting firm in the Washington, DC area, including Homeland
Security and Fannie Mae.
The Ceres technology is a research diagnostic nanotechnology tool that has been used in
biomarker discovery and is presently being marketed primarily as a tool for anti-doping testing in
the concentration of HGH, and through a partnership with Shimadzu Scientific, a large Japanese
LYMETRAP - A PARADIGM SHIFT FOR LYME DISEASE DIAGNOSTICS 5
company selling (insert acronym) (MALDI) mass spectrometry platforms based on the super-
concentration power of the Nanotrap® (see www.biomarkerdiscvoery.com). There are a number
of other applications for the Ceres Nanotrap ® product, which is involved in concurrent research
for breast cancer biomarkers. The primary market opportunity for the company to date has been
through with partnerships either with large biotech companies or established middle-market
companies with complementary technology. However Ceres has developed a direct to health care
and testing laboratory “killer app” that it believes is well positioned to act as a paradigmatic
change in the entire Lyme disease testing market.
Product The Nanotrap® product generally works by binding low abundance analytes such as proteins,
DNA and RNA in any fluid and through the use of variable-sized pores, performing
simultaneous molecular sieving to exclude large particles, concentrating the dilute analytes
inside of a shell like structure and protecting the analytes from degradation. Successful
applications of this product include a variant used to differentiate synthetic Human Growth
Hormone (HGH) from natural HGH in an urine based test using isoforms differentiation. Prior to
the use of the Nanotrap® HGH is a substance that many scientists even doubted passed through
the kidneys, let alone enough of it to be identified. The current state of Lyme disease testing is
analogous to that of HGH both conceptually and from a scientific standpoint in terms of the low
abundance analytes, in this case proteins indicating the antigen, indicating the presence of the
disease. Likewise the goal of perfecting a disease specific diagnostic is in line with the company
goals.
The Nanotrap® remains in the introductory or research and development stage as it continues
to undergo design and testing with regards to the Lyme disease application but has successfully
LYMETRAP - A PARADIGM SHIFT FOR LYME DISEASE DIAGNOSTICS 6
been used as a more accurate, less invasive prototype Lyme diagnostic successfully
concentrating Bb proteins and virtually eliminating false positives from antibody crossover,
eliminating false negatives from low concentration proteins, and providing earlier diagnosis,
before symptoms become pronounced.
As an added benefit, by incubating the Nanotrap® with urine immediately after testing a
tester prevents the common problem of bacterial protein degradation during transportation of
urine samples to the testing location. In the growth phase during the introduction of the product
to the market the ultimate Nanotrap® product would be incorporated into a urine collection
vessel. Western blotting or ELISA could be used as the detection technology for a commercial
Lyme disease diagnostic test. Ceres has additional future plans to develop a specific in-house
urine-based lateral flow assay test for Lyme disease to allow for nearly instant, over-the-counter
Lyme disease testing kit.
Initially the Nanotrap Lyme test will be offered through established laboratory channels, as a
pre-concentration tool for ELISA and Western Blot laboratory tests. Ultimately, the Nanotrap
will be introduced as a direct to consumer over the counter sample collection kit when combined
with a urine specimen collection tube and seeded nanoparticles. Both products will be sold under
the moniker the “LymeTrap.” The difference in the sales of pre-concentration kits to laboratories
and of direct sales to consumers is significant, as the direct to consumer kit will also require a
testing laboratory to provide diagnostic results from mailed samples directly to consumers, as
opposed to health care providers.
LYMETRAP - A PARADIGM SHIFT FOR LYME DISEASE DIAGNOSTICS 7
Market
Current Test & Background Lyme disease is a bacterial infection that affects both humans and animals caused
primarily, in the United States, by the Gram-negative spirochetal bacterium Borrelia burgdorferi
(Bb) found in infected blacklegged ticks which transmit the disease to humans by their bite and
can affect joints, the heart, and the nervous system and primarily symptomatically diagnosed
based physical findings and the possibility of exposure to infected ticks. There is currently no
laboratory test that is approved by the Food and drug Administration (FDA) or the Centers for
Disease Control (CDC). The FDA has published a Public Health Advisory that states “[t]he
results of commonly marketed assays for detecting antibody to Borrelia burgdorferi (anti-Bb),
the organism that causes Lyme disease, may be easily misinterpreted [and should] be used only
to support a clinical diagnosis of Lyme disease.”
(http://www.fda.gov/MedicalDevices/Safety/AlertsandNotices/PublicHealthNotifications/UCM0
62429).
Under this standard, once a symptomatic diagnosis is performed the supporting
laboratory tests consist of two phases seeking to detect antibodies produced by the infected
human in response to the antigen (infection). Phase one involves an enzyme-linked
immunosorbent assay (ELISA) to screen immunoglobulin M (IgM) and immunoglobulin G
(IgG) antibodies that react with the proteins of Bb (Hilton, Devoti et al. 1996). Because
antibodies take some time to develop in the bloodstream as they are a reaction to a disease, this
test frequently results in false negative results as the concentration of antibodies is too low in
human blood, or the test may result in false positives if the person has been previously treated for
Lyme disease or has antibodies for a similar antigen (Antigen detection, 2001). If this test gives
LYMETRAP - A PARADIGM SHIFT FOR LYME DISEASE DIAGNOSTICS 8
a positive or equivocal reading, a second laboratory test called a Western Blot is performed to
detect antibodies to specific Bb proteins (Hilton, Devoti et al. 1996). The CDC considers a
Western Blot Lyme test positive if at least 5 of the 10 different antigen proteins that are tested for
using the Western blot appear in the test result in following molecular weight in kDa: 18, 22-25,
28, 30, 39, 41, 45, 58, 66 and 93). Some patients’ antibodies do not react with commercially
produced bacterial proteins and as a result only CDC and FDA approved method, the two part
ELISA and Western blot Lyme disease test protocol have a high rate of false readings with, at
best a 65% sensitivity and at worst a 45% sensitivity, and thus on average a 35% - 55% false-
negative result (http://www.cdc.gov/mmwr/preview/mmwrhtml/00038469.htm).
Antibody testing overall is problematic because of the nature of antibodies that:
1. take time to appear in reaction to the Lyme antigen and thus cannot be determinative
as to whether Lyme has been contracted if a test is conducted before the antibodies
have developed sufficiently to be detected, and
2. are often present in minimal concentrations in blood or urine and result in false-
negative tests, and
3. frequently result in false-positive tests as these antibodies are produced in reaction to
a host of other diseases, and
4. may exist in the bloodstream as a result of previous inoculation or non-infectious
encounter with Lyme.
The two stage test requires a number of repetitious steps for very little in the way of
certainty in outcome and may only be used to support a clinical diagnosis.
LYMETRAP - A PARADIGM SHIFT FOR LYME DISEASE DIAGNOSTICS 9
Market Need & Projections As a result of the unreliability there is a vast market with a critical need for reliable,
accurate Lyme disease testing. The increase seen in testing, despite the significant shortcomings
of current laboratory analytical techniques, has shown a distinct demand for improved testing
methods. There were over 29,000 confirmed human cases in 2008 in the US, with almost 35,000
probable cases (see Chart 1); a number which has more than doubled in the past 15 years. The
projections for the increase in instances of Lyme disease make it a compelling market.
In order to project growth and potential demand for Lyme disease testing, testing
numbers from 2004 were used where there were 20,000 reported cases of Lyme disease (Chart 1)
and 2.8 million annual tests for the disease as reported by health journals
(http://news.healingwell.com/index.php?p=news1&id=520322). These numbers extrapolate to
140 unreliable laboratory tests ordered for every positive diagnosis of a Lyme case. As Lyme
disease becomes more prevalent, testing will increase exponentially. If a reliable laboratory test
is developed the number of individuals tested could well more than double relative to the number
of diagnosed cases. Taking a conservative estimate, excluding any growth in demand related to
a new, more reliable test, and by extrapolating a nominal rate of growth, similar to the 5-8%
percent seen between 2004 and 2009, it is estimated that over 7,000,000 total laboratory tests
will be conducted every year by 2016 (see Chart 2). Based upon present laboratory testing costs
for the two stage test at $400 per combined test, this means the insurance and health care
industry is likely prepared to spend $2.8 billion for inaccurate Lyme disease tests by 2016.
Competition As previously indicated, the only CDC/ FDA recommended laboratory tests all stem from
the FDA approved test (1998) originated by Chembio Diagnostic Systems called the Wampole
LYMETRAP - A PARADIGM SHIFT FOR LYME DISEASE DIAGNOSTICS 10
PreVue™ Borrelia burgdorferi Antibody Detection Assay, which is a single use, unitized
immunochromatographic test that uses recombinant B. burgdorferi antigens for the qualitative
presumptive (first step) detection of IgG and IgM antibodies to B. burgdorferi in human serum or
whole blood (Table 1, Phase I)
(http://www.niaid.nih.gov/topics/lymeDisease/research/Pages/diagnostics.aspx). This assay is
costs $190 - $200 and is offered by a variety of major national laboratories, including LabCorp
and Quest Diagnostics, and a follow-up Western Blot test (Table 1, Phase II) at a cost of an
additional $200. Other companies offer and a variety of online self-testing options that offer to
test patient self-collected samples, such as LabsMd.com, which offers the full Lyme test battery
for $448.99 (http://labsmd.com/tests.php?view=search_results), and Fry Labs, offering the
ELISA at $145 and the Western Blot at $270, with a $15 mailing fee for a total of $430
(http://www.frylabs.com/forms.php).
Secondary Market & Fringe Tests There are a variety of non-FDA approved laboratory tests that aim at the secondary
market by offering direct to patient sales. This is a much smaller market, however that it exists
at all demonstrates the desperate straits of the realm of Lyme disease testing. The other testing
methods, not in use in United States mainstream health care are essentially “fringe” tests. These
tests which are not covered by any US healthcare insurance provider include:
1. Borrelia burgdorferi antibody index testing 2. Borrelia culture 3. C6 peptide ELISA assay (using recombinant VlsE1 or peptide antigens of
Borrelia burgdorferi ) 4. CD57+ lymphocyte counts 5. Polymerase chain reaction (PCR) for identification or quantification of Lyme
disease (B. burgdorferi ) spirochetal DNA or RNA 6. Provocative testing (testing for B. burgdorferi after antibiotic provocation) 7. Serum borreliacidal assay
LYMETRAP - A PARADIGM SHIFT FOR LYME DISEASE DIAGNOSTICS 11
8. T-cell proliferation response assay 9. Urine antigen assay
(http://www.aetna.com/cpb/medical/data/200_299/0215.html).
The most well known and often sold direct to consumers (because insurance will not
cover the tests) make up the secondary market are the above noted urine test, PCR test and
Borrelia burgdorferi antibody index testing (LTT-MELISA).
The urine antigen assay is actually a urine based antibody test called the Lyme Urinary
Antigen Test (LUAT) by IgeneX, produces more false positive results than standard antibody
tests (http://www.niaid.nih.gov/topics/lymeDisease/research/Pages/diagnostics.aspx).
The PCR test detects the DNA of the Lyme disease spirochete which is highly susceptible
to false-positive results (Aguero-Rosenfeld, Wang, Schwrartz & Wormser, 2005).
The $500 lymphocyte transformation test (LTT-MELISA), while potentially more
accurate than the standard ELISA, still faces the same limitations of other antibody tests as it
relies on the reaction of B cells, rather than detection of the antigen and requires invasive
techniques utilizing blood or CSF (Valentine-Thon, E., Ilsemann, K., & Sandkamp, M., 2007).
The Center for Disease Control (CDC) specifically cautions against the LTT-MELISA, noting its
use is “of great concern and is strongly discouraged” (Aguero-Rosenfeld et al., 2005).
Novel Techniques on the Hoizon Two novel techniques that do not yet have any market, but that are under development,
include and that may present a truly accurate test are focus floating microscopy and chemokine
CXCL13. However both of these also have severe limitations. Focus floating microscopy
requires a biopsy of an infected skin lesion. This method has the obvious drawback or requiring a
piece of skin to biopsy in a disease that does not often present physical symptoms. The
LYMETRAP - A PARADIGM SHIFT FOR LYME DISEASE DIAGNOSTICS 12
chemokine CXCL13 may be a marker for neuroborreliosis but, as such is only useful for
detecting late stage infections.
Summary of Current Market, Technology and Competition According to the National Institute of Health (NIH) “There is a great need to develop
additional simple, sensitive, and rapid procedures to distinguish those who are actively infected
with B. burgdorferi from those who have either recovered from a previous infection or have been
immunized previously”
(http://www.niaid.nih.gov/topics/lymeDisease/research/Pages/diagnostics.aspx).
There is no test anywhere that can measure Lyme antigen present in human blood,
cerebrospinal fluid (CSF) or urine. There is no test anywhere that can accurately make a
determination as t o the presence of the Lyme antigen based upon the presence of Lyme
antibodies. All of the current testing methods are fairly invasive and must be performed by
drawing blood or analyzing CSF, which requires a lumbar puncture.
Ceres LymeTrapTM Offering Ceres will offer the LymeTrap direct shipped to laboratories, consisting of glass vials in
pre-set amounts for 96 well culture plates (96 tests), the standard well-plate for ELISA and
Western Blot at a cost of $75 per test, or $7,200. The LymeTrap offers a single antigen detection
method in place of a two-step process that is both more accurate, timely, and via a urine
specimen, less invasive than any current test on the market, or potentially on the market for
patients exposed to Lyme. Through the FDA approval process Ceres plans to obtain the first
ever laboratory test approved to diagnose Lyme disease. Ceres will likewise seek approval from
the CDC as a recommended laboratory test.
LYMETRAP - A PARADIGM SHIFT FOR LYME DISEASE DIAGNOSTICS 13
Ceres intends to partner with existing laboratories through Value Added Reseller
arrangements, including the major players, such as Quest Diagnostics and LabCorp, and
potentially through direct sales of a Ceres LymeTrap kit at a higher price point in individual
sample collection devices consisting of plastic urine specimen collection devices pre-baited with
the LymeTrap. Even with a modest market penetration and accounting for the FDA approval lag
under 510K, and time to move the initial product to the market and gain acceptance, Ceres
projects over $300 million in United States gross sales revenue by 2016.
Competitive Market Analysis
Supplier Power Brand reputation in this market has little impact on sales, which are controlled by the current
primary suppliers to the health care market and are driven by efficacy of product. The
geographical coverage for Lyme testing must be nationwide and will involve direct shipping the
LymeTrap products to a few primary testing labs. Part of the supplier’s power is the pre-existing
infrastructure that allows the test suppliers to collect patient samples at testing centers around the
country. Most of the suppliers’ relationships with health care providers and other customers is
driven by insurance acceptance of the laboratory itself and the test products the laboratory offers,
making insurance company acceptance vital to sales and supplier power (see Diagram 1, Porter’s
Five Forces Analysis).
Buyer Power Buyers of the Lyme disease tests are mostly made up of physicians and medical institutions
which rely on insurance coverage to subsidize or cover patient costs. There is a smaller
secondary market of consumer patients who are seeking direct testing products for at-home
sample collection. To some degree the primary market buyer choice is limited by FDA and CDC
LYMETRAP - A PARADIGM SHIFT FOR LYME DISEASE DIAGNOSTICS 14
approval. There is little cost associated with changing test products, but the proposed LymeTrap
would actually allow testing laboratories to reduce their costs for better test results as it would
eliminate one of two assays.
Competitive Rivalry While the market is dominated by the major laboratory testing companies, such as Quest
Diagnostics and LabCorp, there are a variety of on-line/ off insurance testing options. Most test,
however are ordered through the major providers. The fixed costs associated with the major
providers are infrastructure costs which give the suppliers their advantage, including the cost of
test centers (laboratory equipment and personnel). The variable costs in Lyme testing are
minimal and involve the reagents and chemicals used in preparing and running well plates
through ELISA or Western Blots test. The Ceres LymeTrap would fall into this category and
may be attractive as it can be directly accounted for as part of a variable cost replacement reagent
by the current major test suppliers.
Threat of Substitution There is little threat of substitution by products other than the LymeTrap, unless there are
products under development which have not been publically disclosed. Currently, the
alternatives in the current market are all “fringe” type tests and antibody tests without any
significant benefit over existing ELISA and Western Blot two stage test protocols. There exists
some legislative opportunity for support in North Eastern United States and United States
Federal Government, both of which have serious Lyme concerns.
Threat of New Market Entrants The barriers to entry into the testing market overall are significant due to high infrastructure
cost for full testing center and multiple test center locations held by the suppliers occupying the
LYMETRAP - A PARADIGM SHIFT FOR LYME DISEASE DIAGNOSTICS 15
market space and the requirement that most diagnostic tests require FDA approval and/or CDC
recommendations before they will be endorsed and thus approved for insurance reimbursement.
The Ceres LymeTrap would integrate into current testing procedures and would seek to enter the
market primarily through existing suppliers. The current incumbents will likely resist
implementing a new product without FDA approval.
Customer/Consumer Analysis – the 6Ws
While the ultimate beneficiaries of the product are potential Lyme patients, the customers
consist of primary care physicians, who are the first line of medical defense for most Lyme
patients and most diagnosis. These customers in turn look health care industry insurance
agencies and nationally established laboratories to provide tests recommended by the FDA and
CDC, which in the case of Lyme, recommends laboratory testing only when certain clinical
symptoms persist, and both of which mandate clinical diagnosis. In the United States, test
purchasing is seasonally dominated by those persons living in the North Eastern portion of the
country, followed closely by the South Eastern United States, where tick populations that carry
the Lyme antigen are prolific. The primary test purchasing season runs from the early spring to
the late fall and continues in lower amounts through the winter months in the South Eastern
United States, where tick populations persist though the winter months due to the warm climate.
Ceres’ primary customers (laboratories) will use the LymeTrap to enhance their current testing
procedures and simultaneously lower the testing price for their customers (insurance companies
and patients). Likely, individuals with a high risk of exposure may be tested more than once
annually for the Lyme antigen based upon the current number of annual tests ordered when
compared to the number of those actually diagnosed.
LYMETRAP - A PARADIGM SHIFT FOR LYME DISEASE DIAGNOSTICS 16
SWOT Analysis
Strengths
Ceres is the first to market with an antigen test for Lyme disease using a proprietary and
patented technology which has been nationally acclaimed and proven on other unique and
difficult testing scenarios, as with HGH. The Ceres science team behind the product consists of
some of the glitterati of the science world, particularly in the world of proteomic (protein)
analysis and discovery. Ceres has been in contact with LabCorp and a number of other testing
groups concerning discussions over other custom tests (see Diagram 2).
Weaknesses
While Ceres has some minor cash flow from its biomarker discovery tool through a VAR
agreement with Shimadzu, and through some direct sales, the primary weakness in Ceres current
plans for the LymeTrap is the lack of significant cash flow to support company operations and
initial product development.
Opportunities
The largest and almost necessary opportunity for the LymeTrap is the opportunity to partner with
existing laboratory testing companies to roll-out the LymeTrap enhanced ELISA/ Western Blot
tests. This will present those companies with an opportunity to help change the paradigm with
the first laboratory diagnostic for Lyme. There are other opportunities in Europe, particularly in
the United Kingdom where Lyme disease is a significant threat as well. The US military also
conducts significant anti-Lyme disease operations as part of its field operations. Personal
experience with the Army and its testing procedures of the company CEO, when serving as an
Army officer may present additional Department of Defense funding opportunities.
LYMETRAP - A PARADIGM SHIFT FOR LYME DISEASE DIAGNOSTICS 17
Threats
The threats to the project center around the acceptance and adoption of the product by
laboratories, health care providers and approval by the FDA and CDC. Because laboratory test
companies have significant infrastructure and control most of the health care disease testing
market the LymeTrap’s initial success will be tied to Ceres’ success in convincing these
companies of the efficacy and value of its product. In turn insurance companies must be
convinced to cover the test.
Promotion The nature of the Lyme disease test and health care diagnostics tests in general rely on a
number of factors, not the least of which is scientific validation. As such a large part of the
promotions will have to be handled through value added reseller agreements (VARs) and
through existing supply channels. Most of the initial marketing, for the test in development, will
be to the laboratory companies and physicians that order these types of tests.
One of the challenges to the sale and promotion of the product involves overturning the
current perceptions that all laboratory tests for Lyme disease are suspect and that doctors cannot
really truly rely on a laboratory test, essentially having to make their best guess as a diagnosis
will work in favor of promoting a product that can offer a much higher degree of medical
certainty to both doctors and patients. To support this Ceres will ultimately have to pursue a
diagnostics medical device approval from the FDA to gain widespread assistance and should
conform development of testing procedures to those used in the FDA approved test allowing a
streamlined 510K approval for the LymeTrap.
Initially, Ceres will have to coordinate and sell its efforts for this test through supply
channels of existing suppliers. Ultimately Ceres plans to sell the LymeTrap test directly to
LYMETRAP - A PARADIGM SHIFT FOR LYME DISEASE DIAGNOSTICS 18
hospitals and medical practices for use with on-site simple laboratory diagnostics. Ceres would
utilize previously developed pre-baited (with the LymeTrap nanoparticles) urine specimen
collection devices, used for the HGH study, or a non-sterile injection kit to allow the immediate
incubation of the LymeTrap with the urine and potential Lyme proteins on-site, interjecting itself
further into the market towards more vertical integration.
Logistics Ceres has a small laboratory and has stockpiled a fairly large quantity of nanoparticles for
this application. Ceres already has a smaller logistics system that involves manual packaging by
laboratory assistants into glass vials and foam shipping containers. This process is sufficient for
research diagnostics sales which Ceres currently conducts at a high level with a very low volume
of sales. When Ceres launches the Lyme product these methods will necessarily change.
The significant scale up of production and packaging for the Lyme diagnostic will be
conducted in a two tiered system. The first tier will begin with base manufacturing of the
nanoparticles conducted at Ceres labs. The entire volume of testing particles for the first year’s
sales (estimated at approximately 45,000 tests), can be manufactured on site over a period of 6
months on current equipment and shipped in a single large moving box. Because the
nanoparticles are so small, the basic patented product and intellectual property can remain an
internally product, ameliorating some of the potential for loss of intellectual property and
outsourced flaws in craftsmanship and design. The second tier of the manufacturing process
takes place at an outsourced warehouse location and consists largely of low skill manual
packaging. Ceres is in discussions with a number of potential partners and contract companies to
perform the injection or nanoparticles into plastic syringe containers and physical packing or the
LYMETRAP - A PARADIGM SHIFT FOR LYME DISEASE DIAGNOSTICS 19
syringe injections, which will then be dropped shipped in mass quantities to laboratories as
ordered by the direct to consumer suppliers and testing laboratories.
Ceres will continue to expand internal laboratory manufacturing capacity to make the
base particle as sales increases require upscaling. Because the nanoparticles have a significant
shelf-life of three to six months, and because the base manufacturing cost is relatively minimal,
Ceres will be able to take advantage of these traits to stockpile reserve particles as part of its
business plan. Ceres has already purchased large quantities of the bait and manufacturing
chemicals in anticipation of this eventuality.
Evaluation and Control The primary limitation to Ceres success is largely governed by the ability of the
technology to detect the Lyme antigen, and by the lack of any significant competitor for antigen
testing. While it is possible that a larger company will copy the LymeTrap type of test, Ceres’
existing patent protection on the underlying technology, the Nanotrap® both in the United States
and Europe. Patents have been filed for the Lyme application and are pending. Similarly, by
adopting a strategy of partnering and selling the product through the largest potential
competitors, Ceres believes it will reduce the motivation of companies that distribute products to
dedicate research and development funds to a product which has been developed for them, and
on which they can make a significant product.
Goals
Ceres expects to have the LymeTrap available by 2011 with market penetration in 2011
at a modest 1%, during the FDA approval process and promotion of the product to increase to
85% of the market by 2016 (see Table 1 and Chart 3). Ceres believes it can attain this goal based
on the efficacy and unique characteristics of its product. Potential customers are led by those
LYMETRAP - A PARADIGM SHIFT FOR LYME DISEASE DIAGNOSTICS 20
companies that have established supply channels for testing for Lyme disease for commercial
purposes such as IGeneX, Inc., Quest Diagnostics, Labcorp, Medical Diagnostic Laboratories
and Central Florida Research Lab.
In summary there is little doubt that the LymeTrap antigen detection test will fill a vital
need for a specific targeted test at a level and in a manner that may seriously change the medical
paradigm in Lyme disease testing allowing the first laboratory test to provide dispositive results
with short turn-around non-invasive diagnostics methods that can be smoothly integrated with
current testing techniques at an overall costs savings to the health care industry, insurance
providers and, ultimately, the patient. Ceres’ internal analysis of the product and cost to produce
the product has led Ceres to conclude the product could drive serious revenue to the company
and allow for follow-on development of additional applications.
LYMETRAP - A PARADIGM SHIFT FOR LYME DISEASE DIAGNOSTICS 21
References
Aguero-Rosenfeld, M.E., Wang, G., Schwrartz, I. & Wormser GP (2005). Diagnosis of Lyme
borreliosis. Clin. Microbiol. Rev. 18 (3): 484–509. Retrieved from PubMed
http://www.ncbi.nlm.nih.gov/pmc/articles/PMC1195970/?tool=pmcentrez.
Dorward, D. W., Schwan, T. G., & Garon, C. F. (1991). Immune capture and detection of
Borrelia burgdorferi antigens in urine, blood, or tissues from infected ticks, mice, dogs, and
humans. Journal of Clinical Microbiology, 29(6), 1162-1170. Retrieved from PubMed
Central database.
Eisendle K, Grabner T, Zelger B (2007). "Focus floating microscopy: "gold standard" for
cutaneous borreliosis?". Am. J. Clin. Pathol. 127 (2): 213–222. Retrieved from PubMed at
http://www.ncbi.nlm.nih.gov/pubmed/17210530.
Hilton, E., Devoti, J., & Sood, S. (1996). Recommendation to include OspA and OspB in the
new immunoblotting criteria for serodiagnosis of Lyme disease. Journal of Clinical
Microbiology, 34(6), 1353-1354. Retrieved from
http://jcm.asm.org/cgi/reprint/34/6/1353.pdf.
Rees, D.H., O'Connell, S., Brown, M.M., Robertson, J. & Axford, J.S. (1995). The value of
serological testing for Lyme disease in the UK. British Society for Rheumatology. Retrieved
July 26, 2010 from http://rheumatology.oxfordjournals.org/cgi/content/abstract/34/2/132.
LYMETRAP - A PARADIGM SHIFT FOR LYME DISEASE DIAGNOSTICS 22
Valentine-Thon, E., Ilsemann, K., & Sandkamp, M. (2007). A novel lymphocyte transformation
test (LTT-MELISA) for Lyme borreliosis. Diagn. Microbiol. Infect. Dis. 57 (1): 27–34.
Retrieved from PubMed at http://www.ncbi.nlm.nih.gov/pubmed/16876371.
LYMETRAP - A PARADIGM SHIFT FOR LYME DISEASE DIAGNOSTICS 23
Appendices (Charts/Tables/Data/Supporting materials)
LYMETRAP - A PARADIGM SHIFT FOR LYME DISEASE DIAGNOSTICS 24
Table 1. Antibody Testing Analysis for Lyme Disease
Phase I
Cost Approx: $200
Phase II
Cost Approx: $200
Total Cost Approx: $400
IgM antibody (ELISA)
IgG antibody (ELISA)
Western blot Diagnosis
POSITIVE POSITIVE POSITIVE Likely Lyme disease
NEGATIVE POSITIVE POSITIVE Late or previous infection NEGATIVE NEGATIVE NEGATIVE No infection present; symptoms may be due to
another cause or antibody levels too low to detect Source: http://www.labtestsonline.org/understanding/analytes/lyme/test.html
LYMETRAP - A PARADIGM SHIFT FOR LYME DISEASE DIAGNOSTICS 25
Chart 1. Reported Cases of Lyme Disease by Year, United States, 1994-2008
State health departments reported 28,921 confirmed cases and 6,277 probable cases of Lyme disease to CDC in 2008. This represents a 5% increase in confirmed cases compared to 2007. The definition and reporting of probable cases was initiated in 2008 based on revisions to the national surveillance case definition.
Source: http://www.cdc.gov/ncidod/dvbid/lyme/ld_UpClimbLymeDis.htm
LYMETRAP - A PARADIGM SHIFT FOR LYME DISEASE DIAGNOSTICS 26
Chart 2. Ceres (Internal) US Lyme Disease Testing Projections*
*Assumes 5% per annum growth in diagnosed cases and correltive increase in number of tests based on annual increases as measured from 2004 – 2009.
Source: Ceres Nanosciences
LYMETRAP - A PARADIGM SHIFT FOR LYME DISEASE DIAGNOSTICS 27
Chart 3. Ceres (Internal) Revenue Projections*
*Projections based on projected test cost and Cost of Goods Sold detailed in Table 1.
LYMETRAP - A PARADIGM SHIFT FOR LYME DISEASE DIAGNOSTICS 28
Table 1. Ceres Projected Testing Revenues
Year Total Tests*
Market Penetration^
Ceres Tests
Ceres Test Revenues
Ceres Test Profit
Market Cost of
Test COGS
per Test
2009 3,889,763 0%
- $ - $ - $ - $ -
2010 4,200,944 0%
- $ - $ - $ - $ -
2011 4,537,020 1%
45,370 $ 3,402,765 $226,851 $75 $70
2012 4,899,981 5%
244,999 $ 18,374,929 $6,124,976 $75 $50
2013 5,389,979 25%
1,347,495 $ 101,062,110 $33,687,370 $75 $50
2014 5,928,977 45%
2,668,040 $ 160,082,382 $53,360,794 $60 $40
2015 6,521,875 65%
4,239,219 $ 211,960,932 $127,176,559 $50 $20
2016 7,174,062 85%
6,097,953 $ 304,897,649 $182,938,589 $50 $20
*Increase per annum in number of tests based on CDC’s avaerage annual increase in number of laboratory tests conducted.
^ Penetration numbers reach high numbers due to exclusvity and first mover advantage for antigen test.
LYMETRAP - A PARADIGM SHIFT FOR LYME DISEASE DIAGNOSTICS 29
Diagram 1. Porter’s Five Forces Analysis of Ceres Lyme Disease Application
Competitive Rivalry • Few companies in market are
established laboratory test providers • Industry is stagnant without
laboratory diagnostic (tests are two stage support for clinical diagnosis)
• Fixed costs: test centers (laboratory equipment and personnel)
• Variable costs: reagents used in ELISA and Western Blot
• One FDA approved variant, multiple non-FDA/ fringe technologies
• LymeTrap is positioned as “killer app” as potential only FDA approved lab test
Supplier Power • Brand reputation has little impact on
sales, which are driven by efficacy of product
• Geographical coverage of any product in this market in national / international
• Product capabilities at present have no effect on primary market sales as all products are equal
• Capabilities are paramount to sales when paradigm changes
• Relationships with customers driven by insurance coverage and thus acceptance of product
Threat of Substitution • Alternatives in current market are all
“fringe” & antibody tests without significant benefit over existing ELISA/ Western Blot
• Market distribution will not change as a result of LymeTrap
• Huge opportunity for legislative support in North Eastern United States and US Federal Government, both with serious Lyme concerns
Buyer Power • Buyers of tests are physicians and
medical institutions • Secondary market consisting of
individuals with risk or symptoms of infection
• Primary market buyer choice is limited by FDA/ CDC approval and technology
• Secondary buyer market driven entirely by non-medical consumer perception
• Little cost associated with change – particularly the LymeTrap
Threat of New Market Entrants • Barriers to entry are significant due
to high infrastructure cost for full testing center
• Test products, like LymeTrap that integrate into current test centers have significantly lower entry barrier
• Incumbents centers may resist a product without FDA approval
• Route to entry through partnership with existing lab companies
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Diagram 2. Ceres SWOT Analysis of LymeTrap
Strengths: Weaknesses:
- First to market with an antigen test. - Proprietary, patented and proven technology. - World renowned science team and background. - Existing contacts with LabCorp and other
channels of distribution.
- Need for Series A funding. - No significant cash flow to support company
operations and initial product development. - Long time to obtain FDA approval if not
possible by 510K. - Expense to obtain FDA approval. - Laboratory test companies have significant
infrastructure and control most of the health care disease testing market
Opportunities: Threats:
- Partnership arrangements with existing laboratory testing company.
- Opportunity to change the paradigm and introduce first and only antigen test controlling the entire market.
- Opportunities in the United Kingdom and Western Europe for Lyme test.
- Department of Defense opportunities for sale. - Opportunity to develop a consumer home test
kit.
- Failure to obtain FDA approval. - Failure to obtain CDC acceptance. - Other technologies beating the LymeTrap to
market. - Lack of development funding. - Insurance companies fail to pay for test as part
of their coverage. - Health care organizations fail to accept test as
medically useful and continue to rely on clinical diagnosis.
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Steps:
1. Search FDA database for IgG and IgM antibody test approval 2. Register with FDA (Establishment) 3. Get device declared Orphan Disease device through office OOPD at FDA 4. Submit exemption request (immediately) – if device is not exempt (probably not exempt) 5. File 510k with device as SE to IgG and IgM antibody test or possibly Treponema
pallidumtreponemal test reagents (below) 6. Obtaining determination that device is SE is the end game!
Looking at this in more detail this is a start. See below
I suggest you indicate that Ceres has registered with FDA and in in the process of obtaining approval for Orphan status and filing a 510K
Gives us a 50% R&D credit as well.
The basic regulatory requirements that manufacturers of medical devices distributed in the U.S. must comply with are:
• Establishment registration. May need to pay Establishment fees at http://www.fda.gov/MedicalDevices/DeviceRegulationandGuidance/HowtoMarketYourDevice/RegistrationandListing/ucm053156.htm (see list at http://www.fda.gov/MedicalDevices/DeviceRegulationandGuidance/HowtoMarketYourDevice/RegistrationandListing/ucm053165.htm) The LymeTrap does NOT qualify as a manufacturer of components that are distributed only to a finished device manufacturer under 21 CFR 807.65(a). The FDA guidance (at CPG Sec. 300.100 Inspection of Manufacturers of Device Components) and 21 CFR 807.65(a) only exempts manufacturers of medical device components from the registration and listing provisions of section 510 of the Act, if those components are the only items the manufacturer produces which have health care applications and they are sold only to other manufacturers. The exemption does not apply to manufacturers of components described in 21 CFR 807.20(a)(5) unless they are marketed only to registered device establishments for further processing. In other words, no lab would qualify as they do not generally manufacture devices.
LYMETRAP - A PARADIGM SHIFT FOR LYME DISEASE DIAGNOSTICS 32
• Medical Device Listing, would need to be verified by Chip and/ or Lance. My best search of the products database: Device #1 reagent, borrelia serological reagent Regulation Description Treponema pallidumtreponemal test reagents. Regulation Medical Specialty Microbiology Review Panel Microbiology Product Code LSR Submission Type 510(k) Regulation Number 866.3830 Device Class 2 Total Product Life Cycle (TPLC) TPLC Product Code Report GMP Exempt? No Recognized Consensus Standard CLSI M34-A Western Blot Assay for Antibodies to Borrelia burgdorferi Third Party Review Not Third Party Eligible Device #2 2009 h1n1 influenza virus (swine origin), nucleic acid or antigen, detection and identification Regulation Description Reagents for detection of specific novel influenza A viruses. Definition 2009 h1n1 influenza virus detection and identification reagents are used to directly detect and differentiate the 2009 h1n1 influenza virus in human respiratory specimens. Physical State Reagent Kit Technical Method Nucleic acid amplification or antigen detection assays Target Area The device is an in-vitro diagnostic device; none of the body parts will utilize the device or are intended to be affected by the device Regulation Medical Specialty Microbiology Review Panel Microbiology Product Code OQW Submission Type 510(k) Regulation Number 866.3332 Device Class 2 Total Product Life Cycle (TPLC) TPLC Product Code Report GMP Exempt? No Third Party Review Not Third Party Eligible
So we have a Class 2 device, product code LSR, which falls under regulation 866.3830 or 866.3332 (neither of which directly apply, which may give rise to concerns for a 510K). Because it is Class 2 we may need a Premarket Notification 510(k), (letter of substantial equivalence from FDA authorizing distribution). A 510(k) must demonstrate that the device is substantially equivalent to one legally in commercial distribution in the United States: (1) before May 28, 1976; or (2) to a device that has been determined by FDA to be substantially equivalent. There are exceptions here http://www.accessdata.fda.gov/scripts/cdrh/cfdocs/cfpcd/315.cfm
• Investigational Device Exemption (IDE) for clinical studies • Quality System (QS) regulation,
LYMETRAP - A PARADIGM SHIFT FOR LYME DISEASE DIAGNOSTICS 33
• Labeling requirements, and • Medical Device Reporting (MDR)
The Center for Device and Radiological Health’s (CDRH) office of device evaluation governs the medical device approval process through Class I, II, or III medical devices. For registration of the device the three possibilities are exemption, premarket notification, and premarket application based on the amount of risk the device poses to the patient. Class II devices are those for which general controls alone are insufficient to assure safety and effectiveness. In addition to complying with general controls, Class II devices are also subject to special controls which may include special labeling requirements, mandatory performance standards and post market surveillance (http://www.fda.gov/cdrh/devadvice/3132.html#class_1).
The LymeTest is probably a non-exempt Class II devices and must submit a premarket notification form known as a 510k application to the FDA at least 90 days before marketing. Before a 510k application is submitted, the sponsor of the device must gather data to prove that the device is in fact substantially similar to a predicate device in terms of safety and efficiency. If gathering this data involves human clinical trials, those trials are further regulated by the FDA, and are thereby more time consuming and expensive. (This would involve an IRB maybe). The key is that the new device must have the same intended use as the predicate device and the same technological characteristics, the new device is deemed substantially equivalent (SE) to the predicate device.
LYMETRAP - A PARADIGM SHIFT FOR LYME DISEASE DIAGNOSTICS 34
Substantially similar:
1. whether the new device has the same technological characteristics as the predicate, and, if there are new technological characteristics,
2. whether the characteristics may affect the safety or effectiveness of the new device.
Data required:
1. intended use,
2. physical composition
3. method of operation
4. specifications
5. performance claims, etc.
Labeling: Generally, the intended use is determined solely by the proposed labeling of the device as submitted in the 510k (actual label for the device and any accompanying information such as directions for use and promotional materials (http://www.fda.gov/cdrh/ode/guidance/857.html). NOTE: According to a 2001 article published in Medical Device and Diagnostic Industry magazine, 22% of all FDA related problems in the medical device and diagnostic industry in 2005 resulted from 510k clearance delays (http://www.devicelink.com/mddi/archive/01/03/001.html).
Exemption: Class II devices fall under this exemption subject to general controls which require that a device be “manufactured under a quality assurance program, be suitable for the intended use, be adequately packaged and properly labeled, and have establishment registration and device listing forms on file with the FDA ” (http://www.fda.gov/cdrh/devadvice/3133.html). If your device does not fall into an exempt category, either a 510k premarket notification or PMA will be required by the FDA before the diagnostic can be brought to market.
If not already listed as exempt, a petition can be submitted to the FDA to exempt a Class I or II device. The FDA has 180 days to respond to the request and if they fail to do so, then the exemption will be deemed granted.
Class II devices declared not substantially equivalent, require a premarket approval application (PMA). WE need to avoid the PMA route.