Jesse Evans, Donovan Fiore, and Tanerfa Tetteh April 9, 2020
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Jesse Evans, Donovan Fiore, and Tanerfa Tetteh April 9, 2020 Table of Contents Executive Summary ...................................................................................................................... 1 The Problem .................................................................................................................................. 3 The Opportunity ........................................................................................................................... 3 Description of Business ................................................................................................................. 5 Product/Service ............................................................................................................................. 7 Macroenvironmental Forces ........................................................................................................ 9 Industry Analysis ........................................................................................................................ 11 Market Analysis .......................................................................................................................... 14 Customer Analysis ...................................................................................................................... 15 Competitor Analysis ................................................................................................................... 17 Primary Competitors ............................................................................................................................... 17 Secondary Competitors ............................................................................................................................ 18 Marketing Strategy ..................................................................................................................... 19 Operations ................................................................................................................................... 22 Research and Development ........................................................................................................ 22 Location ....................................................................................................................................... 24 Key Personnel .............................................................................................................................. 24 Management ............................................................................................................................................ 24 Advisory Board ........................................................................................................................................ 26 Employees ................................................................................................................................................ 26 Financial analysis ........................................................................................................................ 28 Appendix ...................................................................................................................................... 31 Endnotes....................................................................................................................................... 52 Executive Summary Problem and Opportunity Blood cancers are debilitating to hundreds of thousands of individuals, but fortunately, are quite treatable when caught early. Many of the more drastic measures involved in treatment could be avoided with proper genetic testing, but a shocking lack of testing on the market has made this unavailable for consumers. However, new advances in genome sequencing only in the last two decades have seen the price to sequence individual genomes drop from over $100,000,000 USD in the early 2000’s to generally under $1,000 in 2018, with companies like Beijing Genomics, BGI Group, projected to be able to sequence large scale orders for under $200 per genome by the end of 2020.1 This precipitous drop in price allows for more experimentation in genome data analysis, including the identification of translocations implicated in cancers, all of which makes up 10% of diagnosable blood cancers. This type of genetic research has been relegated to large research institutions, but due to advances in technology today, this kind of testing is now feasible for smaller, consumer-based companies to offer as a predictive test. Business Leukogen is an LLC direct-to-consumer genetic testing company that focuses on blood cancer genetic predispositions. Leukogen also provides genetic counseling, blood cancer information, community messaging boards on its website, and webinars—a one-stop-shop for anyone concerned about their risks of developing blood cancer. Leukogen’s value proposition: understand blood cancer risk factors, and if cancer develops, identify symptoms early, treat the cancer sooner, increase survival chances. Leukogen will partner with the Boston laboratory of Beijing Genomics to sequence customer DNA. All customer data and organization practices will be secured according to Health Insurance Portability and Protection Act (HIPPA) and Food and Drug Administration (FDA) regulations, with the product defined as a ‘laboratory developed test.’ Leukogen offers a myeloid genetic risk assessment test examining 72 genetic variants correlated to blood cancers. Leukogen’s proprietary DNA analysis computer program examines translocation variants, the only commercial direct-to-consumer brand to do so. Strategy and Competitive Advantage By targeting two unique, carefully picked target markets, Leukogen is well positioned to capitalize on its strengths in comprehensive testing and in low price point. Focusing marketing on directing individuals to the website through social media targeting, Leukogen plans on capitalizing on the ease of access, finding people both online and face-to-face through partnerships with hospitals and current Leukemia databases. Leukogen meets consumers where they are, providing convenient, specialized service for those in need. Leukogen’s translocation detection and scanning methods are unparalleled in the genetic testing space. This, combined with Leukogen’s comprehensive database of resources available to those currently suffering from and at risk for blood cancer, set it well above any competitors in the space. Competitors Currently, there are several well-established competitors in the arena, but each exceling in tangential areas; few competitors are consumer-based rather than research based, and those who are consumer-based do not achieve even slightly comparable levels of comprehensiveness in genetic testing. From Blueprint 1 Genetics’ expensive full genetic test to GeneDX’s rare blood cancer research, no competitors are providing a low-priced, fully comprehensive test for consumers. Leukogen is positioned to fill this need, using translocation research to provide high-level genetic scanning to those at risk for a fraction of what other genetic testing companies are providing. Team Leukogen’s founding team members are Washington and Lee University graduates, well versed in their respective roles to ensure Leukogen’s success. Acting CEO Jesse Evans already has experience founding and running several start-ups; Tanerfa Tetteh is an internationally experienced accountant well on her way to ACCA qualification; Donovan Fiore has run several marketing campaigns for both small and large organizations. Additionally, Eric Herrara’s support in driving research and development as a neuroscience researcher ensures Leukogen will remain at the forefront of genetic scanning. Leukogen plans on investing its available funds into operations until the business starts to turn positive cashflow and profits, where founders will be compensated with equity only for the first year of operations, with a $30,000 salary each year afterwards. Economics of the Business Leukogen expects a steady gross margin of 65.1% over the first five years of operations. Breakeven is projected to take place in the sixth month of the second year of operations at a breakeven sales value of $940,878 which translates into the sale of 1882 kits. Even though breakeven occurs somewhere in the middle of year two, Leukogen is estimated to start making positive cashflows in the ninth month after inception. Leukogen makes positive profit margins from year one with a net profit margin of 13% which grows to 56% in the fifth year. Proposed Exit Strategy Leukogen has the potential for a high growth rate since it finds itself in the health and technology sector. By year 5, Leukogen will be very attractive to investors as well as a target for acquisition by bigger companies who are already in this line of business. Low debt levels, steady positive cash inflows and overall high financial ratios will serve as a motivation for investors to resist these acquisition attempts. With a cash balance of by year five, Leukogen could expand by getting its own lab or even moving into other forms of cancer research and risk assessment. Proposed Offering An initial investment of $260,000 will be made at the start of the business; this amount makes up the equity of the business. A total of $100,000 will be invested by the founders as well as another $100,000 from angel investors who will be compensated with 20% equity. Leukogen will also have convertible notes of $60,000 with 2% yearly interest convertible in the 6th year