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IntraVenous ANtibiotic Compounding Automation

Periodic Reporting for period 1 - IVANCA (IntraVenous ANtibiotic Compounding Automation)

Reporting period: 2015-03-01 to 2015-08-31

The main aim of the IVANCA project was to study the feasibility of manufacturing, sales and marketing of an intravenous (IV) medicine compounding automation system (IV ICON). The IV Icon is the first automated compounding system designed to tackle common problems related to centralised mass batch compounding of IV antibiotics. In particular, the automated process minimises human error, to ensure the quality of the end product and prevent occupational risks related to manual compounding. Its capacity is 2-4 times higher compared to manual compounding and the main competitors. As part of the feasibility study key target markets and an ongoing hospital pilot were examined. In addition, further examination of manufacturing sourcing, user needs and IPR were undertaken.
The feasibility study demonstrated a number of key features of the IV Icon central to its design, development and manufacture. These include:
• The capacity level meets the needs of the mass batch compounding of IV antibiotics;
• The ready-to-use products reconstituted by IV Icon are safe to use and IV Icon can be integrated to the compounding processes of the pharmacies conducted in clean rooms according to Good Manufacturing Practices (GMP);
• There is market demand (and willingness to pay) for IV Icon with a sizeable market already mapped out;
• Production and business operations – to manufacture and market - are scalable; and
• NewIcon has freedom to operate the business in terms of intellectual property rights (IPR).

For the full potential of IV Icon to be exploited a number of key features need to be developed:
• A flexible and reliable product in relation to running parameters, features and structures of the compounding robot, the biosafety cabinet and related ICT system;
• The validation protocol to ensure that installation is conducted according to GMP requirements;
• Maintenance and added value services, such as installation, user training and documentation
• Scale the business operations and production both horizontally in relation to market-reach and vertically in relation to exploiting the manufacturing; and
• Piloting international operations to support the market development by a demonstration and to tailor IV Icon products ready for large scale international business.

These features will be addressed through, inter alia, seeking co-financing from H2020 SME phase 2 instrument.
1. Overview of activity and main results
The IVANCA project had five main objectives:
• Cut production costs and increase supply volume capability of compounded IV medicines.
• Enable centralised, rapid mass batch production of ready-to-use IV antibiotics with long shelf life.
• Increase patient safety by increasing the quality of IV antibiotics and decrease illnesses caused by contaminated or incorrectly compounded IV antibiotics.
• Increase safety and job satisfaction of pharmacy staff while at the same time enabling them to engage in more interesting and higher value-creating tasks.
• Remove remaining obstacles standing in the way of mass-adoption of compounding robots.
These five objectives were delivered through five main tasks:
• Market Study
• Lessons Learned from ongoing University Hospital Pilot
• Initial Manufacturing Sourcing Plan
• User Needs Study
• IPR and Risk Assessment
• Preparation of Feasibility Report (including Business Plan)

A description of the task and main findings are outlined below.
Task 1: Market Study
A market study was conducted to identify and assess target countries in/outside the European Union for IV ICON. Although basic market knowledge already existed more detailed knowledge was required on areas that impacted on investment in health care automation, such as the structure and funding of health care systems, pharmacy structures, existing automation investments, health care labor costs, and national regulation.
Four companies - Corporate Council Ltd. (UK), StepAfterStep A/S (DK), S-Medical and Katkal Oy (the US) – were tasked to deliver the market study for their respective countries (UK, Denmark, Germany and US). As well as collecting information, the UK and Danish sub-contractors organised meetings with potential stakeholders to exchange views on the development of markets and opportunities and with potential end-users and procurers of the IV ICON. Here the CEO and business developers of NewIcon Oy visited hospital pharmacies, compounding centres and procuring organisations in Denmark, UK and United Arab Emirates (selected as preliminary studies suggested that these countries offered business opportunities through other products manufactured and sold by NewIcon Oy). Market information about Poland was got from NewIcon’s distributor, Sanlab. Market information from Iran and China have been collected during CEOs and business developers visits these conutries.
Reports were prepared outlining a number of key recommendations. Building on information from the market studies the IV ICON Basic and an initial version of the improved system, IV ICON twins, were presented at the European Hospital Pharmacies in Hamburg in March 2015.
The country specific studies looked at a number of themes – for example, markets, competition, procurement conditions and user requirements, including expectation for related services and possible obstacles, such as regulatory requirements. The main findings are summarised below.

Denmark
Large and middle sized retail pharmacies have widely adopted storage and retrieval systems. It is estimated that around 30 % of the Danish retail pharmacies have purchased a system. It is likely, that the ownership of the private retail pharmacies will be liberated, and that will decrease the size of pharmacies in near future and thereby, create a need for smaller sized systems.

In the case of hospital pharmacies, automation is just raising its head. Denmark is regarded as one of the strictest countries in the world what comes to regulation towards hospital pharmacies. The same applies in Finland. In addition, the hospital pharmacy structure is very similar. In this sense, these two countries are very much alike. During this feasibility study, all the key persons of IV compounding were contacted by phone and interviewed about their opinions of the product fit in Denmark. In addition, NewIcon personnel visited two organizations that had automation planning process ongoing.

In Demark, hospital pharmacies are allowed to compound IV antibiotics for stock and are equipped with required clean rooms and biosafety cabinets for sterile production. The market will be ready to adopt this kind new solutions in 2016/2017 when new major hospital investments (both new-build and renovations) take place. One of the prevalent trends in Denmark, is to convert commercially available products that needs to be reconstituted into ready-to-use doses with as long as possible shelf life. This can be achieved by centralized sterile production or coupling products that will be later reconstituted right before use. Two out the five hospital regions have plans to automise the manufacturing processes related to the preparation of ready-to-use medicines. There is clear demand for compounding robot for IV cytostatic doses due to the increasing usage on cytostatic medicines and the high requirements for occupational safety and health and aseptic manufacturing processes. The estimated market for Antibiotic and Cytostatic compounding robots is 15 million euros.

The current competition is limited and based on two antibiotic compounding robots used in hospital pharmacies. However, the majority of the reconstitution is conducted manually at the ward side. The Region Hovedstad, in collaboration with AMGROS and Divisys A/S (in bankrupt), has developed a robot that produces 2.500 coupled product per day (products with a durability of up to 6 months). During the coupling process, commercially available products (e.g. vial and infusion bag) are connected to each other by linking device. However, the vial remains intact and the compounding is finalized in the patient wards. Furthermore, a cytostatic robot, manufactured by Health Robotics, is currently in use and the regional government is looking to purchase more in 2016. For cytostatic compounding, semiautomatic solutions have been adopted in some hospital pharmacies to reduce the occupational risks and support aseptic manufacturing. The current solutions produces 8-16 patient specific bags/hour.

Denmark generally is not familiar with compounding robots and, in procurement terms AMGROS I/S, a company responsible for procuring medicines in health regions, has promoted automation of the processes as part of good practice. Additionally, AMGROS and the Danish hospitals are focusing to provide ready-to-use medicines by different means and centralising their preparation. A number of user requirements were identified (see Task 4) which highlight the potential for exploiting the Danish market.

There are, however, a number of major obstacles and challenges in the Danish market. For example, the norms and protocols applied in the pharmaceutical compounding in hospital pharmacies are among the most stringent in the EU area. Importantly, it is the responsibility of each hospital pharmacy to validate and qualify each single equipment from every supplier.



UK
A major driver in the UK market for automating solutions is the need to reduce costs and improve efficiency. Health and social care providers (from both public and private sectors), including the management of the pharmaceutical services in health care facilities, are seeking options to outsource and centralise operations when they are proven to provide better value for money and savings in costs. Hospital pharmacies are at different levels of technology adoption. For example, some of the more advanced prepare ready-to-use dosages for delivery to wider areas while others (wards) are still preparing the patient specific doses for themselves. In contrast, some tasks are outsourced to private companies. Typically, these tasks are strenuous and require expertise and competence not held by the health care staff, such as nurses and GPs. Here these compounding centers are an interesting business opportunity for automation solutions related IV drug compounding.

A number of automated solutions in the pharmacy area, such as automatic storage and retrieval systems have been adopted by National Health Service (NHS) providers. In terms of competition, however, some hospitals have signaled disappointed with the results as the storage robots have not always proved to be reliable over a long period of time and system providers have increased the fees for the maintenance cost. Consequently, there now is a degree of skepticism about the benefits of these particular systems which point to opportunities for new solutions based on the efficiency and reliability. Overall, there seems to be urgent need to better manage the whole logistical chain of distributing the medicines in the hospital which creates market potential for all NewIcon product portfolio.
Procurement staff are looking for proven data on efficacy and cost-effectiveness. Moreover, to strengthen the reliability of the brand and the sales operations it will be important to develop a local arm to ensure customers’ needs are met in the UK.

The user requirements identified during the visit to England were largely similar to the Finnish ones. For example, a centre in Wiltshire is delivering ready-to-use drugs ordered through a paper-based documentation function. The IV ICON robot will nicely fit into the process. Some work is needed in adapting the system to the existing product range to be reconstituted. In addition, UK standards requires extra HEPA-filter in the biosafety cabinet. The biosafety cabinet that is used in IV ICON system, is already sold widely in UK, so it fulfills this criteria. In terms of providing the services, the need to localise their content and forms of delivery needs to be developed further to have any real chance of market penetration. A number of additional user requirements were identified (see Task 4) which highlight the potential for exploiting the UK market.

Germany
Germany has been the pioneer in European automation system development. Storage robot systems are widely used in DACH region. Since the roots for automation go far back, Germany is fast adapter of new robotic systems and seeks for innovativeness and quality. In DAHC region there is 537 central hospitals from which 75 % consumes more than 1000 antibiotic doses daily. Hence, the market potential of IV ICON is estimated to be 400 hospitals with 1-2 systems each. In addition, significant sales could be reached for NewIcon’s automated dispensing cabinets (ADCs) which differs substantially from existing solutions.

In DACH region, all the main competitors are present. The strongest competitor in storage systems is Apostore. Health Robotics announced its first i.v.STATION installation in Charite-Universitatsmedizin Berlin in 2009. After that they have not published novel installations in Germany. Intensive competition has forced the prices really low, especially with the storage system. It is likely that this will also increase the pressure set towards IV ICON pricing and expected return of investment. IV ICON Basic and IV ICON Twins were presented in European Association for Hospital Pharmacies (EAHP) conference held in Hamburg March 2015. Their semi-automation features gained lot attention especially from the competitors. It became very clear, that the speed and mass batch compounding feature (instead of patient specific doses) differentiated IV ICON remarkably from other systems and thereby, it can be regarded as one of its kind.

Success in procurement in DAHC region demands on local presence in Germany. The target customers are typically big hospitals or hospital groups. Another way to go would be through construction companies building and removating hospitals.

The main challenges in Germany and other DACH countries arises from high expectations towards the system performance, quality and product readiness level. The compatible products should be listed out and GMP documentation localized to Germany should be ready. In addition, the quality of services should be in top level. The prices of the consumables (e.g. water tubes) and maintenance services should fine-tuned at the lowest price level as possible for gaining maximal ROI to the customer.

US
Key trends in the US market, are reduction of medication errors which cost control, rises from aging population and leads to increased demand for technologically advanced products. US accounts for the leading position of the procurers in the pharmacy automation systems. The global market for automated pharmacy solutions is expected to grow from 4.7 billion in 2011 to 7.8 billion by 2018 (Transparency Market Research, Pharmacy Times). The figure includes all automotive pharmacy solutions: automated dispensing systems, packaging and labeling systems, storage and retrieval systems, table-top counters and automated compounding systems. North America accounts for more than half of automated systems market share due to tough regulations in hospitals and pharmacies.

According the limited market study conducted as part of this feasibility study, it seems that US is the forerunner what comes to IV compounding market. However, there is very limited knowledge on what IV assisting technologies are used during the compounding process in hospitals and compounding pharmacies at the moment. The majority of antibiotic IV medication is intended for use inside the hospital – senior care facility patients requiring this treatment are transferred to a hospital. Small hospitals outsource FDA approved compounding pharmacies for their IV compounding needs. Most compounded sterile preparations (CSPs) are reconstituted manually under the hood in a hospital. Some very large teaching hospitals have acquired RIVA and i.v.STATION. Smaller hospitals and nursing homes use the services of large scale compounding pharmacies like Pharmedium. Large hospitals and health care providers are moving away from outsourcing the compounding pharmacies, prompted by a meningitis outbreak in 2012 when injection of contaminated steroid, methylprednisolone acetate in IV bags, caused the deaths of 42 people and persistent fungal infections in 720 people. Due the outbreak, a number of compounding pharmacies were closed (NECC and Ameridose) and many lost business from hospitals. As a result, the FDA became involved in regulation and monitoring of manufacturing of compounding medication with rigorous inspections of all compounding pharmacies. This resulted in an increase of sales to i.v.STATION and RIVA to in-house hospital pharmacies. Recent figures suggest that 80% of health care providers listed manual IV compounding as the area of the medication preparation process most vulnerable to medication errors - a driving force that propels future sales of pharmacy automotive solutions in US hospital and stand-alone pharmacies.

The main competitors in the US are RIVA (by Intelligent Hospital Systems, based in Canada and since March 2015 also in Illinois by the name of ARxIUM) and i.v.STATION (by Health Robotics acquired by Aesynt, Pennsylvania US). i.v.STATION i.v.STATION2 (parental liquids) and i.v.STATION ONCO (hazardous medicines) has been recognized as a most likely purchased IV compounding automation solutions in 2014. In 2014, Health Robotics reached 80% of the total IV Robots market share in the world. Both RIVA and i.v.STATION are fully automated IV compounding solutions, although IV ICON has lower price, higher volume and utilizes less space. The uniqueness of IV ICON is in semi automation which generates better control of the process, production of IV medication in syringes and vials, not IV bags and specialisation in antibiotic compounding and ability to reconstitute several syringes or vials at a time.

In procurement terms, potential customers are hospitals with high demand in high volume of IV antibiotics. Such a hospital needs to have a large in-house pharmacy with the clean room and high demand for a specific antibiotic that could be produced using IV ICON Hospitals that have at least 250 beds
2. Conclusions and update on the business plan
Recommendations and next steps

The Feasibility Study was done to arrive at an educated go / no-go decision regarding the next steps in the commercialisation and significant scaling-up of IVANCA / IV ICON. The Recommendations concluded from the study and selected next steps are described in the table below.

Recommendations Next steps
1) Markets Study

IV ICON should be target to those countries which fulfill some of the criteria below:
- excellent product fit to existing markets which have competitors present (e.g. UK, US)
- excellent or good enough market fit in evolving markets where IV ICON could be forerunner (e.g. Denmark, Poland, UEA, Iran)
- relatively low user requirements based on regulation and capability to pay (UAE, Poland, Iran, Kuwait)

Utilise early adapters to gain proven data on the efficacy and cost-effectiveness for Commissioners (e.g. UK for NHS).

Utilise selected countries as a global reference (e.g. UK, Denmark).

Utilise the opportunities which are created by

Pay attention how to localize services to gain competition advantage.

Utilize the market opportunities arising from regulatory changes that favors the use of automation and recommends the centralisation on the IV reconstitution process from ward to clean rooms.

Head for excellent product fit by localization of the product in selected, significant market areas (e.g. US, China).
Head for country pilots:
- UK: excellent product fit; utilisation of early adapters for gaining proven data, gaining a global reference
- Denmark: medium product fit; market opportunity that arises from being forerunner in new hospital building projects in 2017
- Poland: excellent product fit; relatively low user needs and forthcoming restrictions in regulation to favor IV ICON
- UAE, Iran: excellent product fit; relatively low user needs, forerunner in the markets, excellent solvency

Conduct selected and focused market studies to identify where IV ICON could be forerunner or where legislation is becoming to favor centralized IV preparation or where the market fit is excellent:
- Eastern and South Europe
- Gulf area

Conduct market studies in countries with huge market potential and expected need for product localization or need for additional regulatory work for educated go / no-go decision:
- US
- China

Positioning IV ICON and highlighting:
- ROI; high volume, small size and lower cost
- Semi-automation; Control on the process

2) Lessons learned

Develop a next generation version of the IV ICON (Basic  Twins) to:
- gain more flexibility for modular product structure
- gain more flexibility for compatible products (vials, syringes)
- gain more capacity for vial production (2x)
- change the way of loading the goods for avoiding false alarms and creating robust work flow
- create a platform to broaden the product family with a system intended for reconstitution of hazardous medicines by patient specific production manner

Produce material related on qualification the system according the GMP to easier the implementation of the system inside the pharmacy processes.

Develop and manufacture pilot version of IV ICON Twins:
- Hardware: 2 arms, loading in trays, cleaning properties
- Software: compounding recipes, IT interface

Develop a modular structure for sales.

Produce a testing system in the manufacturing site for test trials of new products to be compounded for creating added value in customer services.

Produce a layout for GMP documentation for improving after sales services.

Develop the site acceptance test phase (SAT) so that it can be performed faster.
3) Manufacturing and sourcing plan

Develop a modular product structure for:
- manufacturing
- sales
- life cycle planning

Seek vertical scaling from suppliers.

Seek scale of economics by increasing the size of purchases.

Develop added value services and sales to improve the scalability of the product and related business.

Develop a modular structure by:
- mechanical designing
- number coding
- sale modules
- updated features

Develop supplier, collaboration and subcontracting networks to reach assembly volumes that meet the sales target for NewIcon and support the market strategy.

Improved sourcing plan of the components.

ICT solutions for remote monitoring and updating of the product.
4) User needs study

Develop IV ICON so that it can more easily adapt after installation to different sizes and shapes of vials and syringes and, active pharmaceutical ingredients and formulations of dry powders. This feature is needed for the periodic public bidding process which may change the selection of initially agreed compatible products.

Develop system so that end product can be either vial or syringe and the capacity is as high as possible.

Produce GMP related material to support the implementation process.

Develop ICT so that it can support the quality controls.


Technical improvements and versions to the hardware, as regards:
- loading/unloading
- cleansing and cross contamination
- different suppliers of pharmaceuticals and syringes

Develop software to:
- support qualification testing
- generate reports for quality documentation
- adapt different sizes, shapes and solubility’s of powders
- updating the product (long-term care services)

Create value added services from:
- validation protocols and documents
- compounding recipes produced with test system, for antibiotics that are hard to manually prepare but are high on demand

Develop additional systems for:
- labeling
- ethanol handling of goods
5) IPR

Seek protection to unique innovations relating to the reconstituting the IV antibiotics.
Strategy to use IP rights in marketing and to ensure respected status in the selected market will be developed.

IP protection of additional systems for:
- labeling
- ethanol handling of goods

The IVANCA project proved that the IV ICON compounding robot have potential to meet the objectives outlined for the objectives of the SME 1 project. The overall target for the business with IV ICON has been sharpened and as the product clearly seems to have potential for the sales. However, this feasibility study led to some significant changes to the preliminary commercialization plan. These changes are summarized in the table below.

Preliminary Commercialisation Plan Modification
Focus on selected market areas with excellent product fit. Seeking countries were IV ICON can be forerunner and early adapters can be found. Searching countries with wider scope and creating varies entry strategies.
Use IV ICON as an entry product of NewIcon product portfolio for selected countries. Select the entry product from product portfolio depending on the customer and promote “total pharmacy automation” concept.
IV ICON is used for standard IV antibiotic selection agreed with customer during the sales. Technical improvements (hardware and software) for adapting constantly changing reconstituted products. Life-term services for updating are required.
Marketed as a stand-alone system with easy installation. Marketing reliable customer services and providing GMP related quality documentation for implementation. Integration to hospital information system is an option for customer.
Scaling will be handled by producing a fixed standard product. Creating a modular product structure which enables localisation, customisation and vertical scaling.
IP focuses on IV ICON. Creation of new IP extended to additional systems.


The business plan Vision 2018

Products/services

IV ICON Twins with remote access for update, repair and maintenance services. ICT configurable to different labels and able to support validation during installation and integration IV ICON Twins to pharmacy’s quality processes.
One system installed in NewIcon factory for testing the new compatible products and new compounding recipes
- A modular Mechanical product structure and generate number codes for each modules
- Utilize the IV ICON Twins platform to hazardous IV medicines compounding system

Marketing strategy
- Credibility and track record: Country pilots, reference cases, quality products and services
- Customer relations: Flexibility, long lasting customer relationships with a “developing touch”, excellent customer services
- Business case: Creating real return of investment, offering total pharmacy automation concept and part of NewIcon product portfolio
- Brand is built on quality, reliability and flexibility
Differentiate from Competitors
- Reasonable price and proven return of investment
- Excellent customer support and reasonable maintenance costs
- Smooth installation and implementation by providing assistance with GMP related documentation
- Protect the hardware by patents (pending: needle handling)
- Protect software by limiting the information flow
- Gain advantage by flexibility both in customer relations and in customization of solutions
- Being best at the selected niche market with significant differentiating technological choices; semi-automation, high capacity and specified high volume products

Risk-management
Manage the localization processes by sustaining the product line and the differencing only to meet requirements proven to be feasible for further development of the business. Markets will be evolving for long and purchasers are likely to pick-up slowly new features.

Manufacturing
Aim towards standard product manufacturing model
- Vertical scaling opportunities could be gained by relocating the assembling work more to component providers
- Develop further the sourcing networks
- Calculations for defining exact cost price to improve retail price settingCosts and pricing
- Aim at the level of 300 000EUR and pricing models that support long-term relationship
- Manage costs of the related consumables, such as water tubes
- Manage costs of related services: installation, maintenance, updates
- The modular pricing is set for following parts:
o Biosafety cabinet with robotic arms (the core system)
o Grippers and loading trays (customer specific)
o Consumables: water tubes
o Installation services
o GMP documentation
o Maintenance services with software license and help desk
o Integration to hospital information system
o Different prices are set for H2O2 tolerant and non-tolerant system
o User training

Sales Operations and logistics

Mix of own sales and services and wise use of distributors.

Issue Details
Sales • Build by pilot installations and references
• Build by long lasting partnerships
Installation services








• support to local service partner
• WLAN connection to the system to pinpoint the cause of error
• Training about working in clean room conditions with Finnish training center
• GMP documentation to local needs
• Shipment responsibilities (e.g. FCA)
Maintenance services • Biosafety cabinet; 1 time per year particle measurement
• Robot; 2 time per year changings certain replacement parts
User training • Support to local service partner
• User training before and after installation
Help Desk • Support to local service partner
• Local language
• Physical response in 4 hours
Market research • Focus in meeting with potential clients and getting acquainted to localization needs
• Small and targeted
• Down-to-earth and hands-on
• Acts as an experiment to pre-test new partnerships
Distributors • Culturally distant countries e.g. developing markets
• Where own sale organization is not in next 5 years strategy
• Sales targets, first contract to limited period (18 months)
• Options to use other partners to facilitate the first sales
• Distributor is responsible of installation, maintenance and help desk services
• FCA pricing
Direct sales
• Strategically important market areas (e.g. international reference, culturally close to domestic market, development possibilities and partnerships)
• High market potential (in size and structure)
• Existence is essential
• Other countries where direct sales are preferred but do not require local legal entity (e.g. Iran)

Legislative and regulatory aspects
IV ICON is considered processing equipment in Europe and therefore, is not under medical device directive. The regulatory requirements should be investigated before entering market areas outside Europe. Especially, attention has to be paid before entering to US or Chinese markets.

Typically, each hospital or compounding center has to comply at least some kind of national legislation which may vary significantly between countries. NewIcon aims to help customers to meet these criteria and easy the documentation burden by added value services.


1.1. Financing and resourcing of the business plan

Whilst NewIcon is an well-established company with domestic and international sales on pharmacy storage automation systems and a pipeline of products for the customer segments of hospital and retail pharmacies, NewIcon Oy will need financing to develop the company’s capacity to run the grow and go even more international with IV ICON. Currently, NewIcon evaluate s Institutional Venture Funds . Also the current shareholders and investors have been engaged to support the company’s growth plan. Furthermore, Finnvera, a specialised financing company owned by the State of Finland are considered as a potential co-financier in the internationalization phase. Additionally, R&D financing from Tekes –the Finnish Funding agency for Innovation, have already been granted to develop the Total Pharmacy Automation product portfolio of NewIcon, including IV ICON. H2020 SME 2 will be applied to pilot IV ICON, test scaled up production of the related services for international business.
The organization of NewIcon is being supported by board and advisory group with internationally experienced members. Moreover, during the IVANCA project the company has recruited a COO, who will be organizing the scaling of the production operations.