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Mass-Customization Report Summary

Project ID: 717921

Periodic Reporting for period 1 - Mass-Customization (Mass-customization of implants: the business model)

Reporting period: 2016-03-01 to 2016-08-31

Summary of the context and overall objectives of the project

Ortho Baltic has developed an advanced design and manufacturing practices for Custom-Made Implants (CMIs) and Custom-Made Surgical Guides (CMSGs) – premium quality orthopaedic products that currently fail to achieve large-scale commercial success over much inferior standard orthopaedic implants.
The main advantage of CMIs, compared to standard implants, is the patient-specific design, which matches the implant to the bone (not vice-versa) and individual alternatives for its attachment. It also encompasses the complete biomechanical harmonization of replaced joints and their connectors. Moreover, unlike standard implants, the CMIs are constructed as integral devices. All this ensures lower surgical invasiveness, shorter operation time, faster healing process, reduces risks of infection, joint dislocation and revision surgeries, fuller restoration of patient’s physical performance and quality of life; making CMIs much more suitable not only for complicated clinical cases. In addition, CMIs are produced using metal 3D printing technologies (additive manufacturing). This method as such gives implants added value because it almost has no limitations in realization in one peace most complex constructions and enables forming trabecular metal surfaces that ensure better secondary fixation of the implant. These functional surfaces may be injected with the mixture of tricalcium phosphate and hydroxyapatite enriched with patient-specific antibiotics encapsulated in microcapsules which provides controlling release of antibiotics in timely dosages, infection prevention, and treatment cost economy of scale.
During the Phase 1 “Mass customization of implants” project, a multi-part feasibility analysis was developed. The economic viability analysis suggests that after removal of some of industrial and market barriers to what the project is devoted, the CMI market grow will increase substantially (from 7% to 26% per annum). Once it finally accelerates, the technological viability modelling showed that the transition from a unitary to mass production would cut down unit production costs dramatically, ultimately lowering the product price to end-users.
An in-depth competition analysis revealed that no company on the market currently operates a mass customization business model for CMIs, nor has it the adequate systems installed to do so. Ortho Baltic will thus be able to gain competitive advantage upon: a) its surgeon-manufacturer communication tool MICE (Medical Implant Customisation Engine) implementation by offering value added services, such as 3D model-based CMI specifications configuration, design adjusting, CMI validation in the stage of pre-surgery planning and documentation processes, and b) implementation of its shop floor management system MS Dynamics (Mass Customization Dynamics) – Lean/TOC-based process optimization platform, specifically adjusted to the specific of digital in-nature CMI design, manufacturing and validation processes. These features will support the trend of personalized surgical solution while simultaneously make Ortho Baltic a superior quality CMI and CMSG producer.
The next steps for commercialization of CMI mass-customization business model are development of academic surgeon and medical student training programmes together with leading medical universities on CMI need identification and surgeon participation in CMI design and validation processes applying MICE software and corresponding CDSS (Clinical Decision Support System) MICE Trainer with user interface based on principles of gamification. These solutions should greatly contribute to a new surgical thought paradigm – one that is based on patient-specific decision making, CMI-based qualification, and incentives to wider use of CMI in surgical treatment and market growth. Moreover, both MICE and MICE Trainer would give Ortho Baltic access to the users of these systems and enable us to evaluate their readiness to use CMI and CMSG in surgical tre

Work performed from the beginning of the project to the end of the period covered by the report and main results achieved so far

Ortho Baltic has conducted a group of activities during SME-instrument phase 1 project “Mass Customization of implants” in order to assess the feasibility of the commercialization of such business model and to develop a commercial business plan. The following activities were conducted:
1.1. The feasibility study was prepared to assess the technological, economic, legal, market, logistical, and financial viability of the business model. Main results include:
1.1.1. CMI production cost calculation model based on production capacity and technological factors.
1.1.2. Pricing comparison model against competition for different price components.
1.1.3. Analysis of CMI pay-back via optimization of aggregated treatment costs using CMI vs. standard implants in the treating clinical conditions requiring joints replacement.
1.1.4. Analysis of standard implants and CMI markets, market barriers and means to their removal, markets forecast for the next 10 years
1.1.5. Analysis of market stakeholders, and competition environment.
1.1.6. Analysis of implant supply chains and models of payment for health care services employed in EU countries.
1.1.7. Market analysis of current universal ERP systems’ applicability to specific of CMI mass-production business model.
1.1.8. Possible impact of technological solutions under development to CMI costs, lead time and assurance of market accessibility.
1.1.9. Estimation of investments with different profitability scenarios for the company.
1.1.10. Freedom to operate analysis with legal action plan for the business model.
1.2. The business plan was developed, which included:
1.2.1. Innovation strategy development plan with the full list of systems’ functionalities and indicators it would use to achieve them.
1.2.2. Research and development plan which is aimed at development of emerging technologies from the current TRL to actual systems proven, launch and operations.
1.2.3. Marketing plan with identification of target customers, priority segments, competitor analysis and value proposition (for each system).
1.2.4. Organizational plan with responsibilities of internal human resources and outsource strategy.
1.2.5. Financial plan with identification of three outcome scenarios based on user base development and CMI market growth and 7 year forecasts for project’s profit-and-loss for different outcome scenarios.
1.2.6. Identification of possible risks and their mitigation strategies.
Based on the analysis described above, the following results for the project are anticipated:
1) Duration of labour input for supply chain of one CMI order will be cut down from 68 to 36 hours.
2) CMI unit cost will decrease by 58%, Ortho Baltic price for CMI unit will go below 3.500 Eur per piece what is less than half what is in market now.
3) CMI lead time will reduce from approx. 42 days to 28 days (in urgent cases – 14 days).
4) CMI market will expand from treating clinical cases where the use of CMI has no alternative among standard implants to treating cases, where the use of CMI leads to better treatment results than standard implants, and where the use of CMI decreases the total pathology treatment costs more than the price difference between CMI and standard implants and in 10 years will reach 10% of total orthopaedic implants market (4 billion USD).
5) Patients will get the best possible health benefit over the least private and/or public costs (minimum surgical invasiveness, surgical / post-surgical risks and post-surgical pain, fast healing and rehabilitation and maximum restoration of functionality/mobility with minimum side effects).
6) The expected accumulated CMI sales for the first 5 years after the project implementation are 32.3 million EUR. The company expects to make 0.968 million EUR average net profit per year.

Progress beyond the state of the art and expected potential impact (including the socio-economic impact and the wider societal implications of the project so far)

"The company’s overall objective of this project is to solve two societal challenges.
First, the project aims to incentivize surgeons to apply personalized surgical solutions more widely. This relates to the change of a current surgical thought paradigm. Instead of letting surgeons continue to twist and turn trying to solve the problem of ""how to make do with what we have"" we ask them to describe the individual constructional and functional solutions to be implemented in an implant that is going to be used in treatment of a specific patient, in a specific clinical case. This switch is already slowly taking place due to changing trends in healthcare compensation systems – payments from ‘per no. of treatments’ moving to ‘outcomes of treatments’. Ortho Baltic project will further accelerate this by developing tools for surgeons training to apply CMI in surgery treatment and for communication with CMI manufacturers in product design and validation processes (MICE and MICE Trainer), will make their platforms open to surgeons and medical students, hospitals and universities, and license them (MICE) to other CMI manufacturers, which are our competitors for CMI orders, while also being our allies in competition against standard implant manufacturers.
Second, and most importantly, the company is positioned to make a premium-quality medical product (custom-made implant) more available and affordable to general public in price and supply terms. From one side this will be caused by growing demand for CMIs and CMSGs which lead to economies of scale. From other side, Ortho Baltic will use MS Dynamics shop floor processes management and optimization platform to make the transition from unitary to mass production more efficient than their competitors, who will then be forced to adapt and drop their currently-inflated CMI prices to remain competitive.

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