Flu
The Express Influenza A+B Test
Biotechnology Group Project
Group 4
Nathan Havko
Afshin Khan
Desiree Mendes
Craigen Nes
Aaron Ogden
Chrystal Quisenberry
1
Table of Contents
I.
II.
III.
Executive Summary
4
Business Plan Overview
5
Introduction
10
I.a.
Influenza Overview - A global disease with a global market
10
I.b.
Laboratory & In-home Diagnostics
11
I.c.
Our Innovations
11
Scientific Background
13
II.a.
Viral epitopes, glycoprotein Hemagglutinin and Neuraminidase
13
II.b.
Single Domain Antibodies
14
II.c.
Phage display, a cheaper alternative to current antibody generation
15
Research and Development
16
III.a.
16
Phage Display-Panning the library to find the Influenza AB specific
antibodies
III.b
Optimization of lateral flow tests
17
IV.
Market Analysis, projections
17
V.
Regulations
22
VI.
Process Design
25
VI.a.
Upstream processing
25
VI.b.
Downstream processing
26
VII.
Alternative Process Design
30
VIII. Cost Estimates
34
IX.
Economic Analysis and Rate of Return on Investment (ROROI)
38
X.
Conclusions
42
XI.
References
43
XII.
Appendices
51
A.
Patents
51
B.
Process Flow Diagram
53
C.
Fermenter Sizing
54
D.
Processing Times, Step Yields, and Flow Rates
55
2
E.
Process Equipment
56
F.
Annual Material Costs
57
G.
Alternative Process Flow Diagram
59
H.
Alternative Fermenter Sizing
60
I.
Alternative Processing Times, Step Yields, and Flow Rates
61
J.
Alternative Process Equipment
62
K.
Alternative Annual Material Costs
63
L.
Economic Analysis
65
3
Executive Summary - FluCheck (PathogeniX, Inc.)
We propose a business model based on the application of new antibody technologies
that will revolutionize rapid disease diagnostics. Currently, rapid diagnostic tests rely on the
production of monoclonal antibodies that require expensive hybridoma cell culture systems for
their production. We plan to significantly reduce production costs by generating antibodies in
cheap bacterial expression systems. In addition, we will modify our antibodies to enhance their
performance relative to monoclonal antibodies. The result will be a product that is designed to
outperform traditional monoclonal antibody-based rapid diagnostics, at a fraction of the cost.
These advantages will ensure that PathogeniX diagnostic tests are affordable, rapid, and
reliable. Development and marketing of PathogeniX's first product, FluCheck, will aid in the
diagnosis of the globally relevant pathogen, influenza, and establish PathogeniX as a leader in
rapid diagnostics technology.
PathogeniX will be competing against three major companies that have secured 70% of
the current $173 million market. We expect to capture the remaining 30% of $51.9 million within
five years. We will do this by drastically reducing production costs and improving sensitivity.
With an estimated capital investment of $589,715, and a yearly operating cost of approximately
$452,078, we predict reaching profitability in less than five years. Sale and distribution of
Flucheck will establish our company as a leader in rapid diagnostics, and strategically position
PathogeniX for expansion into related markets, including diagnostics for pathogens like
Leishmania spp., Plasmodium spp., and Toxoplasma spp.
4
PathogeniX Business Plan
Overview - Cheaper, more sensitive diagnostics: Flucheck
The objective for our company is to become a leader in rapid disease diagnostic
technology. Our key innovation is based on the use of multivalent single-chain antibodies. Preclinical analysis has shown that multivalent single chain antibodies cloned for bacterial
expression systems perform comparably to or better than conventional mouse monoclonal
antibodies produced in hybridomas in both competitive substrate binding and pathogen
neutralization parameters (Holliger 2005; Hultberg, Temperton et al. 2011). Additionally,
multivalent single chain antibodies are amenable to cost-effective production using bacterial
expression systems (Harmsen and De Haard 2007). By developing multivalent antibodies for
use in influenza diagnostics we can capture a portion of a $173 million dollar influenza
diagnostics market and establish our brand as a leader in reliable and affordable biosensor
technology.
Phase 1:
Start up Funds - Our solutions to a common problem
We have developed several strategies to overcome the financial challenges that many
start-up ventures face. Initial funds will be raised through Washington State University with
donors consisting of friends and family, and angel investors. Additional strategies include
soliciting partnership with a venture lab, such as Singularity University Labs to take over our
operation plan. This is a common strategy for start-ups to circumvent initial equipment and
facility costs. In the event we are unable to secure partnership with a venture lab, we will pursue
additional funds from private investors, venture capitalists, bank loans, or grant opportunities
through the National Science Foundation, National Institutes of Health, Howard Hughes Medical
Institute, World Health Organization, and others.
Product Development - For a more detailed explanation, see section II and III
5
The initial phase for our company is the development of strain-specific multivalent single
chain antibodies with high affinity and avidity for Influenza A and B epitopes. To do this, we will
pan commercially available camelid phage display libraries, using influenza A and B specific
neuraminidase (NA) and hemagglutinin (HA) as target antigens. This is a well established and
cost effective method for finding an antibody with the desired antigen specificity (Asanuma,
Matsumoto-Takasaki et al. 2008; Hultberg, Temperton et al. 2011; Olichon and de Marco 2012).
Once we find the phage that produces our desired HA or NA specific antibody, we will clone the
antibody-coding phage DNA into Gateway expression vectors. We will then over express our
antibody in E. coli and validate each of its characteristics, including specificity for each influenza
strain's HA and NA epitopes, affinity, avidity, solubility and thermal stability. Antibodies with the
best properties will then be manipulated to generate their multivalent counterparts. To do this
we will amplify the DNA sequence that codes for each antibody's substrate binding domain, the
complementarity determining region (CDR). Then, we will ligate together multiple copies of the
same CDR DNA sequence. Generation of multivalent antibodies in this fashion is also an
established method for enhancing the substrate binding properties of an antibody (Hultberg,
Temperton et al. 2011). Finally, each multivalent antibody will be reevaluated for its HA and NA
epitope specificity, affinity, avidity, and solubility.
During the development of suitable antibodies, we will also optimize the methods for
patient sample acquisition. To accomplish this, we will obtain patient samples through a
collaboration with the Washington Department of Public Health, local clinics, hospitals, and the
University of Washington School of Medicine. While nasal swabs are recognized as the most
common and efficient technique, we will also evaluate nasal aspirates, throat swabs, and
sputum to determine the method that works best with Flucheck. More specifically, sample
preparation buffers will be tested systematically by differing the sample loading volumes, as well
as concentrations of detergents, salts, and reporter antibody. The timeline for phase one is
6
approximately 1-2 years, and we have chosen carefully our product development techniques to
ensure an accelerated, low cost, and industry scalable entry into the market.
Our last stage of development before market launch will be to obtain the licenses for the
ability to use single-chain camelid libraries and multimeric single-chain antibody technology from
Genentech, Inc. Because license costs are subject to the market value and licensor, our
estimated cost is based on a previous agreement made by Chembio for a rapid flow HIV test
(IPRA 2012) with a market value approaching $30 million (PRWEB 2008). Each license from
Genentech Inc. will carry a 5% royalty on sales of the nonexclusive license, proprietary
information and trade secrets, with an optional negotiation.
Phase 2:
Marketing Flucheck to hospitals, clinical research labs, and basic research labs
We will begin the sale and distribution of Flucheck at the end of our development phase
(Phase 1), which we predict to occur two years after we begin operation (Figure 1). After we
have established an equivalence of safety and effectiveness will be ready for our first small
scale launch of Flucheck. Initially, prototype test kits will be supplied to clinicians and
researchers. We will focus on distributing to small and moderate sized clinical labs that are
currently underserved by our major competitors. We will also begin to contract manufacturing of
the rapid flu tests to biotech companies. These strategies are designed to mitigate fiscal losses
between year two and three, or until we begin to make profit. Objectivity and connectivity will
continually increase confidence and preferred use of Flucheck. We expect that the significantly
reduced cost and equal-to or better-than performance of Flucheck will make our product the
primary choice for rapid influenza diagnostics.
Potential exit #1 - Asset Sales to a competing national lab
7
The predicted market capture and corresponding profit growth of PathogeniX will likely
gain the attention of labs such as Quest and LabCorp. Furthermore, our established business
platform will be competitive so that Quidel and Chembio would be prompted to buy out our
company. At this point we will consider an asset sale of PathogeniX, which we value at $15
million
Phase 3: Marketing of product to consumer for at-home diagnostics test
According to a recent report by Quidel, Inc. the future of diagnostics is ―at-home
diagnostics‖ where we will
bring diagnostics to the
consumer. We have designed
Flucheck so that retail costs
are within the budget of
average American
households. Consequently, we
will begin to market Flucheck
as an at-home diagnostic
directly to consumers during
the fourth year of our
Figure 1. Economic projection of incurred costs and losses
over first 5 years of PathogeniX. The first two years are
phase 1, requiring a significant investment. We expect to
begin profiting from sales at year three. Operational costs
will remain relatively constant including equipment, material
and service upgrades.
operation. Profit from expansion into the at-home diagnostics market will boost our general
applicability and accessibility. We anticipate PathogeniX will capture profit margins as high as
30%, and an ROI approaching 5% by the end of year four. To accommodate the demand for our
tests, we will form partnerships with distributors who ship our products to pharmacy containing
vendors such as Walgreens, Rite-Aid, Walmart and Target. Marketing tactics will incorporate
media coverage, word-of-mouth advertising, public relations outreach, and internet social
networks such as Facebook, LinkedIn, and others. According to a recent report by Quidel, the
8
average advertising cost for 2010 was around 0.9% of the total revenue made which we expect
to use as a template for marketing purposes.
Potential exit #2 - Assets sale to a competing national lab
By capturing 20% market share for rapid influenza diagnostics, 5% from the point of care
market, PathogeniX is sure to gain the attention of national labs. At this point, the growing value
of our company would also look attractive to Quidel who would then purchase PathogeniX. At
this point we will consider an asset sale of PathogeniX, which we value at $30 million.
Phase 4: Expand into other infectious disease markets including veterinary services
The success of Flucheck within the diagnostics market will attract the attention and
confidence of venture capitalists who will invest further into the company’s portfolio. During our
fifth year, PathogeniX's will begin to expand into other markets by applying our innovations to
the detection of many other infectious diseases. We plan to develop rapid diagnostics for
several types of protozoan parasites that cause some of the deadliest diseases in the world. To
do this, we will apply the business model outlined here to the development of diagnostics for
Leishmania spp., Plasmodium spp., Toxoplasma spp., and Trypanosoma spp. Other pathogens
we will investigate for potential diagnostics will include: HIV, Hepatitis-C, human papilloma virus
(HPV) with carry global market values of $1.3 billion, $200 million, and $1.2 billion, respectively
(EATG 2008, Chembio 2012, Mijuk 2011). Another potential market will be rapid diagnostic tests
for the detection of biowarfare agents such as anthrax.
Furthermore, our molecular diagnostics is not limited to human diagnostic and
therapeutic, and our technology could be implemented in veterinary medicine, which will reach a
global market value of $420 million by 2015 (DCN 2010). For example, our technologies could
be used as an ovulation test for animal breeders, such as equine or cattle. Alternatively, we
could develop rapid detection systems for heartworm in canines and felines, which will
circumvent the expensive nature of the current blood-based tests.
9
Potential exit #3 - Assets sale to a competing national lab
By diversifying the infectious diseases for which PathogeniX produces diagnostics, our
market will have grown substantially. At this point we will consider an asset sale of PathogeniX,
which we value at $30 million, to national labs and other industry leaders, including Quidel and
Chembio.
I. Introduction
I.a - Influenza Overview - A global disease with a global market
Influenza is a highly contagious respiratory disease caused by single-stranded RNA
viruses known as influenza. There are three known influenza virus types: A, B, and C. The most
prevalent influenza types are A and B-- that are associated with the most serious epidemics.
However, type C occurs infrequently and has never been associated with large epidemics of
human disease (WHO 2013). Furthermore, influenza A and B are differentiated into subtypes
based on differences between glycoproteins presented on the exterior of their viral capsid.
These proteins are necessary for influenza's successful entry into host epithelial cells, and
contributes to acute illness. Acute influenza infection affects 5-20% of the U.S. population
annually, and manifests itself as a sudden onset of malaise, sore throat, cough, fever, rhinitis,
and joint pain (WHO 2013).
While these acute symptoms may not seem extreme, influenza infection can easily
escalate into severe illness or death. This is especially true for high risk populations, including
those with compromised immune responses, as well as individuals with chronic diseases of the:
heart, lungs, kidneys, or liver. Also, populations with metabolic diseases, such as diabetes are
highly susceptible to influenza infection. It is not uncommon for these high-risk populations to
develop life-threatening secondary infections, such as bacterial pneumonia or autoimmune
disorders including hypercytokinemia. These observations are particularly alarming because of
10
influenza's high rate of transmission. Taken together, it isn't surprising that seasonal influenza
epidemics are responsible for a loss of $71-167 billion per year
I.b - Laboratory & In-home Diagnostics - A major component of the prevention &
treatment system
Rapid diagnosis of viral diseases can facilitate the timely administration of appropriate
interventions. Furthermore, correct diagnosis of infectious diseases lowers the frequency and
duration emergency room visits, as well as the unnecessary application of antibiotics. Also,
rapid diagnostic testing can aid in the prevention of outbreaks in institutions such as schools
and nursing homes. In addition to greatly aiding in the control and treatment of seasonal flu
outbreaks, rapid diagnostics are critical for the control of pandemic flu outbreaks, such as the
H1N1 outbreak in 2009. Rapid diagnostics are a vital component of disease prevention and
treatment strategies (Uyeki, Prasad et al. 2009).
Although rapid diagnostic tests are paramount for guiding treatment and infection control
measures, current technologies are expensive (Uyeki, Prasad et al. 2009). The high cost of
monoclonal antibodies is due to the expensive hybridoma cell culture systems used for antibody
production. Finding an alternative to monoclonal tissue culture for large-scale antibody
production would revolutionize rapid diagnostics. In addition to their implementation in clinical
and research settings, affordable diagnostics could be distributed to schools, businesses, or as
an over-the-counter in-home test.
I.c - Current diagnostics: antigen capture lateral flow strips
Commercially
available
rapid
influenza
tests
are
based
on
lateral
flow
immunochromatographic detection of viral antigens. With lateral flow tests, patient samples are
introduced to an absorbent sample pad (Figure 2).
11
A biological sample is typically obtained by nasal swabs, nasal wash and/or nasal
aspirates that are mixed with a extraction reagent containing monoclonal antibodies (Smieja,
Figure 2. A typical immunochromatographic lateral flow test http://www.creativediagnostics.com/colloidal-gold-lateral-flow-strips-development.html
Castriciano et al. 2010). These antibodies specifically bind to targets, such as influenza type A
and/or B antigens, namely hemagglutinin (HA) or neuraminidase (NA), and are often conjugated
to colloidal gold for visualization. Patient samples are then administered onto a test strip, and
through diffusion the sample moves over a chromatography matrix. As the sample diffuses over
the matrix, viral antigens are captured by antigen-specific monoclonal antibodies immobilized on
a 'test line.' As the virus accumulates on the 'test line,' so too does the highly visible colloidal
gold, indicating the presence of pathogen-derived antigens in the sample as a color change.
I.d - Our Innovations - Making cheaper, better antibodies
Our company, PathogeniX, will capture a major portion of the diagnostic market by
delivering a new device that implements multivalent single-chain camelid antibody technology.
These antibodies are amenable to production using bacterial expression systems, eliminating
the need for expensive hybridoma cell culture systems and significantly decreasing our
manufacture costs. This is in part because camelid antibodies are structurally simpler than
mammalian antibodies that do not require complicated post-translational modifications.
Moreover, recent work has shown that single chain camelid antibodies can be made
'multivalent' (see section II.b). These multivalent antibodies have been shown to match or
12
surpass the antigen binding capacity of mouse monoclonal antibodies produced in hybridoma
cell cultures (Harmsen and De Haard 2007; Hultberg, Temperton et al. 2011).
The design of synthetic multivalent single chain camelid antibodies is aided by phage
display. Phage display is a rapid and high throughput system for testing protein-protein
interactions, and has been implemented successfully in the design of synthetic multivalent
antibodies against Respiratory Syncytial Virus, Rabies virus and H5N1 Influenza (Harmsen and
De Haard 2007). Phage display replaces expenses, labor, and variation associated with using
large animals for antibody production. Additionally, phage display systems require antibody
expression in E. coli, and therefore act as a preliminary screen against antibodies that do not
fold or express well in prokaryotic systems (Harmsen and De Haard 2007). Our intention is to
generate synthetic antibodies using bacterial expression and phage display technologies (see
section II.c).
II. Scientific Background
II.a- The viral glycoprotein epitopes, Hemagglutinin and Neuraminidase
There are three well-characterized groups of human influenza virus, types A, B and C.
Types A and B are the causative agents of contagious respiratory illness causing the most
serious epidemics. Influenza A is the most prevalent group and is characterized by the presence
of unique HA and NA antigenic proteins on the viral surface. Both HA and NA antigens present
variable structures which divide Influenza A into numerous subtypes. Influenza B is less
common than A, as well as more antigenically homogenous, but is still an important human
pathogen (CDC 2013). Infections caused by influenza C are not typically associated with 'flulike' symptoms and have not caused large-scale epidemics of human disease, therefore it will
not address in our business plan.
Influenza proteins, HA and NA are involved in viral infection and spread. HA facilitates
host recognition by binding to cell-surface glycoprotein markers. While NA promotes viral
13
spread by cleaving bound sugars from cognate glycoproteins. Virus types A and B have
divergent antigen structures, which partly explains differences in host specificity and strainspecific transmissibility (Wang, Tian et al. 2007). Both HA and NA are antigenic markers for viral
identification and are the common targets for conventional antibody based clinical detection.
II. b - Single Domain Antibodies - A cheaper alternative to mammalian cell culture
In addition to conventional antibodies, members of the family camelid produce unique
functional
antibodies
as
a
homodimer of two heavy chains
(Ghahroudi et al. 1997) (Figure
3).
In
contrast,
human
antibodies are composed of
heterotetramers of heavy and
light chains that are assembled
through domain pairing and
maintained by disulfide bonds
(Holliger 2005). Attempts to
express
fully
assembled
Distinguishing structural features of camelid and
shark antibodies. Conventional Abs composed of
heavy (H) and light (L) chains are found in all
vertebrates. Wesolowski et al. 2009.
human, mouse and other tetrameric antibodies in inexpensive microbial host systems have
been largely unsuccessful due to difficulty assembling and modifying the heavy and light
antibody chains. Furthermore, using fragments of these antibodies has yielded some success,
but often exhibit reduced antigen affinity, poor structural stability, and decreased solubility
(Harmsen 2007, Holliger 2005). The simple structure of single chain camelid antibodies makes
them easily modified to contain additional complementarity determining regions (CDRs).
Multivalent antibodiesDuplicating the antibody's VH region creates additional CDR sites of these
14
antibodies makes them 'multivalent,' and enhances substrate specificity, affinity and avidity
(Hultberg 2011).
Physical characteristics of llama multivalent single chain antibodies are functionally
superior to mouse monoclonal antibodies, retaining their antigen binding capacity up to 90 °C
(Ghahroudi et al. 1997). Thermal stability of single chain camelid antibodies is attributed to the
presence of two disulfide bonds between chains, where conventional antibodies have only one.
Not surprisingly, monoclonal mouse antibodies lose their ability to bind antigen above 70 °C
(van der Linden 1999). Furthermore, single chain camelid antibodies retain their substrate
antigen affinity in the presence of surfactants, such as ammonium thiocyanate. Multivalent
single chain antibodies exhibit additional binding superiority, with an IC50 of 9 pM (Hultberg
2011). Finally, single chain camelid antibodies can bind substrates inaccessible to conventional
antibodies, a property conferred by the long peptide sequence that links the CDR region to their
CH2 region (Figure 3) (Holliger 2005).
II. c - Phage display, a cheaper alternative to current antibody generation
Monoclonal antibodies are produced by immunizing a host animal with the target
antigen. Typically, three immunizations are performed by injecting antigen into an animal at two
week intervals. Between injections, serum is isolated from the animal. ELISA analysis is used to
determine the antigen binding capability and specificity of antibodies within the sample sera.
Once an animal has been identified that is sufficiently immunized to the target antigen, spleen
cells are collected and blended with myalomas to produce hybridomas, with each hybridoma
producing unique monoclonal antibodies. The process from animal immunization to hybridoma
isolation takes at least several months, and requires animal care and cell culture systems.
Antibodies that can be expressed in E. coli are amenable to a much more rapid and costeffective phage display selection system (Olichon and de Marco 2012 Ghahroudi, Desmyter et
al. 1997).
15
Phage display technology allows for rapid identification of antigen-specific antibodies
without a need for time-consuming immunizations and expensive cell culture. Phage display
technology has been successfully implemented for the production of antigen specific camelid
single chain antibodies. With phage display, random polynucleotides are cloned into the CDR of
each antibody's variable region. The random polynucleotides provide a large diversity of antigen
binding capacity which is sampled by expressing each clone as a fusion with a phage coat
protein. Phage that express and display antibodies with affinity for strain-specific HA or NA
epitopes will be retained during repeated washes in a microtiter plate lined with immobilized
influenza A and B NA and HA protein (Olichon and de Marco 2012 Ghahroudi, Desmyter et al.
1997). Antibody coding DNA from retained phage will be subcloned for bacterial expression and
further validated for its appropriateness in commercial distribution.
III. Research and Development
III.a Phage Display - Panning the library to find the Influenza A & B specific antibodies
We will use an established protocol for panning the library as previously described
(Tanha 2002) (Genentech 2011, see appendix A). We will use HA and NA antigens from each
influenza type (or subtype, if necessary) to coat the bottom of microtiter plate wells overnight.
Once the free antigen is washed with PBS, skim milk will be used to block the membrane in
each well, preventing non-specific binding. Phage will be extracted from the phagemid library,
quantified using the typical plaque-forming units metric, and added to each well. Unbound
phage will then be rinsed off, and the bound phage eluted using triethylamine and Tris-HCl. The
eluted phage will be quantified again using a plaque-forming method, and used to transduce
uninfected E. coli. The newly infected E. coli will be used to propagate a "second round" of
phage, enriched for the population that binds influenza HA and NA. This process will be
repeated four times to screen for multiple phages that display a camelid antibody specific to
each antigen. After obtaining this population, subpopulations will be evaluated for specificity to
16
only influenza A or B antigens. Those that are highly specific will be isolated, and the DNA of
the antibody sequence will be amplified with flanking restriction sites. The resulting DNA will be
ligated into a Gateway over expression vector, such as pET-SUMO from Life Technologies, Inc.
This over expression vector will be used to produce antibodies in E. coli that will be reevaluated
for substrate specificity, as well as other properties such as avidity and affinity.
III.b Optimization of lateral flow test strips
Immunochromatographic parameters will be explored and optimized to ensure
maximum Flucheck test sensitivity. Test sensitivity is greatly influenced by the rate of diffusion
of the sample over the 'test line'. Faster diffusion generally results in decreased interaction time
between antibodies immobilized on the test strip, and antigens within the patient sample
(Millipore 2013). Additionally, slower diffusion can cause problems associated with evaporation,
and will delay the result. To optimize sample diffusion parameters, several commonly used
immunochromatography matrices will be tested at various widths and lengths. Preliminarily, a
nitrocellulose and polyvinylidene fluoride membranes will be prepared with lengths and widths
ranging from 3 - 8 cm and 1 - 3 cm, respectively. To determine the optimal location for the 'test
line,' antigen specific antibodies will be adsorbed to the strips at several distances from the
diffusion start site. Additionally, 'test lines' will be loaded with differing quantities of antibody
ranging from .5 - 5 ug/test to explore optimal color formation. Each combination of material,
dimensions and antibody quantity will be tested for a minimum detectable concentration of
recombinant antigen spiked into 'negative' biological sample (Millipore 2013).
IV. Influenza Diagnostic Market Description
A very attractive market includes the rapidly growing ―in vitro diagnostics‖ market with a
projected global market value of $69.1 billion by 2017, upward from $49.2 billion in 2012 (MDDI
2013). Of the diagnostic market there is a market segment termed the molecular diagnostics
market that have a market of $5 billion in the US in 2012 (Advamedex 2013). This market is also
17
the fastest growing market with
a growth rate of 19% per
annum. (Akonni 2013) Based
on technology, the market can
be broken down into sectors:
 Clinical chemistry
 Immunochemistry
 Molecular diagnostics
 Hematology
 Coagulation
Figure 5. Market analysis of influenza product market
segment including vaccines, therapeutics and diagnostics.
The estimated market for diagnostic tests will reach $200
million by 2014.
 Microbiology
Globally,
3.7
million
people will die from influenza every year. In the United States, 36,000 deaths are directly
caused by influenza and 226,000 hospitalizations will occur as a result of influenza (CDC 2010).
The cost of influenza without widespread immunization is expected to be greater than $166
billion in the United States every year (Cram 1999), with $37.5 million for inappropriate antibiotic
prescribing (Kozma 1998).
The cost of influenza diagnostic development is offset by the reduction in costs of
clinician visits and antibiotics for patients seeing a physician for respiratory infection. According
to an economic model, of the reasons for physician visits, 21% was attributed to upper
respiratory illness, and of these cases, 47-63% patients will actually have influenza (Kozma
1998).
According to the Global Influenza Market Report (BCC research 2009), the global
influenza market is projected to reach $6 billion in 2014. With the majority of the market
attributed to vaccines and therapeutics, around $200 million is estimated to be generated by
18
rapid influenza diagnostic testing (RIDT) applications (Global Influenza Market 2013) with a fiveyear compound annual growth rate (CAGR) of 8% (Figure 5).
For the fiscal year of 2012, the rapid diagnostic test market reached $173 million, with a
20% annual growth rate (Chem Biosystems 2010) the US market for the 2013 fiscal year is
estimated to be $207.6 million.
IV.a Competing companies and technology
The prominent competitors for the infectious diseases diagnostics market include 3M,
Qiagen, Becton Dickinson, Novartis, Life Technologies, Gen-Probe and LabCorp wih products
ranging from test kits, reagents, instrumentation to services being the major player for revenue.
(Scientia 2010).
These companies currently produce antibody products for influenza diagnostics targeting
clinical venues exclusively, pointing to the immense opportunity our company would have to
secure profit in a home diagnostics market of which there is no current competition.
However, in a recent report from ACS during the national meeting in September 2013,
researchers presented a new approach to diagnosing influenza at home with small molecules.
The technology is based on carbohydrates that bind to HA and NA antigens resulting in
differentiation between influenza A and B strains, and identification of the sub-type. (Phys.org
2013)
IV.b Market Accessibility
Our primary competitor, Quidel, has the QuickVue Influenza A+B rapid diagnostic test on
the market. Quidel reports that 12 million tests are sold at any given time period and the annual
test capacity is 100,000,000 (Quidel 2011).
19
It is important to note that current marketed influenza tests are limited to clinical sites
requiring the skill of an experienced technician. The sites are comprised of family practice,
internal medicine, and urgent care (Quidel 2011). All rapid influenza tests currently available are
based on monoclonal antibodies that are expensive to produce giving us a niche in the market
for cost effective multivalent single chain camelid antibodies. A disadvantage of the current
rapid lateral flow test platform use of monoclonal antibodies is that although they are highly
antigen specific (true negatives), they have low antigen sensitivity (true positives) independent
of seasonal prevalence (CDC 2013). Affluence of the influenza test market is dependent on the
demand for tests during flu season as was exhibited during a wane in the market of 2010
following the 2009 H1N1 pandemic (Market Watch 2013).
Although three major companies control approximately 70% of the rapid influenza
diagnostic market (Quidel, BD, Alere), the remaining 30% ($51.9 million) is accessible to our
company. We plan to first enter the market by selling our tests to hospitals, which during flu
season will be in highest demand. We anticipate establishing a firm market control of 30% by
the end of our fourth year that will capture the attention of the major competitors such as Quidel,
who will become interested in absorbing our company (pg 10). Because our competitive
platform is based on camelid single chain antibodies produced in E. Coli, the cost effectiveness
and efficiency will phase out monoclonal antibodies production for influenza rapid diagnostics.
20
IV.c Projected market potential
Beyond our current accessible market which comprises mostly hospitals and physician
office laboratories, our company will pursue projected market potential within point of care
(POC) and rapid medical device markets (Mdx) comprising a consumer based at-home
influenza diagnostic kit analogous to those already available that test for:

infectious disease

pregnancy

STD

glucose
monitoring

drug/alcohol

cholesterol

tumor markers

urine chemistry
Figure 6. POC market analysis by fragment segment with
$700 million market size for infectious diseases by 2016.
The leaders of the infectious diseases point of care (POC) test market are Alere and
Chembio Diagnostics offering their products to physicians in clinical settings from hospitals to
family practice. While we plan to enter the influenza diagnostic market with an influenza
diagnostic kit for clinical use, our company will continue to grow steadily by entering into the
segment for home diagnostic testing. Our projected accessible market will then be consumers in
the United States and on a global scale (Fig 6) (BCC Research 2012), for a home influenza
diagnostic test kit.
21
IV.d Market and consumer outlook for at-home diagnostic tests
The consumer market for POC and/or at-home diagnostic tests was $440 million in 2012
(Debenedette 2013), with the value of home diagnostics at $215 million, exclusively (PwC
2011). The global POC market in 2011 was valued at $13.8 billion (Monegain 2012) and is on a
trajectory to $16.5 billion in 2016. Of these projections, the infectious disease diagnostic market
is expected to hit $1.8 billion in the United States by 2017 with 7% CAGR.
It is apparent that the drive for our influenza home diagnostic test in the POC market will
lie in the consumer. There is a need for influenza monitoring which is especially apparent for
adolescents and the elderly. It is our expectation that the influenza diagnostic kit will be lucrative
enough to translate into adoption by health administrators in the education system, day care
facilities, and nursing homes and can enter the market for infectious disease field testing
applications. In fact, growth of an aging population and demand for preventative measures
against influenza is expected to be a dominate force behind the growth of the rapid influenza
diagnostic market and point of care sales over the next decade.
V. Regulations
The Federal Drug Administration (FDA) has classified medical devices as: ―devices that
are intended for the use in the diagnosis of disease or other condition, or in the cure, mitigation,
treatment, or prevention of disease, in man or other animals‖ (―FDA, Medical Device,‖ 2013). ―If
a product is labeled, promoted or used in a manner that meets the following definition in section
201(h) of the Federal Food Drug & Cosmetic (FD&C) Act it will be regulated by the FDA as a
medical device and is subject to premarketing and postmarketing regulatory controls‖ (―FDA,
Medical Device,‖ 2013). Our device falls into this category and will be subject to a specific set of
general controls set by the FDA as its governing body. In addition, a branch of the FDA, the
22
Center for Devices and Radiological Health (CDRH), further classifies our product into in vitro
diagnostic devices (―FDA, In Vitro Diagnostics,‖ 2013). According to the FDA, in vitro diagnostic
devices are: ―reagents, instruments, and systems intended for the use in the diagnosis of
disease or other conditions, including a determination of state of health, in order to cure,
mitigate, treat, or prevent disease or its sequelae. Such products are intended…for use in the
collection, preparation, and examination of specimens from the human body‖ (―FDA, 21 CFR
809.3,‖ 2013).
All medical devices regulated by the FDA are categorized either as a Class I, II or III
medical device to ensure patient safety. Class I devices are those devices that are considered
to be ―low risk‖ devices that do not present unreasonable risk of illness or injury and are subject
to the least amount of regulatory control (Myraga, n.d.). Our product falls into a Class I medical
device as an ―influenza detection device‖ (―FDA, 21 CFR 866.3330,‖ 2013) and will be exempt
from 510(k) premarket notification procedures and a premarket approval application (―FDA, 21
CFR 807.85,‖ 2013). Our product will only be subject to the general controls of the regulatory
requirements which include: annual registration and listing of device (―FDA, 21 CFR 807,‖
2013), good manufacturing practice (―FDA, QS regulation 21 CFR 820,‖ 2013), labeling (―FDA,
21 CFR 801 and 809,‖ 2013) , and prohibitions against misbranding and adulteration (―FDA, 21
CFR 807.97,‖ 2013). In addition, the FDA has exempt Class I devices from the design control
requirements that control the design input requirements in early stages of the development of a
device (―FDA, 21 CFR 820.30,‖ 2013).
Another set of regulatory controls in which we will be in compliance with come from the
Centers for Medicare and Medicaid Services (CMS) who are the governing body that regulates
all laboratory testing in the US through the Clinical Laboratory Improvement Amendment (CLIA)
(―CMMS, Clinical Laboratory Improvement Amendment,‖ 2013). The purpose of the CLIA is to
ensure laboratory testing follow a specific set of guidelines to maintain and provide high
23
standards for patient care and safety (―FDA, Clinical Laboratory Improvement Amendment,‖
2009). We expect our device to fall under the category ―CLIA-waived‖ since our device is simple
to use and accurate which classifies it only under the general controls of a Class I medical
device (―FDA, CLIA-Waivers,‖ 2009). In summary, meeting regulatory requirements will not pose
a challenge for our product to receive marketing clearance in the US for the current regulations
set for a Class I medical device.
However, according to a recent report by the FDA’s CDRH Microbiology Devices
Advisory Committee Meeting held June 13, 2013 there is a proposed reclassification of Rapid
Influenza Detection Tests (RIDT) [in vitro diagnostic devices] into Class II medical devices
(―FDA, Reclassification of RIDT,‖ 2013). The purpose for the reclassification is to establish
better protocols to regulate rapid diagnostic tests due to published reports on their poor
sensitivity when compared to other methodology (―FDA, Reclassification of RIDT,‖ 2013).
This reclassification would not only affect currently marketed RIDT but any new test that
wants FDA clearance (―FDA, Reclassification of RIDT,‖ 2013). Some of these new criteria that
will have to be met will include: ―appropriate reference methods to demonstrate the performance
in support of a 510(k) clearance, annual monitoring of analytical reactivity after the product is
cleared for market, as well as testing of newly emergent strains of influenza‖ (―FDA,
Reclassification of RIDT,‖ 2013).
If the reclassification goes into effect for RIDT, the current regulations for a Class II
medical device will require submission of a 510(k) premarket notification review which comes
with certain costs associated for submission. ―For FY 2014 (October 1, 2013 through September
30, 2014), the fees for 510(k) applications are listed in Table 1‖ (―FDA, Premarket Notification
Review Fees,‖ 2013).
24
*
Table 1. FY 2014 510(k) Review Fees (US Dollars)
Submission
Standard Fee
Small Business Fee
(<100 million in gross receipts or sales)
510(k)
$5,170.00
$2,585
*FDA premarket notification [510(k)] review fee (―FDA, Premarket Notification Review Fees,‖ 2013)
Due to the impact on public health, FDA hopes to reclassify RIDT’s into Class II medical
devices with special controls to help regulate their Total Product Life Cycle in hopes of
alleviating false negative results and more accurate patient diagnosis (―FDA, Reclassification of
RIDT,‖ 2013). According to the document published by the CDRH Microbiology Devices
Advisory Committee, the FDA has not come to a final decision for reclassifying RIDT into Class
II medical devices (―FDA, Reclassification of RIDT,‖ 2013). However, it is important to note for
future marketing of our product pipeline.
VI. Process Design
A single antibody type will be over expressed in E.coli per batch. Additional batches will
be done to generate additional antibody types.
VI.a
Upstream Processing
VI.a.i Fermentation
Prior to fermentation, the batch fermenters will be steam sterilized. E. coli bacteria will
then be grown in fermenters at 37˚C. The 0.7 L seed fermenter will be operated for 12 hours.
After fermentation in the seed fermenter, bacterial cells will be inoculated into the production
fermenter (7 L). Each fermenter will be complete with agitators and cooling jackets. With a
25
medium supplemented with glucose, corn steep liquor, ammonium sulfate, and other elements,
we can expect a 15 hour fermentation cycle according to Datar and Rosen (1990). Furthermore,
a yield of 0.3 g of target antibody per liter of fermentation was estimated from previous values in
Makino, et al (2011) and Ghahroudi, et al (2005). According to Arbabi-Gharoudi (2005),
antibody expression can range from 0.1 -500 mg/L in a shake flask and 3.1 g/L in a large
fermenter. Based on our market size and share (Chem Biosystems 2010), we intend to make 4
million diagnostic kits per year with 2 μg per test. This means that we will need 8 g of our heavychain only antibodies per year.
Taking into account the overall process yield (see Appendix D) and an overdesign of
125%, the total fermentation volume per year will be 39.2 L. With 6 batches per year, the
production fermenter size will need to be 7 L.
Processing times and yields for some steps in the production process are estimated
using Datar and Rosen (1990), and are listed in Appendix D. Some processing times and yields
were determined from the Millipore and GE healthcare websites or from the literature
(Dominquez 2008, Fahrner, et al. 2001). The overall process time was calculated to be 53.25
hours with an overall yield of 85.8%.
VI.b
Downstream Processing
VI.b.i Cell Harvesting
The fermentation broth will then be centrifuged to concentrate and recover the cells. The
broth will be concentrated from 7 L to 2.6 L, by a sterilizable, high-speed centrifuge with axial
discharge valves. The centrifuge can process the E. coli broth with an estimated cell recovery of
99.5%.
26
VI.b.ii Homogenization
To disrupt the cell membranes and release the target antibodies, two high-pressure
homogenizers are run in series. For a total of four passes, the cell slurry will be pumped through
the two homogenizer system twice. Because of the multiple passes through the homogenizers
as well as shear forces, we anticipate a loss of about 1% according to Datar and Rosen (1990).
Before and after each homogenization step, the suspension will be cooled to 5˚C (Palmer
2004). The homogenizers can process 5.2 L/hr, so the total homogenization step will take 1
hour. Inclusion bodies will not need to be addressed because camelid antibodies are well
expressed in microorganisms with high stability and solubility (Harmsen 2007).
VI.b.iii Centrifugation
The homogenate will be centrifuged at 12,000 x g for 15 minutes to separate the soluble
protein solution from the cell debris. The homogenate will be concentrated from 2.6 L to 0.26 L
(10 fold) (Datar and Rosen 1990). The cell debris should be sent to the kill tank while the
soluble protein and solution should pass on for further processing.
VI.b.iv Ultrafiltration/Diafiltration 1
The ultrafiltration/diafiltration (UF/DF) steps are used to change the buffers in order to
change the media to the proper concentration and pH conditions. Information for step yields and
process times were determined from Millipore’s application note entitled: ―A Hands-On-Guide to
Ultrafiltration/Diafiltration Optimization using Pellicon Cassettes.‖ The Ultrafiltration cassettes
chosen are Pellicon 2 Ultrafiltration cassettes with type C membranes. The selected nominal
molecular weight limit (NMWL) is 5 kDa with a recirculation rate of 5-35 L/min. Assuming a flux
of 100 L/(hm2) (Lydersen 1994), the required area of this membrane will need to be 6.48 cm 2.
27
The first UF/DF module will concentrate the medium with pH 7.4 buffer for the Protein A Affinity
Chromatography column.
VI.b.v Protein A Affinity Chromatography
The
Protein
A
Affinity
Chromatography
will
be
performed
using
RepliGen
Bioprocessing’s CaptivA PriMab. The buffer for equilibration, washing, loading, and
regeneration will be 0.02 M sodium phosphate at pH 7.4. After equilibration, the antibody
solution will be loaded into the column. The dynamic binding capacity of the column is 44
mg/mL at a 6 minute retention time. A wash step will ensure that all non-specifically bound
impurities are also filtered through the column. The volume of wash buffer used will be 5 times
the resin volume. The unwanted components will flow through a waste stream and will be sent
to the kill tank for waste treatment. The bound antibodies will then be eluted with 0.1 M citric
acid at pH 3 for 10 – 2 hours. The column can be cleaned after elution with a 5 hour exposure to
0.1 N NaOH for 100 cycles. The cost of this capture step will include the chromatography
column and its peripherals as well as resin and buffers. 1M Tris-HCl at pH 9.0 will be used to
neutralize the buffer after elution. Because 1.33 g of protein will be purified by the column in
each batch and the binding capacity is 44 mg/mL, the size of the column should be at least 30
mL.
VI.b.vi Ultrafiltration/Diafiltration 2
After elution, the buffer will have to be exchanged for buffer with the proper pH for
loading into the Anion Exchange column. The buffer will be changed to a pH slightly higher than
the pI of the target antibody. The concentration of antibody will be about 25 mg/mL with a final
volume of 53 mL. The same process for calculating size, cost, and processing times apply to
UF/DF 2 as explained above in UF/DF 1. The area of this membrane will need to be 2.27 cm 2.
28
VI.b.vii Anion Exchange Chromatography
Anion exchange chromatography uses a positively charged group immobilized to the
resin. It is used to remove process-related impurities such as bacterial proteins, DNA, and
leached Protein A. The resin type used for Anion Exchange can be diethylaminoethyl (DEAE)
(Grodski and Berenstein 2010). This DEAE Sepharose Fast Flow will be purchased from GE
Healthcare Life Science. Because the pI of the specific antibody is unknown, optimal binding
and elution conditions will have to be determined to achieve the highest yield of antibodies. The
operating pH of the column should be slightly higher than the pI of the antibody in order to
obtain a net negative charge on the surface of the antibody so that it can bind to the positively
charged resin. Again, because the pI of the antibody is unknown, the buffer is also unknown. An
estimate for the price of the buffer component is based on the assumption of using Tris as the
buffer. The antibody product pool will be loaded at a concentration of 25 mg/mL onto the anion
exchange column. After a wash of 5 column volumes, the antibody of interest will be eluted with
0.5 - 1 M NaCl in dilute buffer. All impurities on the column will be removed with a cleaning
protocol with 1 M NaOH followed by column regeneration. Column parts and media can also be
dismantled and sterilized by autoclaving at 120 ˚C for 30 minutes. Since the sample is loaded at
a concentration of 25 mg/mL with about 1.33 g of protein in solution, we chose the column size
to be 53 mL. As a low estimate, we can assume that the column can be reused 50 times after
cleaning.
VI.b.viii Ultrafiltration/Diafiltration 3
Size, cost, and processing times for UF/DF 3 are calculated in a similar fashion as
UF/DF 1. The required membrane area is 4 cm2. UF/DF 3 prepares antibodies into their final
product concentration before diagnostic test manufacturing. The concentration of the product
29
will be at least 5 mg/mL. Antibodies that are not immediately sent for diagnostic test production
can be stored at 2-8˚C for an extended time period.
VII. Alternative Downstream Processing to Address Inclusion Bodies
In future applications of our camelid antibodies, we may need to address
inclusion bodies. We may also find that modifications to our antibodies results in an insoluble
form of the antibody. In these scenarios, we will use the downstream processing method outline
below. Taking into account the overall process yield (see Appendix D) and an overdesign of
125%, the total fermentation volume per year will be 69.4 L. With 6 batches per year, the
production fermenter size will need to be 12 L.
Processing times and yields were calculated similar to section VI. The overall process
time was calculated to be 119.5 hours with an overall yield of 48%.
VII.a.i Cell Harvesting
The fermentation broth will then be centrifuged to concentrate and recover the cells. The
broth will be concentrated from 12 L to 4.44 L, by a sterilizable, high-speed centrifuge with axial
discharge valves. The centrifuge can process the E. coli broth with an estimated cell recovery of
99.5%.
VII.a.ii Homogenization
To disrupt the cell membranes and release the target antibodies, two high-pressure
homogenizers are run in series. For a total of four passes, the cell slurry will be pumped through
the two homogenizer system twice. Because of the multiple passes through the homogenizers
as well as shear forces, we anticipate a loss of about 1% according to Datar and Rosen (1990).
Before and after each homogenization step, the suspension will be cooled to 5˚C (Palmer
30
2004). The homogenizers can process 8.4 L/hr, so the total homogenization step will take 1
hour.
VII.a.iii Centrifugation and Solubilization of Inclusion bodies
The homogenate will be centrifuged at 12,000 x g for 15 minutes to concentrate and
collect the inclusion bodies (Bu 2013). The supernatant will be discarded. If we feel as though
some insoluble material is in the supernatant, we can filter this through a 0.22 μM filter (Bu
2013). The homogenate will be concentrated from 4.44 L to 0.44 L (10 fold) (Datar and Rosen
1990). The slurry containing the centrifuged inclusion bodies will be pumped to a jacketed and
agitated reaction tank. A solution of 6M guanidine hydrochloride (GuHCl) and 1mM EDTA at a
specific pH will be added to the pellet protein to solubilize the inclusion bodies (Palmer 2004,
Sinacola 2002). The pH of the solution would be determined based on the pI of the antibody.
Based on previous examples, the pH may be 8.0 or higher (Geng 2008). To this solution, 10
mM β-mercaptoethanol will be added. The reaction will be carried out at room temperature for 8
hours (Datar and Rosen 1990). The sample will be centrifuged at 12,000 x g for 15 minutes to
remove insoluble material (Sinacola 2002). The overall yield for the solubilization step is
estimated to be 75% (Datar and Rosen 1990).
VII.a.iv Refolding of Soluble Target Antibodies
To fully reduce all disulfide bonds, β-mercaptoethanolwill be is added at a concentration
of 10 mM for 30 minutes (Sinacola 2002). The solubilized inclusion bodies will be kept at a
temperature of 4˚C and the protein is slowly diluted into ice-cold refolding buffer containing 0.2%
Tween 80, 5 mM EDTA, and 0.8 mM reduced glutathione (GSH)/0.2 mM oxidized glutathione
(GSSG) (Yamaguchi 2013, Geng 2008, King 1972). This tank will be gently agitated during the
process of dilution which will be carried out for 48 hours at 4˚C. After this, samples will be
31
dialyzed against dialyzing buffer containing 0.2% Tween 80 and 1 mM EDTA. Dialysis is
performed twice within 12 hours to remove urea and glutathione (Geng 2008). The dialysis
membrane area will have to be 49 cm2. The refolding step may be excessive due to the high
refolding capabilities of heavy chain antibodies, but its necessity is overestimated for financial
estimations (Dolk 2005, Eyer 2012). The overall yield for the refolding steps is estimated to be
75% (Datar and Rosen 1990).
VII.a.v Ultrafiltration/Diafiltration 1
The ultrafiltration/diafiltration (UF/DF) steps are used to change the buffers in order to
change the media to the proper concentration and pH conditions. Information for step yields and
process times were determined from Millipore’s application note entitled: ―A Hands-On-Guide to
Ultrafiltration/Diafiltration Optimization using Pellicon Cassettes.‖ The Ultrafiltration cassettes
chosen are Pellicon 2 Ultrafiltration cassettes with type C membranes. The selected nominal
molecular weight limit (NMWL) is 5 kDa with a recirculation rate of 5-35 L/min. Assuming a flux
of 100 L/(hm2) (Lydersen 1994), the required area of this membrane will need to be 49 cm 2. The
first UF/DF module will concentrate the medium with pH 7.4 buffer for the Protein A Affinity
Chromatography column.
VII.a.vi Protein A Affinity Chromatography
The
Protein
A
Affinity
Chromatography
will
be
performed
using
RepliGen
Bioprocessing’s CaptivA PriMab. The buffer for equilibration, washing, loading, and
regeneration will be 0.02 M sodium phosphate at pH 7.4. After equilibration, antibody solution
will be loaded into the column. The dynamic binding capacity of the column is 44 mg/mL at a 6
minute retention time. A wash step will ensure that all non-specifically bound impurities are also
filtered through the column. The volume of wash buffer used will be 5 times the resin volume.
32
The unwanted components will flow through a waste stream and will be sent to the kill tank for
waste treatment. The bound antibodies will then be eluted with 0.1 M citric acid at pH 3 for 10 –
2 hours. The column can be cleaned after elution with a 5 hour exposure to 0.1 N NaOH for 100
cycles. The cost of this capture step will include the chromatography column and its peripherals
as well as resin and buffers. 1M Tris-HCl at pH 9.0 will be used to neutralize the buffer after
elution. Because 1.33 g of protein will be purified by the column in each batch and the binding
capacity is 44 mg/mL, the size of the column should be at least 30 mL.
VII.a.vii Ultrafiltration/Diafiltration 2
After elution, the buffer will have to be exchanged for buffer with the proper pH for
loading into the Anion Exchange column. The buffer will be changed to a pH slightly higher than
the pI of the target antibody. The concentration of antibody will be about 25 mg/mL with a final
volume of 50 mL. The same process for calculating size, cost, and processing times apply to
UF/DF 2 as explained above in UF/DF 1. The area of this membrane will need to be 2.27 cm 2.
VI.b.viii Anion Exchange Chromatography
Anion exchange chromatography uses a positively charged group immobilized to the
resin. It is used to remove process-related impurities such as bacterial proteins, DNA, and
leached Protein A. The resin type used for Anion Exchange can be diethylaminoethyl (DEAE)
(Grodski and Berenstein 2010). This DEAE Sepharose Fast Flow will be purchased from GE
Healthcare Life Science. Because the pI of the specific antibody is unknown, optimal binding
and elution conditions will have to be determined to achieve the highest yield of antibodies. The
operating pH of the column should be slightly higher than the pI of the antibody in order to
obtain a net negative charge on the surface of the antibody so that it can bind to the positively
charged resin. Again, because the pI of the antibody is unknown, the buffer is also unknown. An
33
estimate for the price of the buffer component is based on the assumption of using Tris as the
buffer. The antibody product pool will be loaded at a concentration of 25 mg/mL onto the anion
exchange column. After a wash of 5 column volumes, the antibody of interest will be eluted with
0.5 - 1 M NaCl in dilute buffer. All impurities on the column will be removed with a cleaning
protocol with 1 M NaOH followed by column regeneration. Column parts and media can also be
dismantled and sterilized by autoclaving at 120 ˚C for 30 minutes. Since the sample is loaded at
a concentration of 25 mg/mL with about 1.33 g of protein in solution, we chose the column size
to be 50 mL. As a low estimate, we can assume that the column can be reused 50 times after
cleaning.
VII.a.ix Ultrafiltration/Diafiltration 3
Size, cost, and processing times for UF/DF 3 are calculated in a similar fashion as
UF/DF 1. The required membrane area is 4 cm2. UF/DF 3 prepares antibodies into their final
product concentration before diagnostic test manufacturing. The concentration of the product
will be at least 5 mg/mL. Antibodies that are not immediately sent for diagnostic test production
can be stored at 2-8˚C for an extended time period.
VIII. Cost Estimation
Equipment Cost
For the economic analysis, the Fixed Capital Investment (FCI) was estimated using the
equipment costs referenced from Datar and Rosen (Datar, 1990) and adjusted to costs in 2013.
Equipment costs are usually calculated using the six-tenths factor rule and the equation:
34
This equation was used to scale the costs of our equipment from the prices of equipment found
in the literature. Despite this general rule, an exponent of 0.75 was used to replace 0.6. This
was done because at such a small scale, the six-tenths rule is too conservative. Equipment
costs were found from sales quotes, Datar and Rosen (1990), Petrides (2000), Perry, et al.
(1984), Peters and Timmerhaus (1980), Popper (1970) and Aries and Newton (1955). To adjust
past costs to the year 2013, the Chemical Engineering Plant Cost Index (CEPCI) was used.
We have included the costs of equipment for the additive manufacturing of biosensors including
3D printers, evaluated to be approximately $50,000. Accounting for an overestimation or 15%
and for producing antibodies against 2 strains, we estimate a total equipment cost of $92,000.
Individual costs can be found in Appendices below.
The different portions of the economic analysis were estimated as percentages of equipment
costs referenced from Intelligen Inc. (BioProcess Design and Economics, 2012).
The FCI, which is the sum of direct and indirect costs is $15.7 million and yielded a Total Capital
Investment of $31 million in 2013 dollars. This cost includes the construction of a small-scale
biotech plant for production processes of antibodies and manufacturing of biosensors. However
it does not include the pre production research costs. That has been discussed below.
Raw Material Costs
Manufacturing costs are based on the raw material costs just as the FCI is based on equipment
costs for the analysis. Raw materials cost were inferred from an online service provider and also
referenced from Datar and Rosen and adjusted for 2013 dollars. The breakdown of the
individual raw materials for upstream processing can be found in Appendices below.
35
To make 4 million tests per year, the amount of antibodies/strain to be produced is 108g, with a
concentration of 2 micrograms/strain per test. We estimated that 6 batches of production would
be required in a 54L fermenter, which makes the total annual cost of upstream and downstream
production to be $7929 per strain and $15858 for both strains.
The cost of raw material cost for biosensor manufacturing is evaluated to be $200000 as a
conservative estimate given by Proven Process Inc. in Massachusetts, which is a contract
manufacturer for medical devices.
Yearly Operating Costs
The costs of manufacturing, depreciation and marketing are accounted as yearly operation
costs. Manufacturing includes the costs of raw materials for fermentation processes and the raw
materials for manufacturing of the biosensor devices, which were valued in reference to medical
devices plastic. The labor, supervision engineering and plant overhead costs were calculated
according to the standard numbers of hires for a small scale plant at an average salary of a little
over $50000. Depreciation is used to estimate the amount of money that must be saved to
replace equipment after its usable lifetime. As the usable lifetime of a plant is estimated to be 10
years, the yearly depreciation value was calculated to be $1.5 million. Marketing and distribution
costs are also addressed as a yearly operating cost as 20% of the total. Therefore a Total
Operating Cost in 2013 dollars is estimated to be $8.8 million.
36
The following figures show the breakdown of our expenses for the various purposes and
have a close similarity with Rosen and Datar’s downstream process economics.
Figure 7: Breakdown of annual total expense
Figure 8: Schematic of total manufacturing expense
37
Pre production R&D
The expenses associated with the initial research and clinical testing is estimated to be
$1 million as quoted by Proven Process Inc. in Massachusetts, which is a contract manufacturer
for medical devices. This will included the cost of designing and developing our prototype and
an initial batch for sensitivity analysis and clinical testing. This would also incur any FDA costs
that may be associated. The Standard Production Package provided by Massachusetts based
Capralogics could achieve the production of antibodies for $10000/year.
Economic Analysis and Rate of Return on Investment (ROROI)
The ROI Forecasting Calculator for Quality Initiatives was developed by the Center for
Health Care Strategies, which is a nonprofit health policy center. It is a Web-based tool
designed to help state Medicaid agencies, health plans, and other stakeholders assess and
demonstrate the cost-savings potential of efforts to improve quality. It provides step-by-step
instructions for users to calculate ROI for the proposed quality initiatives. It can be used online
at (http://www.chcsroi.org/Welcome.aspx). Users enter a variety of assumptions before starting
the calculation, including target population characteristics, program costs, and expected
changes in health care utilization, to estimate potential savings.
The analysis of ROROI was performed to determine the selling price of our product and
to determine the return on investments and payout periods. The ROROI is a measure of the
return on investment expressed on an annual percentage basis. A minimum ROROI of 20%
yields a selling price of $3.3 and payback time of TCI in 3.4 years. However, if we sell each
biosensor strip/cassette at $10 we could achieve a payout period of less than a year.
38
Adjustments Made for Future Costs and Savings

Inflation refers to rises in the prices of goods and services over a period of time. The ROI
calculation can adjust for inflation by using constant dollars to measure the costs of a
program over time.

Discounting is simply the difference between the original amount in the present and the
same amount in the future. In other words, $100 next year is worth less than $100 this
year. Thus, future money has to be discounted to be comparable to current money.

Depreciation of equipment is the reduction in the value of an asset due to usage,
passage of time, wear and tear, technological outdating or obsolescence, depletion,
inadequacy, or other factors. Among the several methods for calculating depreciation,
straight-line depreciation is the simplest and most often used technique, which can be
expressed as
Annual depreciation = (Original cost - salvage value) / Years of life
Where the salvage value is an estimate of the value of the asset at the time it will be sold
or disposed of; it may be zero or even negative.
The annual deprecation was calculated to be $1.5 million.
The other major factors affecting the price are the reduced cost of labor with the
availability of additive manufacturing using 3D printers and the absence of costs incurred by
clinical trials of Class 2 and 3 medical devices, which is not required by our Class 1 device.
Market Economics
According to NYU Business School, to value an asset, we have to forecast the expected
cash flows over its life. This can become a problem when valuing a publicly traded firm, which at
39
least in theory can have a perpetual life. In discounted cash flow models, we usually resolve this
problem by estimating cash flows for a period (usually specified to be an extraordinary growth
period) and a terminal value at the end of the period. While we will look at alternative
approaches, the most consistent way of estimating terminal value in a discounted cash flow
model is to assume that cash flows will grow at a stable growth rate that can be sustained
forever after the terminal year.
There are three components to forecasting cash flows. The first is to determine the
length of the extraordinary growth period; different firms, depending upon where they stand in
their life cycles and the competition they face, will have different growth periods. The second is
estimating the cash flows during the high growth period, using the measures of cash flows we
derived in the last chapter. The third is the terminal value calculation, which should be based
upon the expected path of cash flows after the terminal year.
The question of how long a firm will be able to sustain high growth is perhaps one of the
more difficult questions to answer in a valuation, but two points are worth making. One is that it
is not a question of whether but when firms hit the stable growth wall. All firms ultimately
become stable growth firms, in the best case, because high growth makes a firm larger and the
firm’s size will eventually become a barrier to further high growth. In the worst-case scenario,
firms may not survive and will be liquidated. The second is that high growth in valuation, or at
least high growth that creates value, comes from firms earning excess returns on their marginal
investments. In other words, increased value comes from firms having a return on capital that is
well in excess of the cost of capital (or a return on equity that exceeds the cost of equity). Thus,
when you assume that a firm will experience high growth for the next 5 or 10 years, you are also
implicitly assuming that it will earn excess returns (over and above the required return) during
that period. In a competitive market, these excess returns will eventually draw in new
competitors and the excess returns will disappear (Andrew Fight, 2013).
40
Once the length of the extraordinary growth period has been established, we have to
forecast cash flows over that period. It is in this stage of the process that we will be called upon
to make our best judgments on how the company being valued will evolve over the coming
years.
Forecasting future cash flows is key to valuing businesses. In making these estimates,
we can rely on the past history of the firm or on estimates supplied to us by analysts or
managers, but we do so at our own risk. Past growth rates are not reliable forecasters of future
growth and management/analyst estimates of growth are often
biased. Tying expected growth
to the investment policy of the firm how much it reinvests and how well it chooses its
investments is not only prudent but preserves internal consistency in valuations. When valuing
equity, especially in high growth businesses, the bulk of the value will come from the terminal
value. To keep terminal values bounded and reasonable, the growth rate used in perpetuity
should be less than or equal to the growth rate of the economy and the reinvestment rate
assumed has to be consistent with the growth rate (Stern Lecture Series).
41
Figure showing the effect of increasing ROI on time to profitability with device priced at $3.3,
$10 and $15
To estimate the operating margins for Flucheck, we begin by estimating the operating
margins of other firms in the influenza diagnostics business. In 2004, the average pre-tax
operating margin for firms in this business was approximately 20%. We will assume that
Flucheck will move toward its target margins, with greater marginal improvements in the earlier
years and smaller ones in the later years.
The initial analysis show that we need to have a minimum cost price of $4.8 per device
to receive a 20% ROROI. However the ROI is very small and may not help us to recover the
costs of Manufacturing, Operational costs and the Total Capital Investment to generate profits
within a 5 years period. Also as there is no market for home diagnostics for viral influenza
currently, we made the assumption of selling our product to both clinics and distributors like
Walgreens for at home testing. Therefore, economic strategic planning dictates that we sell our
device at a minimum of $10 to clinics and at a minimum of $18 to consumers for investment
recovery and profits. This is also our strategy for creating a niche for at-home flu diagnostics.
X. Conclusions
In the United States, for 2012, in vitro diagnostics was shown to be a globally profitable
market that included $69.1 billion (see section IV). PathogeniX will capture a major portion of
this market with FluCheck, a rapid influenza A and B diagnostic device. We have designed
FluCheck so that its production costs are significantly lower than any other device available.
Furthermore, by using innovative multivalent camelid-based antibodies, we will have improved
the effectiveness, sensitivity, and accuracy of our diagnoses (see section II & III). Development
of the FluCheck will position PathogeniX as a leader in rapid diagnostics technology.
42
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50
XIII. APPENDICES
Appendix A- Patents – Source: Free Patents Online
The patents described below in Table 1 are relevant to our invention of alpaca antibodies
generated for a rapid in vitro diagnostic test for Influenza A and B. Although competition exists,
our invention includes an unreported application of alpaca antibodies for the deliverance of an
at-home influenza diagnostic kit. In this respect, our group would have exclusive patenting rights
but would be required to obtain licenses for use of the phage library technology and lateral flow
device assembly aspect of our invention.
Table 1: Patents relevant to the development of a rapid lateral flow diagnostic kit comprising
alpaca antibodies generated by phage display and transformed in E. Coli.
Patent No.
Date
Inventors/
Assignee
License
(yes/no)
Invention
Description
WO
2013030604
3/7/2013
Simon Hufton/
Health
Protection
Agency and
Simon Hufton
Yes
―Influenza
virus antibody
composition‖
Sequenced, cross-reactive alpaca antibodies have
been produced recognizing several variants of
influenza. Applications of the antibodies include
claims for treatment or prevention of influenza
infection, development of alpaca-based vaccines
against influenza, as a reagent for detection of virus
subtype that is Group 1,2 hemagglutinin based (i.e.
H1N1, H1-3, H5-8, H9, H11-13, H16), and for use in
a universal influenza vaccine.
US
7,985,840 B2
7/26/2011
Germaine
Fuh, Sachdev
S. Sidhu/
Yes
―Synthetic
antibody
phage
libraries‖
Our company will obtain a license for technology that
includes a method for expression vectors that contain
polynucleotide sequences which encode the camelid
heavy chain with variability among the CDR 3 binding
region. Libraries generated can then be used for
screening of target phage capsids that bind or do not
bind to the antigen.
―Non-metal
colloidal
particle
immunoassay
‖
A method of performing a diagnostic immunoassay
utilizing colloidal non-metal (e.g., selenium, tellurium,
sulfur, etc.) particles having conjugated thereto a
binding
component
capable
of
specifically
recognizing an analyte to be determined.
Genentech
Inc.
US 4954452
9/9/2004
D.A. Yost/
Abbott
Laboratories
Yes
51
EP
0810436A1
12/3/1997
P.J. Davis/
Unilever PLC
Yes
―Solid-phase
analytical
device‖
52
An analytical test device incorporating a dry porous
carrier to which a liquid sample suspected of
containing an analyte can be applied indirectly, the
device containing a mobile detector reagent and an
immobilized capture reagent, and the means to
control and detect analyte and detector reagent
binding.
Appendix B -Process Flow Diagram
53
Appendix C -Fermenter Sizing
Market Size
We expect to capture 30% of
this market.
Antibody needed per
diagnostic test
Total mass of antibodies
needed per year
Antibody yield per liter of
fermentation
Volume of fermentation
needed to produce
Losses due to process yield
Over design
Fermentation Volume
needed for annual
production
Batches per year
Final fermentation size
54
Appendix D -Processing Times, Step Yields, and Flow Rates
Process Step
Seed Fermentation
Production Fermentation & cooling
Centrifuge: Harvest cells
Homogenization
Centrifuge 2
UF/DF 1
Affinity Chromatography
UF/DF 2
Anion Exchange
UF/DF 3
Overall
Step Yield
(%)
100
100
99.5
99
99.5
99
95
99
95
99
Process Time
(h)
12
18
1
3
0.25
4
4
4
3
4
85.8%
53.25 hours
55
Process Flows (L)
In
Out
0.7
0.7
7.0
2.6
2.6
0.26
0.03
0.09
0.05
0.16
0.7
7.0
2.6
2.6
0.26
0.03
0.09
0.05
0.16
0.27
Appendix E -Process Equipment
Upstream Equipment
Quantity
1
1
1
1
1
1
3
2
Description
1.05 L/h Continuous sterilizer SS-316
0.7 L Seed fermenter SS-316
7 L Production fermenter SS-316
11.7 L/h Axial compressor for seed fermenters
36.3 L/h Axial compressor for production fermenter
2.1 L Agitated media holding tank SS-316
0.63 L Agitated media storage tank SS-316
2.1 L/h Centrifugal pumps SS-316
Cost
$512
$145
$813
$120
$281
$95
$115
$725
Total Upstream Purchased Equipment Costs
$2,805
Downstream Equipment
Quantity
1
1
6
2
1
2
2
2
1
3
1
1
2
1
16
Description
Sterilizable, high-speed centrifuge, SS316, 8.4 L
Sterilizable, high-speed centrifuge, SS316, 2.59 L
Plate heat exchanger SS-316 (2.33 L/h)
3.11 L Holding tanks SS-316
0.31L Holding tanks SS-316
0.19 L Holding tanks SS-316
0.064 L Holding tanks SS-316
5.2 L/h high-pressure, two stage homogenizer, 800 bar g, SS 316
4.9 L Kill tank SS-316
UF/DF modules for buffer exchange (0.0004 m2)
0.03 L Protein A Affinity Chromatography Column SS-316
0.05 L Anion Exchange Column SS-316
Chromatography Column Peripherals (Pumps, controls, etc.)
0.7 L Product holding tank
Positive displacement pumps SS-316 (7 L/h)
Cost
$609
$252
$941
$254
$23
$31
$14
$10,141
$178
$217
$321
$490
$794
$40
$1,573
Total Downstream Purchased Equipment Costs
$15,879
Total Purchased Equipment Cost
Multiplier for other equipment and overestimation
$18,684
15%
Total Purchased Equipment Cost for Design
$21,487
56
Appendix F -Annual Material Costs
Upstream Raw Materials
Component
Conc. (g/L)
Glucose
Corn Steep Liquor
KH2PO4
K2HPO4
Antifoam
Tetracycline
(NH4)2SO4
Trace elements
53
80
0.2
0.2
0.3
0.02
1
-
Annual Need
(kg)
2.45
3.70
0.01
0.01
0.01
0.00
0.05
Price ($/kg)
Annual Cost $
1.09
0.19
13.88
13.88
7.67
86.76
0.22
$2.67
$0.70
$0.13
$0.13
$0.11
$0.08
$0.01
$0.65
Total Upstream Raw Materials for Year $4.47
Downstream Equipment Materials (Resins and Membranes)
Membranes
UF/DF 1 (1.96L)
UF/DF 2 (0.09L)
UF/DF 3 (0.16L)
Column Packing
Affinity (30 mL)
Anion Ex (50 mL)
Area/Module
(m2)
1
1
1
Modules
Needed
0.000648
0.000227
0.0004
$/Module
Total Cost
788.73
788.73
788.73
9.64
5.14
7.21
Price/L
Total Cost
1538
1538
69.91
123.04
Total for Downstream Equipment Materials
$215
Capacity
(mg/mL)
44
25
Volume Needed
(L)
0.045
0.08
57
Appendix F -Annual Material Costs Continued
Downstream Raw Materials
Component
Citric acid
NaCl
NaOH
Anion Ex Buffer
Sodium Phosphate
Tris HCl
Amount (g)
0.58
3.12
2.25
0.59
0.07
4.78
$/g
0.0041
0.0085
0.0004
0.0399
1.208
0.0087
Resin
Protein A
DEAE
Ethanol, 95%
Amount (L)
0.03
0.05
2.1
$/L
5800
976
13.61
Cost ($)
0.0024
0.026
0.0009
0.23
0.00009
0.041
Cost for Year ($)
0.143
0.16
0.0055
0.14
0.00054
0.248
Cost for Year ($)
175.76
52.05
171.53
Total Annual Cost for Downstream Raw Materials $400
Total Annual Material Costs $619
58
Appendix G -Process Flow Diagram
59
Appendix H -Fermenter Sizing
Market Size
We expect to capture 30% of
this market.
Antibody needed per
diagnostic test
Total mass of antibodies
needed per year
Antibody yield per liter of
fermentation
Volume of fermentation
needed to produce
Losses due to process yield
Over design
Fermentation Volume
needed for annual
production
Batches per year
Final fermentation size
60
Appendix I –Processing Times, Step Yields, and Flow Rates
Process Step
Seed Fermentation
Production Fermentation & cooling
Centrifugation-cell harvesting
Homogenization
Centrifugation-Select Inclusion bodies
Solubilization of Inclusion bodies
Centrifugation
Refolding Target Antibody and Dialysis
UF/DF 1
Affinity Chromatography
UF/DF 2
Anion Exchange
UF/DF 3
Overall
Step Yield
(%)
100
100
99.5
99
99.5
75
99.5
75
99
95
99
95
99
Process Time
(h)
12
18
1
1
0.25
8
0.25
60
4
4
4
3
4
48%
119.5 hours
61
Process Flows (L)
In
Out
1.20
1.20
12.0
4.44
4.44
0.44
7.56
0.56
1.96
0.03
0.09
0.05
0.16
1.20
12.0
4.44
4.44
0.44
7.56
0.56
1.96
0.03
0.09
0.05
0.16
0.27
Appendix J -Process Equipment
Upstream Equipment
Quantity
1
1
1
1
1
1
3
2
Description
1.8 L/h Continuous sterilizer SS-316
1.2 L Seed fermenter SS-316
12 L Production fermenter SS-316
0.02 L/h Axial compressor for seed fermenters
0.062 L/h Axial compressor for production fermenter
3.6 L Agitated media holding tank SS-316
1.08 L Agitated media storage tank SS-316
3.6 L/h Centrifugal pumps SS-316
Cost
$767
$217
$1,218
$180
$421
$142
$172
$1,087
Total Upstream Purchased Equipment Costs
$4,202
Downstream Equipment
Quantity
1
1
1
6
2
3
3
2
2
1
1
1
5
1
1
2
1
18
Description
Sterilizable, high-speed centrifuge, 12 L, SS316
Sterilizable, high-speed centrifuge, 8 L, SS316
Sterilizable, high-speed centrifuge, 4 L, SS316
Plate heat exchanger SS-316 (4 L/h)
5.33 L Holding tanks SS-316
2.35 L Holding tanks SS-316
0.06 L Holding tanks SS-316
0.2 L Holding tanks SS-316
8.4 L/h high-pressure, two stage homogenizer, 800 bar g, SS 316
8.4 L Kill tank SS-316
Solubilization tank, agitated and jacketed, 7.6 L, SS316
Refolding tank, agitated and jacketed, 1.96 L, SS316
UF/DF modules for buffer exchange (0.004 m2)
0.03 L Protein A Affinity Chromatography Column SS-316
0.05 L Anion Exchange Column SS-316
Chromatography Column Peripherals (Pumps, controls, etc.)
0.7 L Product holding tank
Positive displacement pumps SS-316 (12L/h)
Cost
$796
$563
$378
$1,410
$380
$309
$21
$31
$15,192
$267
$861
$313
$2,372
$321
$490
$794
$40
$2,652
Total Downstream Purchased Equipment Costs
Total Purchased Equipment Cost
Multiplier for other equipment and overestimation
$27,190
$31,392
15%
Total Purchased Equipment Cost for Design
$36,101
62
Appendix K -Annual Material Costs
Upstream Raw Materials
Component
Conc. (g/L)
Glucose
Corn Steep Liquor
KH2PO4
K2HPO4
Antifoam
Tetracycline
(NH4)2SO4
Trace elements
53
80
0.2
0.2
0.3
0.02
1
-
Annual Need
(kg)
4.20
6.34
0.02
0.02
0.02
0.00
0.08
Price ($/kg)
Annual Cost $
1.09
0.19
13.88
13.88
7.67
86.76
0.22
4.57
1.20
0.22
0.22
0.18
0.14
0.02
0.65
Total Upstream Raw Materials for Year $7.20
Downstream Equipment Materials (Resins and Membranes)
Membranes
UF/DF 1 (3.5L)
UF/DF 2 (1.5L)
UF/DF 3 (2.25L)
DF 1 (3.5L)
DF 2 (3.5L)
Column Packing
Affinity (0.5L)
Anion Ex (0.75L)
Area/Module
(m2)
1
1
1
1
1
Modules
Needed
0.004897
0.000227
0.0004
0.004897
0.004897
$/Module
Total Cost
788.73
788.73
788.73
788.73
788.73
$32.43
$5.14
$7.21
$32.43
$32.43
Price/L
Total Cost
1538
1538
$69.91
$123.04
Total for Downstream Equipment Materials
$238
Capacity
(mg/mL)
44
25
Volume Needed
(L)
0.045
0.08
63
Appendix K –Annual Material Costs Continued
Downstream Raw Materials
Component
Citric acid
NaCl
NaOH
Anion Ex Buffer
Sodium Phosphate
Tris HCl
GuHCl
EDTA
GSH
GSSG
Amount (g)
0.58
3.11
2.25
0.60
0.07
4.8
4331
2.59
0.48
0.24
$/g
0.0041
0.0085
0.0004
0.0399
1.208
0.0087
0.0062
0.0011
3.26
3.82
Cost ($)
0.002
0.026
0.0009
0.023
0.00009
0.041
14.69
0.0066
1.57
0.92
Cost for Year ($)
0.014
0.159
0.0055
0.140
0.0005
0.249
88.13
0.039
9.42
5.50
Component
β-mercaptoethanol
Tween 80
Ethanol, 95%
Amount (L)
0.0053
0.49
3.6
$/L
3.85
34.73
8.63
Cost ($)
0.032
40.82
49.01
Cost for Year ($)
0.193
244.91
294.05
Resin
Protein A
DEAE
Amount (L)
0.030
0.053
$/L
5800
976
Cost for Year ($)
175.75
52.05
Total Annual Cost for Downstream Raw Materials $871
Total Annual Material Costs $1116
64
Appendix L –Economic Analysis
65
66
67