Marketing Planning for Caliper Technologies

1
Marketing Planning for Caliper Technologies
Labchips

• Mgmt. 266A Product Management (Cooper)
• William Fang, Greg Kim, Bryant Kong,Simon Male,
  Rohit Talwani
• March 13, 2002

2
Planning Objective

• To determine the likelihood of various levels of
  revenue growth for Caliper Technologies labchip
  product line over the coming year.

3
Agenda

• What Are Labchips?
• Caliper Technologies
• Market Overview
• Critical Issues
• Hugin Network
• Probabilities
• Results and Decision Nodes
• Sensitivity Analysis
• Recommendations
• Questions?

4
What Are Labchips?

• Labchips are miniature silicon devices used for
  biomedical applications on a micro-dimensional
  scale
• Use MicroElectroMechanical systems (MEMS)
  technology
• Can reduce duration of experiments by orders
  of magnitude
• Automate previously manual laboratory processes
• Require much smaller amounts of sample and
  reagents
• Offer mission-critical benefits to researchers
• Faster throughput
• Cost savings
• Reduced human error

5
Caliper Technologies

• Public biotechnology company with 32 M in
  revenues from two main sources
• Labchips and Agilent analyzer system (est. 19.2
  M)
• High-throughput screening systems
• Labchip systems are used in chemistry,
  biomedical research, and drug discovery and
  development
• DNA, RNA, protein, and cell analysis
• Market leader in labchips
• Principal strategic partner is Agilent
  Technologies
• Uses lead customer programs to identify new
  product applications
• Recently settled patent litigation with
  competitor ACLARA

6
Market Overview

• Labchip market estimated at 300 M in 2000
• Projected annual growth rates of 30-40
• Early stages of development
• Fragmented competition
• Public labchip companies ACLARA, Cepheid,
  Nanogen, Orchid
• Large bioscience players Applied Biosystems,
  IBM, Motorola
• Private companies Many players
• Acadamic and government instiutitions MIT,
  Dept. of Defense
• Significant market trends
• Escalating RD costs, expiring patents drive
  customer need
• Intellectual property battles patent
  litigation or cross-licensing
• Lack of technology standards

7
Critical Issues

• Derived from preceding market analysis
• Also regulatory, manufacturing, social and
  behavioral issues
• Affect research applications or future uses of
  labchips

8
Hugin Network
Internal Economics
Demand
Product Design
Customer Need
Competition
Product Success
Major Forces
Regulation
9
Internal Economics

• Technical factors dictate product complexity and
  manufacturing cost
• Combined with pricing decision, this determines
  Calipers margins

Standards
Customization
High Medium Low
Leader Follower
Micro-dimensional Constraints
Product Design
Inter-operability
Problematic Not a Problem
Yes No
Complex Moderate Simple
Manufacturing Cost
Demand
Price
Not Costly Costly Very Costly
Low Medium High
Low Medium High
Margins
Product Success
Good Acceptable Poor
10
Demand
Aging Population

• Primary driver of demand is labchips ability to
  meet customer needs
• Secondary driver of demand is value-based price
  of product

Growing Plateauing
Process Change
Government Funding
Significant Medium Insignificant
High Medium Low
Inter-operability
Customer Need
RD Cost
Patent Expiration
High Impact Low Impact
Rising Plateauing
Yes No
High Medium Low
Demand
Price
Low Medium High
High Medium Low
Product Success
11
Competition
Patent Litigation

• Strategic partnerships and cross-licensing
  determine degree of competition
• Intensity of competition directly impacts
  Calipers margins

IntenseFew
Cross-Licensing
HighMediumLow
ManyModerateFew
Strategic Partnerships
Competition
IntenseModerateLittle
Margin
12
Regulation Can Hinder Growth

• Regulation and low access to capital can slow
  Calipers growth

Access to Capital
Bull Market Bear Market
FDA
Approval Rejection
Product Success
Regulation
International
FavorableUnfavorable
ApprovalUnfavorable
13
Four Major Forces Impact Product Success
Demand
Price
High Medium Low
Access to Capital
Competition
High Medium Low
Bull Market Bear Market
Margin
Product Success
Regulation
Favorable Unfavorable
Good Acceptable Poor
High Medium Low
Utility (Revenues)
High 30.7 M (60 growth) Medium 25.0 M (30
growth) Low 21.1 M (10 growth)
14
Estimating Probabilities

• Probabilities for starting nodes were
  straightforward
• No other nodes influencing them
• Probabilities for nodes with inputs were more
  difficult. We
• Decided the order of strength in which input
  nodes influence the node
• Arranged in ordinal orders each probability set
• Determined the graphical behavior of the
  probability
• Assigned probabilities

15
Demand Example
Customer Need has a larger influence on Demand.
So we ordered each permutation and set the two
extreme values.
We then determined the graph of the probability
appears as follows
16
Demand Example continued
Then we interpolate the in-between values to
complete the table
17
Results and Decision Nodes

• Calipers expected labchip revenues are 24.9 M

18
Sensitivity Analysis
19
Recommendations

• Caliper should focus on the factors that most
  strongly influence product success
• Build customer demand
• Lobby for favorable regulations
• Caliper should use its lead customer programs to
  identify and develop labchip applications that
  are widely valued in its beachhead market
• Risk of building too many customized applications
• Could get stuck in early market forever
• Need to cross chasm with application that will
  enable company to dominate pharmaceutical market

20
Questions?