The Financial Benefits of the MicroSEQ Microbial Identification System

Transcription

1 White paper Financial Benefits of the MicroSEQ Microbial Identification System The Financial Benefits of the MicroSEQ Microbial Identification System Up to 160% ROI over 3 years, Break-even as soon as 5 months* Introduction Harmful bacteria and fungi can cause serious problems for pharmaceutical manufacturers by contaminating raw materials, production facilities, and branded products. The cornerstone of an efficient production process is the ability to identify microbes quickly and effectively. Traditional phenotypic and biochemical methods for identifying microbes have problems associated with them, notably inconsistent or inconclusive results, and slow identification times. The MicroSEQ Microbial Identification System, which uses a genotypic-based approach for identifying micro-organisms, enables users to perform faster, more accurate, and more reproducible identifications than traditional phenotypic methods. The MicroSEQ ID System also helps reduce test times, cut total ownership costs, and minimize risks associated with production downtime. It helps enable easy discrimination of thousands of bacterial and fungal species, and offers rapid time to results (TTR) from pure culture isolate to actionable results. The return on investment (ROI) analysis provided in this white paper only takes into account the direct and inventory costs associated with performing microbial identification. The additional benefits of being able to identify problems early or before a product reaches the consumer has not been included in this analysis. Thus, the benefit of avoiding product recalls, which results in lost revenue and a reduction of a brand s value, has not been included in this ROI analysis. This white paper details the direct and inventory financial benefits gained by using the MicroSEQ ID System instead of phenotypic identification and provides in-depth examinations of the financial value offered by the MicroSEQ ID System in several hypothetical scenarios common in pharmaceutical manufacturing quality control laboratories. All estimates presented are hypothetical and meant for illustrative business purposes only. Individual results may vary depending on circumstances. Highlights of ROI Findings Applied Biosystems collaborated with an independent research organization which specializes in ROI and cost-benefit analysis to perform an objective study of the financial returns generated by the use of the MicroSEQ ID System. The organization examined the direct ROI and benefits offered by the MicroSEQ ID System under three scenarios: In-House Testing vs. 100% Outsourcing Small Number of Tests per Year The benefits a pharmaceutical manufacturer could gain by switching to a MicroSEQ ID 3130 System after previously outsourcing 100% of its identifications. The scenario assumes that 500 IDs will be performed per year for three years. Phenotypic-Based Method Average Number of Tests per Year The benefits a pharmaceutical manufacturer that performs an average number of ID tests per year could gain by purchasing a MicroSEQ ID 3130 System for routine in-house testing, rather than a competing product which uses a phenotypic method of identification. The scenario assumes that 1,000 IDs will be performed per year for three years. Phenotypic-Based Method High Number of Tests per Year The benefits a pharmaceutical manufacturer that performs a high number of ID tests per year could gain by purchasing a MicroSEQ ID 3130xl for routine in-house testing, rather than a competing product which uses a phenotypic method of identification. The scenario assumes that 8,000 IDs will be performed per year for three years.

2 A detailed business analysis of the benefits of the MicroSEQ ID System reveals the following highlights, based on a three-year study period: By bringing testing in-house using a MicroSEQ ID 3130 System instead of 100% outsourcing, a manufacturer could realize a net present value benefit of $343,589, with a three-year ROI of 161%, and break-even after 11 months. By purchasing a MicroSEQ ID 3130 System for routine in-house testing instead of a competitive phenotypic system, a manufacturer that performs an average number of ID tests per year could realize a net present value benefit of $381,459, with a three-year ROI of 132%, and break-even after 11 months. By purchasing a MicroSEQ ID 3130xl System for routine in-house testing instead of a competitive phenotypic system, a manufacturer that performs a high number of ID tests per year could realize a net present value benefit of $1,172,251, with a threeyear ROI of 90%, and break-even after 5 months. The above three hypothetical scenarios and business cases will be explored in greater detail later in this white paper. But first, the overall benefits of using the MicroSEQ ID System will be examined. Benefits of the MicroSEQ ID System The MicroSEQ ID System uses a genotypic-based approach for identifying micro-organisms. The system helps identify bacteria and fungi by performing automatic gene sequencing, and then comparing the results to validated sequences in the MicroSEQ ID microbial libraries. Identifications are faster and more accurate than those generated by phenotypic or biochemical identification methods. The MicroSEQ ID System offers a variety of benefits compared to traditional identification methods, notably accuracy, speed, and ease of use. Accuracy Traditional methods are less accurate than the MicroSEQ ID System. Phenotypic or biochemical identification systems may provide inconsistent and inconclusive findings, often leading to repeat testing or incorrect identifications. This can have serious implications for manufacturers. Typically, traditional systems have limited databases and overall poor accuracy. Making matters worse, if a system initially identifies an organism incorrectly, there is a 30% to 50% chance that it will incorrectly identify the organism in a subsequent test 1. In many instances, the identification needs to be sent to an outside lab, leading to further costs and delays. Inaccurate results also decrease staff productivity, because staff spends extra time running tests. Inaccurate results can lead to other serious problems. In a worst-case scenario, a manufacturing license can be suspended due to contamination and sterility issues. Public disclosure of a suspension has serious financial implications, including loss of brand equity and a significant drop in the product s revenue. In addition, regulatory agencies around the world regularly update guidelines for sampling frequency and methods of isolation and identification. They recommend using DNA-based microbial identification of bacteria and fungi to the species level 2. Switching to the MicroSEQ ID System can help customers maintain regulatory compliance. Speed The MicroSEQ ID System is one of the fastest commercially available identification systems available, taking only five hours from an isolated colony from a primary culture plate to final results, without need for any further sub-culturing. By providing test results more quickly, the MicroSEQ ID System helps ensure that there are no delays in releasing finished products from manufacturing. Releasing finished products more quickly helps decrease a manufacturer s inventory cost, due to faster time to market. Faster testing also helps increase productivity and reduce labor costs, because overall, less labor is needed to perform the same number of tests. The TTR from a test is particularly important in instances in which bacteria or fungi are found in a critical area where such organisms are not normally found. Manufacturers will hold any pharmaceutical products found in those areas, and not release them until tests can be run identifying the micro-organism. When using traditional methods, it can take up to five days (including the time it takes to grow a culture) before a definitive answer can be found. Using the MicroSEQ ID System, users could obtain results in five hours after culture, which means that results can be available in a little over a day. With the MicroSEQ ID System, finished products could be released more quickly than with competing testing systems. Speedier results provide financial benefits in other ways as well. With a competing system, when results need to be found quickly, a manufacturer has to pay an outside lab for same-day service, which can run as much as $120- $300 per test. Because the MicroSEQ ID System could return results the same day, outside lab testing need not be done. Ease of Use The MicroSEQ ID System identifies microbial species using a simple, easy-to-follow workflow that requires minimum hands-on time. No previous DNA sequencing or genotyping experience is required, and a single,

3 standardized procedure is used for all bacterial and fungal isolates. No prior knowledge of the organism is required, no gram staining is necessary, no biochemical testing is done, and no previous experience is needed. Because the MicroSEQ ID System is simpler to use than competing methods, it helps increase the productivity of those doing the tests. The Business Case for the MicroSEQ ID System The combination of the MicroSEQ ID System s accuracy, speed and ease of use can help lead to considerable financial benefits when compared with competitive phenotypic systems. To better understand those benefits, Applied Biosystems contracted with an independent research organization which specializes in ROI and costbenefit analysis to create three typical hypothetical scenarios comparing the costs and benefits of using the MicroSEQ ID System. All three scenarios assume that the cost for a quick turnaround ID from a contract lab is $300, and that the cost for a normal turnaround ID from a contract lab is $120. As explained earlier the three scenarios are: In-House Testing vs. 100% Outsourcing Small Number of Tests per Year This scenario examines benefits a pharmaceutical manufacturer could gain by switching to a MicroSEQ ID 3130 System for in-house testing after previously outsourcing 100% of its testing. The scenario assumes that 500 IDs will be performed per year for three years. Phenotypic-Based Method Average Number of Tests per Year This scenario examines benefits a pharmaceutical manufacturer that performs an average number of ID tests per year could gain by purchasing a MicroSEQ ID 3130 System for routine in-house testing, rather than a competing product which uses a phenotypic method. The scenario assumes that 1,000 IDs will be performed per year for three years. Phenotypic-Based Method High Number of Tests per Year This scenario examines benefits a pharmaceutical manufacturer that performs a high number of ID tests per year could gain by purchasing a MicroSEQ ID 3130xl for routine in-house testing, rather than a competing product which uses a phenotypic method. The scenario assumes that 8,000 IDs will be performed per year for three years. Note that the scenarios do not take into account a variety of difficult-to-measure benefits that manufacturers could gain by using the MicroSEQ ID System. The high accuracy of the MicroSEQ ID System helps to promote brand protection, for example, which may lead to lower insurance costs, as well as an improved overall brand reputation. These benefits have not been included in the following business analyses. SCENARIO 1: In-House Testing vs. 100% Outsourcing Small Number of Tests per Year This hypothetical scenario examines the benefits a manufacturer would gain over a three-year period by switching to a MicroSEQ ID 3130 System for in-house testing after previously outsourcing 100% of its testing. The scenario assumes that 500 IDs will be run a year, for a total of 1,500 IDs over a three-year period. It also assumes that the cost for a quick turnaround ID from a contract lab is $300, and the cost for a normal turnaround ID from a contract lab is $120. The scenario assumes that half of the IDs will require a quick turnaround, and the other half will require normal turnaround times. A business analysis shows that by bringing testing in-house using a MicroSEQ ID 3130 System, a manufacturer could realize a net present value benefit of $343,589, with a three-year ROI of 161%, and break-even after 11 months. Switching to in-house testing with a MicroSEQ ID 3130 System offers two primary financial benefits: the elimination of outsourcing costs, and a dramatic reduction in inventory costs. Inventory costs would be reduced by $381,675, and contract lab costs would be reduced by $317,520. Carrying finished product inventory for a long period could lead to substantial direct and indirect costs. These include tying up money in goods and materials that are not needed; additional warehouse space; pilferage; pharmaceuticals being held past their expiration date; excessive insurance fees; and inventory management costs. The MicroSEQ ID 3130 System could help reduce inventory costs significantly. Because in-house testing with MicroSEQ ID 3130 helps allow quicker IDs to be made, inventory could move through the system faster, which could lead to a reduction in finished products inventory and associated expenses. Overall, the ability of MicroSEQ ID 3130 to help provide reliable identification faster could decrease reliance on justin-case inventory levels and associated expenses. Reduced costs associated with less inventory could be realized seven months after the validation period because it takes that amount of time for the inventory to be reduced.

4 SCENARIO 1 scenario 1. in-house testing vs. 100% outsourcing Financial Benefits of the MicroSEQ Microbial Identification System Net Present Value (3-Year) $343,589 ROI (1-Year) 51% ROI (3-Year) 161% Validation Period (months) 4 Payback Period (months after validation) 7 Break-even (months) 11 Break-even Analysis with Inventory Costs Incremental inventory benefits from using MicroSEQ ID are realized seven months after validation (validation occurred in month number 4). three-year analysis MicroSEQ ID 3130 Costs Start Up Year 1 Year 2 Year 3 total Investment $123,000 Labor Costs During Validation $7,333 $0 $0 $7,333 Annual Maintenance $0 $10,000 $10,000 $20,000 Labor Costs After Validation $9,219 $13,829 $13,829 $36,876 Consumables $9,939 $14,908 $14,908 $39,756 Contract Lab Costs During Validation $35,280 $0 $0 $35,280 Contract Lab Costs After Validation $1,411 $2,117 $2,117 $5,645 Total Project Costs $122,490 $63,183 $40,854 $40,854 $267, % ID Outsourcing Start Up Year 1 Year 2 Year 3 Additional Inventory Costs $175,364 $144,417 $61,893 $381,675 Investment Labor Costs During Validation $0 $0 $0 $0 Annual Maintenance $0 $0 $0 $0 Labor Costs After Validation $0 $0 $0 $0 Consumables $0 $0 $0 $0 Contract Lab Costs $105,840 $105,840 $105,840 $317,520 Total Benefits $281,204 $250,257 $167,733 $699,195 Financial Analysis Year 1 Year 2 Year 3 Net Value ($123,000) $218,022 $209,404 $126,879

5 SCENARIO 2 scenario 2. routine in-house testing vs. phenotypic-based method average number of tests per year Financial Benefits of the MicroSEQ Microbial Identification System Net Present Value (3-Year) $381,459 ROI (1-Year) 76% ROI (3-Year) 132% Validation Period (months) 4 Payback Period (months after validation) 7 Break-even (months) 11 Break-even Analysis with Inventory Costs Incremental inventory benefits from using MicroSEQ ID are realized seven months after validation (validation occurred in month number 4). three-year analysis MicroSEQ ID 3130 Costs Start Up Year 1 Year 2 Year 3 total Investment $123,000 Labor Costs During Validation $7,333 $0 $0 $7,333 Annual Maintenance $0 $10,000 $10,000 $20,000 Labor Costs After Validation $9,219 $13,829 $13,829 $36,876 Consumables $19,878 $29,817 $29,817 $79,511 Contract Lab Costs During Validation $70,560 $0 $0 $70,560 Contract Lab Costs After Validation $2,822 $4,234 $4,234 $11,290 Total Costs $123,000 $109,813 $57,879 $57,879 $348,570 Phenotypic System Costs Start Up Year 1 Year 2 Year 3 total Additional Inventory Costs $175,364 $144,417 $61,893 $381,675 Investment $60,000 Labor Costs During Validation $12,833 $0 $0 $12,833 Annual Maintenance $0 $6,000 $6,000 $12,000 Labor Costs After Validation $5,762 $13,829 $13,829 $33,419 Consumables $5,460 $13,104 $13,104 $31,668 Contract Lab Costs During Validation $123,480 $0 $0 $123,480 Contract Lab Costs After Validation $26,460 $63,504 $63,504 $153,468 Total Costs $60,000 $349,359 $240,854 $158,330 $808,543 Financial Analysis Year 1 Year 2 Year 3 Net Value ($63,000) $239,547 $182,975 $100,451

6 SCENARIO 3 SCenario 3. ROUTINE in-house testing vs. phenotypic-based method high number of tests per year Financial Benefits of the MicroSEQ Microbial Identification System Net Present Value (3-Year) $1,172,251 ROI (1-Year) 58% ROI (3-Year) 90% Validation Period (months) 4 Payback Period (months after implementation) 1 Break-even (months) 5 Break-even Analysis with Inventory Costs Incremental inventory benefits from using MicroSEQ ID are realized seven months after validation (validation occurred in month number 4). three-year analysis MicroSEQ ID 3130xl Costs Start Up Year 1 Year 2 Year 3 total Investment $198,000 Labor Costs During Validation $7,333 $0 $0 $7,333 Annual Maintenance $0 $19,800 $19,800 $39,600 Labor Costs After Validation $9,219 $13,829 $13,829 $36,876 Consumables $157,839 $236,758 $236,758 $631,356 Contract Lab Costs During Validation $560,280 $0 $0 $560,280 Contract Lab Costs After Validation $22,411 $33,617 $33,617 $89,645 Total Costs $198,000 $757,083 $304,004 $304,004 $1,563,090 Phenotypic System Costs Start Up Year 1 Year 2 Year 3 Additional Inventory Costs $175,364 $144,417 $61,893 $381,675 Investment $80,000 Validation Costs $12,833 $0 $0 $12,833 Annual Maintenance $0 $8,000 $8,000 $16,000 Labor Costs $5,762 $13,829 $13,829 $33,419 Consumables $43,355 $104,052 $104,052 $251,459 Contract Lab Costs During Validation $980,490 $0 $0 $980,490 Contract Lab Costs After Validation $210,105 $504,252 $504,252 $1,218,609 Total Costs $80,000 $1,427,909 $774,550 $692,026 $2,974,485 Financial Analysis Year 1 Year 2 Year 3 Net Value ($118,000) $670,827 $470,546 $388,022

7 SCENARIO 2: Routine In-House Testing vs. Phenotypic-based Method High Number of Tests per Year This hypothetical scenario details the benefits a manufacturer that performs an average number of ID tests per year could gain by purchasing a MicroSEQ ID 3130 System, rather than a competing product which uses a phenotypic method. The scenario assumes that 1000 IDs will be run a year, for a total of 3,000 IDs over a three-year period. A business analysis shows that by purchasing a MicroSEQ ID 3130 System rather than a competing phenotypic system, a manufacturer could realize a net present value benefit of $381,459, with a three-year ROI of 132%, and break-even after 11 months. The greatest financial benefits are significantly less contract lab costs for the MicroSEQ ID 3130 System compared to the competing phenotypic product and a reduction in finished product inventory costs. The MicroSEQ ID 3130 System enables more accurate identification, and requires very few IDs be sent out to a contract lab 30% of all IDs for the competing product, versus only 2% for the MicroSEQ ID System. As with the previous scenario, we assume that the cost for a quick turnaround ID from a contract lab is $300, and the cost for a normal turnaround ID from a contract lab is $120. The scenario assumes that half of the IDs will require a quick turnaround, and the other half will require normal turnaround times. As a result of the decreased number of IDs sent out to a contract lab, the manufacturer could realize $195,098 in savings over three years. The other major benefit is a decrease of $381,675 in finished product inventory costs, for the same reasons outlined in the previous scenario. Reduced costs associated with less inventory could be realized seven months after the validation period because it takes that amount of time for the inventory to be reduced. SCENARIO 3: Routine In-House Testing vs. Phenotypic-based Method High Number of Tests per Year This hypothetical scenario details the benefits a manufacturer that performs a high number of ID tests per year could gain by purchasing a MicroSEQ ID 3130xl System with 12 capillaries, rather than a competing product which uses a phenotypic-based method of identification. The scenario assumes that 8,000 IDs will be run a year, for a total of 24,000 IDs over a three-year period. A business analysis shows that by purchasing a MicroSEQ ID 3130xl System rather than a competing phenotypic system, a manufacturer could realize a net present value benefit of $1,172,251, with a three-year ROI of 90%, and break-even after 5 months. The two primary financial benefits are significantly less contract lab costs for the MicroSEQ ID 3130xl System compared with the competing phenotypic product, and a reduction in finished product inventory costs. The MicroSEQ ID 3130xl System is more accurate than phenotypic products, and requires that very few IDs be sent out to a contract lab 30% of all IDs for the competing product, versus only 2% for the MicroSEQ ID System. As with the previous scenarios, we assume that the cost for a quick turnaround ID from a contract lab is $300, and the cost for a normal turnaround ID from a contract lab is $120. The scenario also assumes that half of the IDs will require a quick turnaround, and the other half will require normal turnaround times. In this scenario, there will also be a decrease of $381,675 in inventory costs, for the same reasons outlined in the previous scenarios. Reduced costs associated with less inventory occurs seven months after the validation period because it takes that amount of time for the inventory to be reduced. Conclusions The MicroSEQ Microbial Identification System uses a genotypic-based approach for identifying bacteria and fungi, and can help generate significant financial benefits compared to phenotypic or biochemical identification methods. The MicroSEQ ID System helps to reduce costs in a variety of ways because it enables users to obtain faster, more accurate, and more reproducible results than traditional phenotypic methods. According to an independent research organization which specializes in ROI and cost-benefit analysis, the MicroSEQ ID System offers these typical financial benefits in three common scenarios: In-House Testing vs. 100% Outsourcing Small Number of Tests per Year By bringing testing in-house using a MicroSEQ ID 3130 System instead of outsourcing, a manufacturer could realize a net present value benefit of $343,589, with a three-year ROI of 161%, and break-even after 11 months. Phenotypic-Based Method Average Number of Tests per Year By purchasing a MicroSEQ ID 3130 System instead of a phenotypic-based system, a manufacturer that performs an average number of ID tests per year could realize a net present value benefit of $381,459, with a three-year ROI of 132%, and break-even after 11 months. Phenotypic-Based Method High Number of Tests per Year By purchasing a MicroSEQ ID 3130xl System instead of a phenotypic-based system, a manufacturer that performs a high volume of ID tests per year could realize a net present value benefit of $1,172,251, with a threeyear ROI of 90%, and break-even after 5 months. In addition to the direct financial benefits, the MicroSEQ ID System offers other hard-to-measure benefits as well by helping to ensure brand protection, reducing risk of product recalls, and improving regulatory compliance.

8 References 1. Alexander R, et al., New Technologies Forum 6: Rapid Methods in Microbiology Report, FDA Guidance for Industry: Sterile Drug Products Produced by Aseptic Processing Current Good Manufacturing Process, US Food and Drug Administration, *All estimates presented are hypothetical and meant for illustrative business purposes only. Individual results may vary depending on circumstances. Assumptions on industry-wide cost of raw materials and inventory days were based on the IndustryWeek/Manufacturing Performance Institute Census of Manufacturers, and a report from the University of St. Gallen s Institute for Technology Management titled International Benchmarking Study: Operational Excellence in the Pharmaceutical Industry, For more information about the MicroSEQ Microbial Identification System, please call the Sales Office nearest you, visit or contact pharma@appliedbiosystems.com. NOTICE TO PURCHASER: LIMITED LICENSE, Thermostable Enzyme. Use of the MicroSEQ S rdna Bacterial Identification Kit, MicroSEQ Full Gene 16S rdna Bacterial Identification Kit and MicroSEQ D2 rdna Fungal Identification System is covered by one or more of the following US patents and corresponding patent claims outside the US: 5,079,352, 6,127,155, 5,476,774, 5,219,727, 6,677,152 (claims 1-23) and 5,773,258 (claims 1-10). The purchase price of these products includes a limited, non-transferable immunity from suit under the foregoing patent claims for using only this amount of product solely in environmental testing, quality control/quality assurance testing, food and agricultural testing, including reporting results of purchaser s activities for a fee or other commercial consideration, and also for the purchaser s own internal research. No right under any other patent claim is conveyed, expressly, by implication, or by estoppel to the purchaser by the purchase of these products. Further information on purchasing licenses may be obtained by contacting the Director of Licensing, Applied Biosystems, 850 Lincoln Centre Drive, Foster City, California 94404, USA. Notice to Purchaser about Limited License: The MicroSEQ S rdna Bacterial Identification Kit, MicroSEQ Full Gene 16S rdna Bacterial Identification Kit and MicroSEQ D2 rdna Fungal Identification System are sold pursuant to a limited sublicense from Amersham International plc under one or more U.S. Patent Nos. 5,498,523 4,994,372, U.S. Patent Application Serial Nos. 08/324437, 08/ and corresponding foreign patents and patent applications. The purchase of these kits (reagent) includes a limited nonexclusive sublicense (without the right to resell, repackage or further sublicense) under such patent rights to use this reagent for DNA sequencing or fragment length analysis solely with an Applied Biosystems commercial automated sequencing machine or other authorized DNA sequencing machines that have been authorized for such use by Applied Biosystems, or for manual DNA sequencing. No license is hereby granted for use of these kits, or the reagents therein, in any other automated sequencing machine. Such sublicense is granted solely for research or other uses that are not unlawful. No other license is granted expressly, impliedly, or by estoppel. For information concerning the availability of additional license to practice the patented methodologies, contact: Amersham Life Science, Inc., Vice President, Regulatory Affairs, P.O. Box 22400, Cleveland, Ohio Patents are pending in countries outside the United States. Copyright 2008, Applied Biosystems. All rights reserved. Applera, Applied Biosystems, AB (Design), and MicroSEQ are registered trademarks of Applera Corporation or its subsidiaries in the US and/or certain other countries. Printed in the USA, 07/2008 Publication 128WP01-01 Headquarters 850 Lincoln Centre Drive Foster City, CA USA Phone Toll Free International Sales For our office locations please call the division headquarters or refer to our Web site at