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Vine Brook Capital

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Summary: Vine Brooks Capital closed in April 2009 with $350 Million of investor commitments and though the last decade had been one filled with highs and lows, the firm realizes that they need to play a bigger game in health care market. However firms were generally taking a longer and more cautious approach with the idea that they want to provide more than just initial seed funding but also provide enough to get the product from the earliest stages to the market.

(Rhodes-Kroff, leamon, Strope, 2011)

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The Investment Choices: (1) Always Covered Software: A software system for hospitals to manage an auction based registry egistry for nurse and other clinical staff.

Key Features, Pros and Cons: Always covered Software (ACS) is already moving in a positive direction. It has already been implemented in 4 mid-sized hospitals and the reviews and feedback has been very positive. They already have and interest from top-tier customers and they also have a clear competitive advantage of being first to the market. There were also high switching costs and a clear exit strategy with a possibility of being acquired by a large health care software provider. Also the CEO of the company had a depth of experience.

However the competitive advantage may not be sustainable. The software could easily be replicated. It would be difficult to generate sales immediately as it generally took large hospitals and unions about a year to implement functional and technical changes. Attaining approvals would be an arduous task starting from senior management to the IT departments. (Rhodes-Kroff, leamon, Strope, 2011) Hypotheses on Value Propositions: Points of Parity: Always covered software would have a huge advantage in this area as they are they first to the market.

However the issue is that the software would be easy to replicate and could be replicated by the hospital itself. Points of Difference: This software would essentially be taking on the costly job of scheduling and via a web interface match job requirements to staff. $3 million spent on filling shifts would currently be saved. It also allowed for greater system wide visibility. Minimizes the need for outside agencies. Possibility of expanding to other areas as well. Testing Plan: The big advantage that ACS brought to the table was that it had already been successfully implemented and had received positive feed-back across the board.

Further testing would be to conduct primary market research on the implementation of the software. How feasible would it be to change a hospitals entire staffing system? Will Unions be on board? Do the features of the software align with the objectives of the Unions? What are the barriers to entry? Customer Segments and Testing:The overall plan for ACS would be expand to different markets such as other parts of the hospital, other staff heavy organizations. The software could also be potentially used by the government, insurance companies, public offices, call centers.

Following the success in the health industry the software could be testing out regionally in small companies first before moving on to large corporations. (2) BioChallengers, INC (BCI) : A biotech focused on commercializing therapies for MS. Key Features, Pros and Cons: BCI has already an extensive amount of financing due to clinical trial success of the drug. The current drugs on the market were accompanied by severe side effects and didn’t last as long as BCI’s drug XD10. There was good reason to believe that the company could enter an IPO as early as 2012 and had a clear exit strategy.

Apart from the XD10, the company had a portfolio of other drugs attract strategic investors. On the down side the lack of knowledge in the industry was a hindrance, and the success of the phase trials were risky and had to be validated in the US and by the FDA. Also VBC was not being offered any board rights. (Rhodes-Kroff, leamon, Strope, 2011) Hypotheses on Value Propositions: Points of Parity: There were other drugs on the market that claimed to work on systems of MS. Both XD10 and the competition were not completely void of side effects.

There were similar other new drugs in development. Points of Difference: XD10 lasted longer, potentially worked better and had lesser side effects. It already had the backing and financial commitments from the company’s original backers for the phase 3 trials. Testing Plan:Testing in the market would obviously only be possibly once the phase 3 Trials are complete and approved by the FDA. To make this possible, steps must be taken to have the phase 3 trials completed in the US and approval obtained by the FDA.

Market research could then be conducted comparing the effects of the drug compared to other drugs on the market. Customer Segments and Testing: The market could be divided into segments based on the level of systems of stages of MS. People at different levels would be tested with the approved drug to measure its effectiveness. Based on the success of XD10, the company could then also look into diversifying and developing drugs for diseases that share symptoms with MS (3) SweetDreams Technology (SDT): An implantable device to reduce effects of Sleep Apnea

Key Features, Pros and Cons: One of the major advantages for SDT is that the only other competitive device and therapy in the market had a 50% drop out rate. Sleep apnea as a condition was only diagnosed about 10% of the time and as such presented a huge market potential. On the downside, the product had not reached human trials yet, and though it was a medical device vs a drug, it could be a while before it reached the market. There were also some concerns regarding the current management team as to whether they had the experience to handle the growth. Rhodes-Kroff, leamon, Strope, 2011) Hypotheses on Value Propositions: Points of Parity:The closest competition to the device created by SDT was the CPAP machine. Both were medical devices used to treat conditions of sleep apnea and Points of Difference: The CPAP machine was sold primarily by pulmonologists. The SDT device would be aimed at physicians and cardiologists. In tests so far the device was easily tolerated and worked as expected. However the CPAP machine had a very high drop-out rate.

The SDT technology had already received the backing of a high profile company and they were in good relationship with SDT. Customer Segments and Testing: This device would have a very high market exposure due to the vast number of people affected with sleep apnea Customer segments would range from those who were never diagnosed with sleep apnea, to those who wanted to try something different than the CPAP machine and even segments who had dropped out from CPAP and were waiting for new technology. Market research and testing could be conducted in all these fields.

Based on the case information, the key decision criteria are that VBC wanted to make sure that the company that they invested in had a clear competitive advantage that was sustainable, a clear exit strategy and one which was the least risky and would allow them to get back to basics. VBC also wanted to ensure quick returns. They also wanted to ensure that the project they undertook required the least amount of “partner time” (Rhodes-Kroff, leamon, Strope, 2011). Always covered Software (ACS): From initial evaluation ACS seems like the best option with its proven track record and the fact that it has already been successfully implemented.

However there are some clear and large risks that would be involved particularly with the times cycle for sales, the ability to convince unions and the very real threat of being copied. This venture would be the riskiest of the three BioChallengers, INC (BCI): BCI presents the least risk of the three. It has a clear exit strategy and should possibly be able to offer an IPO as early as 2012. The drug has been successful comparatively so far is in the last stages of trial. The lack of insider knowledge is a worry for the management, but this can be easily circumvented by hiring consultants and industry experts.

Though board rights are not being offered, this might be perfect as VBC prefers a venture with the least partner time SweetDreams Technology (SDT): On paper SDT is very promising. It represents an entry into a market where the only other competitor is vastly unpopular. On the downside it has not yet entered human trials. It would also be a company that would require the most hands on by the partners of VBC. It is in its early stages and the partners at VBC would have to invest considerable time and effort in bringing it to the market stage Recommendation: Based on the direction that the board is looking to take BioChallengers.

INC presents the best venture for the firm to invest in. It presents a clear exit strategy and is close to an IPO. The venture would result in the least partner time and involvement and has the track record of already achieving prior financing due to the success of its trials. The competitive advantage is high as they have already achieved much success and the company also makes for an attractive acquisition target. This project would also allow Hardina to step away from the Medical devices market and be associated with a project that was projected to have a quick turnaround.

Cite this Vine Brook Capital

Vine Brook Capital. (2016, Oct 10). Retrieved from https://graduateway.com/vine-brook-capital/

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