YouTube Facebook LinkedIn Google+ Twitter Xingrss  

The Theranostics Promise


By Michael A. Greeley

March 14, 2006 | “A tremendous amount of discovery and clinical development for new drugs involves clinical trials that include companion diagnostic tests,” asserts Brian Buxton, co-founder of Easton Associates, a leading medical consulting firm based in New York. “These ‘theranostic’ tests are poised to become a major factor in the future worldwide in vitro diagnostic testing market” — currently around $28 billion in sales of kits, reagents, and instruments. But the market is comprised of many different types of tests, and this heterogeneity introduces a series of concerns as one contemplates building a company in this space.

“A disease-severity pyramid is a useful way of assessing the prospects of new tests,” says Buxton. “At the top are tests for severely ill patients, critical to the choice of therapy, that can command high prices but have fairly small markets — fewer than 200,000 patients. At the bottom are screening tests, like the PAP and PSA, that can see more than 40 million tests a year but face greater pricing pressures, including complex economic analyses of the testing cost versus the ‘quality-adjusted life years’ saved. So finding the best positioning and launch strategy for a new test is quite complex.”

Bernard Cambou, CEO of StageMark, a lupus diagnostics startup based in Pittsburgh, echoes this issue by focusing on a disease with a readily identifiable physician base of less than 5,000 doctors. “The reimbursement approval process is long and unpredictable and does not serve the field well...and for that we want to focus on disease progression,” says Cambou. Ultimately, reimbursement decisions tend to be method-based, not value-based, which further undermines the potential of diagnostics companies. Postsurgical prognostic and predictive tests may run $1,000 to $3,000, while presurgical screening tests may run $25 to $100.

Other issues highlighted by entrepreneurs include the “nonlinear” distribution models, the lack of standards, and the process throughput of laboratories. Diagnostics providers need to sell to both doctors and processing labs. The duality of this distribution model is complicated. Bruce Zetter, of Children’s Hospital in Boston, asks, “Who is the customer? Pharma or the patient or the doctor?” He continues, “The lack of standards in this field is one of the greatest risks; there is a great number of biomarker opportunities and potential testing platforms.” Zetter still sees extraordinary potential in this field: “Why here, why now? This opportunity stems from the new drug pipeline that has few drugs working on a high percentage of the patient population. Theranostics will drive meaningful adoption.”

Labs, Markers, and Maps
Another key question is which clinical laboratories can perform the test. Buxton says there are more than 6,000 clinical labs in the United States performing roughly $40 billion of testing annually. “Most testing is done by hospital labs, but commercial ‘reference’ laboratories, large and small, are also critical players,” he says. “A new immunoassay screening test could be performed by nearly all of these laboratories, while a complex, new ‘molecular’ diagnostic test might find only a handful of labs that could perform it accurately. Even though molecular diagnostics is the fastest-growing segment of testing, the systems required to do it remain so complex that fewer than 400 U.S. labs can perform these tests. Entrepreneurs need to be clear on how their test design will affect which labs can perform their test, and how this will affect revenues.

Buxton also points to another important but subtle implication in the regulatory landscape: “FDA clearance takes time and money, and some new tests may not yet have reached the ‘recipe and kit’ that are required. Companies can sell a new test without FDA clearance, but only to labs that develop and validate their own ‘homebrew’ recipe. In this case, the need to report new developments to investors may run counter to the rules governing claims for ‘analyte-specific reagents’ — and these rules aren’t 100 percent clear.”

Lastly, an emerging concern for entrepreneurs and investors is the explosion in claims of novel biomarkers and the role of patents. The intellectual landscape risks being overwhelmed by competing claims, which will lead to great market and clinical confusion. The number of molecular biomarker and medical diagnostics opportunities now raising capital is very high. This competitive element risks undermining many promising technologies. As Zetter observes, “This field requires more sophistication to weed out the great number of ‘unwashed’ biomarkers.”

E-mail Michael A. Greeley: mgreeley@idgventures.com.

Click here to login and leave a comment.  

0 Comments

Add Comment

Text Only 2000 character limit

Page 1 of 1


For reprints and/or copyright permission, please contact  Terry Manning, 781.972.1349 , tmanning@healthtech.com.