Tuesday, September 13, 2011

PSA Update: Dealing with Diagnostics

Last week, we added Mike Pellini, CEO of the cancer genomics start-up Foundation Medicine, to our Pharmaceutical Strategic Alliances Conference panel that will be discussing strategies for sharing risk in relationships between pharma companies and diagnostics developers. Mike was president and COO of Clarient Labs until its sale to GE Healthcare last year – one of several notable M&A transactions involving CLIA lab-oriented assets.

We recruited Mike after Iain Miller, head of theranostics strategy and business development at BioMerieux, told us he was taking a new position as global head of personalized medicine at GE Healthcare, where he started this week. Iain will still be at PSA to talk about Biomerieux’s deals with Ipsen and GSK around predictive cancer biomarkers and now, also a bit about his new role at GE, which includes the challenge of leveraging the value of Clarient and bringing additional assets in around it. With Iain’s move and Mike’s addition, we maintain a balance on the panel between larger and smaller company perspectives. Rounding out the session are Nic Dracopoli of J&J and Risa Stack of Kleiner Perkins Caufield & Byers, an early and frequent investor in companies developing complex, high-value diagnostics, the vast majority of which are performed in the CLIA setting.

The potential value a CLIA lab brings to pharma as well as other players like GE is a subject we’ve discussed in several IN VIVO features this year, including in the current (Sept.) issue, where we ask the question “Is Diagnostics the New Biotech…and Will Pharma Embrace It?”

The two fields share obvious historical parallels including common starting points, first with the use of antibodies as targeting agents and probes, and later with genomics. In both cases, the same core assumptions existed around using those tools to unlock the power of the biological perspective. And there was a need for physicians, potential development partners, and regulators to get their arms on a unique and innovative set of promising technologies.

Pharma’s interest in the new wave of complex diagnostics is two-fold. It clearly needs to be able to ensure the development and distribution of companion diagnostics for its targeted therapies – why some argue risk sharing is inevitable, if not yet in evidence. For some, diagnostics also appears to have regained its appeal as a way to diversify: think Novartis with Genoptix or Eli Lilly with Avid Radiopharmaceuticals.

Unlike big box diagnostics companies, which are primarily interested in running as many tests as possible on their platforms, the developers of complex diagnostics tend to be vertically oriented. They feature the kind of narrow and deep focus on a specific disease state that is required for adoption and payment of high-value offerings. Those capabilities fit well with – and some would argue are essential to – the biomarker discovery efforts now woven into virtually all of new drug development. On the commercial side, they also offer the potential to leverage the value of a specialized sales force.

Pharma has danced with diagnostics but also maintained its distance, much as it did with biotech in its early days, keeping in touch via alliances until the emergence of product franchises it could acquire. But unlike biotech, where products and franchises are basically additive to a portfolio, there’s a co-dependency with diagnostics, at minimum in the area of companion diagnostics and potentially more broadly, as an increasing number of diagnostics and related services emerge that help direct the choice and management of therapy over all.

The question is: What business models best address this evolution. Is collaboration and risk-sharing the way to go? Are diagnostics franchises now becoming investible assets for pharma such that they will be swallowed lock, stock, and barrel (and if so, which underlying tools and technologies will be most sought after)? Let’s see what the experts at PSA have to say.

Join us September 23.

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