Medical Device Link.

John P. Wareham is chairman, president, and CEO of Beckman Coulter Inc. (Fullerton, CA). This month he will end his year of service as chairman of AdvaMed (Washington, DC), the industry trade association.

The chief architect of that megamerger was John P. Wareham--now chairman, president, and CEO of Beckman Coulter--who presided over the restructuring that was necessary in the wake of the deal. In the process, he helped create one of the most profitable corporate entities in the IVD industry.

In this interview with IVD Technology writer Greg Freiherr, Wareham discusses the opportunities and challenges that face companies seeking to make it in the IVD industry.

IVD Technology: What does Beckman Coulter see as its major opportunities?

John P. Wareham: The first is what we call automated solutions. What drives that is the high labor required of testing in both life sciences research laboratories and clinical laboratories. Automating those processes increases efficiency as well as safety --and, in some cases, the quality of the answer. So the area of automated solutions is one driver we see for almost all our businesses and it's one of the major opportunities.

What specific opportunities do you see in the field of automation?

Because sample processing is a big cost driver for clinical laboratories, one opportunity is to develop ways of managing samples so that the lab can perform more tests with a single sample.

On the life sciences research side the issues relate more directly to the volume of testing, because pharmaceutical and biotech companies are performing more and more testing. That field is growing exponentially--the more we know, the more we have to test for.

How is Beckman Coulter positioning itself to meet opportunities specific to the IVD sector?

As we discussed, we believe the field of automated solutions is one key area, and it is a driver for other areas of interest. Being able to combine workstations is going to be another driver. Still another driver that is going to continue to have an influence on the marketplace is safety, where some of the key issues can also be addressed through automation.

Do you see evidence that your competitors recognize these same opportunities, or do you alone see them?

I think we took the lead in automation. I don't think our competition saw the opportunities in this field as early as we did.

Are there other opportunities?

Life sciences researchers are currently very active as part of the discovery process for new therapeutics. In that area, the amount and kinds of testing that are being conducted is increasing very rapidly. For our company, we think that the discovery processes involving protein analysis and even cell analysis will become major opportunities for our company. And last, but not least, we have a new technology called major histocompatibility complex (MHC) tetramer that will enable us to move into immune system testing. We think this will be a major area of testing for drug discovery, clinical trials, and patient care.

Patient Stratification

What is so special about immune system testing?

When diseases of the immune system are involved, it is very difficult to know whether therapy is working. Consequently, regular monitoring of the patient is extremely important. The expansion of clinical interest in this area represents a major business opportunity.

The first place we're using the MHC tetramer technology is in clinical trials, where we're monitoring patient responses to new vaccines. The technology is already being used in more than 20 clinical trials, but eventually that monitoring function will move into the patient-care environment. We hope this technology will become the standard for vaccine monitoring.

The hottest area in vaccine development is HIV. Are you currently involved in any HIV testing?

We are involved in both HIV and melanoma testing. Our next step is to get some standard product into the marketplace, because most of the products being used today are custom-made and specific to the peptides of the vaccine developers. Because there are certain peptides related to HIV and melanoma for which everybody tests, our interest is in creating a marketplace for some standard testing products that can be used even in the research environment.

Drug screening and finding the early indications of disease are some major opportunities. Are there others?

One area that we believe will be very important is patient stratification--testing that enables clinicians to preselect the most appropriate therapy for a particular patient. We also think that the types of monitoring will be different for such therapies--much more patient-specific. And this goes back to products like the MHC tetramers in immune system testing--the kinds of technologies that will enable clinicians to monitor whether a therapy is effective or is continuing to be effective. These are going to be the future areas of focus in our industry.

What technologies are currently being devised to capitalize on these opportunities?

We have a lot of information technologies that can be applied to improve the efficiency of the industry. We have some specific kinds of testing technology--such as the MHC tetramers that we've talked about--plus the whole field devoted to the analysis of single nucleotide polymorphisms (SNPs). In theory, developments in this field will enable us to stratify patients according to differences that are meaningful for therapeutic effectiveness. Technologies such as these can be developed so that we can capitalize on opportunities, and we're participating to some extent in all of them.

Are there challenges in developing such technologies?

There are all kinds of challenges and barriers. The biggest is that, for the most part, these technologies are statistically based, and it is a huge task to create a database sufficient to identify relationships among particular SNPs and particular diseases. Then there is the regulatory side--demonstrating to regulators that this is a useful thing to do. And you've got to find reimbursement for it all; nobody's going to pay for such products unless the manufacturer can prove they will add value. And, of course, you've still got to convince the whole medical and laboratory community. Even if you succeed in overcoming the regulatory and reimbursement obstacles, there is no telling how quickly the product will be adopted. Changing accepted practice is hard to do.

R&D Strategies

In terms of strategy, do you want to diversify or to strengthen core areas?

Since the mid-1990s, our key strategy in diagnostics has been to strengthen our participation in the central lab. Our customers were consolidating and there was price competition. Clearly, then, we had to have a strategy to consolidate in the central lab and we've done that.

So I wouldn't say that is any longer an R&D strategy. We now have the product breadth we need in diagnostics, we have the automation enablers, and we have pretty good market shares.

Now you're moving onto other things. What are these?

One is to enhance our life sciences position using an automated solutions platform. We have a product, called the Biomek FX, introduced in the second quarter of 2000 that is a great platform for the life sciences research market. It's a liquid-handling robot. Our basic strategy is to apply that platform in the life sciences markets and become a major participant in testing segments in those markets. That's the mechanism by which we will go forward and where we have some of our alliances with other companies. We also have internal programs to add testing in that area, such as for cytokines. These activities are going to be the basis by which we expand our life sciences research into more of an applications focus.

Where do you see R&D taking you in the next five to 10 years?

Beyond automation, we think there will be big opportunities in two areas. One is in bringing into patient care some of these newer technologies--products that allow the stratification of patients for optimized therapy, and new techniques such as our MHC tetramers for determining whether the therapy is working. Bringing some of these technologies into patient care is something that our R&D should be addressing in the 10-year horizon.

The second area of our R&D focus is in miniaturization of some of the existing testing technologies, and making them more applicable to the growing variety of different clinical sites.

How do you identify potential allies or partners?

We have teams that focus on doing that. They explore and try to establish relationships and eventually create an opportunity. In many cases, however, it results from something happening to the partner. For instance, a company might recognize that they have a need and come to us to fill it. So we're very busy with people coming to us. But we do have some specific initiatives to make sure that we're participating in certain segments of the market.

In what areas are your teams looking right now?

I hesitate to say specifically, but it's probably no surprise that point-of-care testing is one market segment that we're interested in. In that segment there are a lot of mostly small start-up companies. We would like to get some kind of foothold in some segments of that market, so that's a busy area.

Another area of interest is in the field of automated solutions for life sciences research, where there's a plethora of small companies with expertise in certain chemistry areas. We have a team that does nothing but look at those companies to see if there's a market for us to automate their processes and handle their product distribution.

Market View

How do you evaluate the markets for your products?

The process varies by market segment. It's difficult to simplify without oversimplifying, but if we're talking about clinical diagnostics, we tend to target a market segment--acute care hospitals of certain sizes or private laboratories--in certain testing fields, and then design to that market. That has been our approach on the clinical diagnostics side for many years--at least from a Beckman point of view.

On the life sciences research side, the process tends to be a little different--it is more focused on the early adopter. Here, we tend to focus more on the technology and the enabling of that technology.

Within specific markets, how can you be sure that what you are developing will be popular? Where do you get your intelligence?

We have two centralized marketing strategic organizations--one for clinical diagnostics and one for life sciences research. Within those organizations are embedded market research activities. We use those internal infrastructures to organize our market assessments. And, of course, market assessments depend upon what you're trying to assess, but we tend to use that as our mechanism.

What do you believe are the keys to future growth? Vigorous R&D obviously is one of them, but are there others?

A lot of our future depends upon reimbursement activities. Governments around the world manage healthcare, and sometimes this is not for the benefit of the patients but in deference to their budgets. So technology is held in abeyance.

Another issue is the adoption rate--meaning how fast new technologies are adopted in clinical practice. At the testing level, at least, it takes a little while.

Then there is globalization, where we have a lot of underdeveloped countries with people who are underserved by medical care. As globalization boosts their economies, those countries begin to spend more on healthcare. That's a huge opportunity for future growth.

Draining the labor pool

A tight labor market can make it difficult for diagnostics manufacturers to find good people. How do you find qualified staff?

We're blessed in that we are headquarted in Southern California, an area that has a large labor pool and where there are always people coming into and out of that pool.

For example, when Boeing did some reorganization, we were able to pick up a lot of aerospace people. And then we taught healthcare to them.

We do run into problems on occasion with certain kinds of talent. Software engineering is one of them today, as you might suspect. But as the dot-com world evolves, we might have some opportunity to locate more people from that field. We also do a lot of internal transferring and development that allows us to move resources around.

If you're turning aerospace workers into healthcare specialists, you're finding talented people who can do something for you in the future, not necessarily right now.

That's right. And in certain disciplines you can do that. Generally speaking, an engineer has transferable skills. You may have to teach him or her about the customer, but that's only a minor obstacle; we've done a lot of that. Adopting such a cross-industry perspective expands your labor pool.

Copyright ©2001 IVD Technology