Medical Device Link.

Originally Published IVD Technology September 2003

Business & Marketing

Every successful company in every industry has leaders who have not only a vision of where a company should be going, but also ideas on how to get there. The IVD industry is no exception. But probably more so in the IVD industry, leaders with good ideas are needed considering the highly competitive nature of this industry. 

The IVD industry has gone through some tough times during the past few years. For example, the IVD industry has had to endure difficult economic conditions and the consequent decrease in venture capital funding, increasing consolidation through various mergers and acquisitions, and changes in regulatory requirements, such as the IVD Directive in Europe. These challenges have made it hard for companies to find success in the IVD industry.

However, despite these difficulties, there are still ample opportunities to succeed in the IVD industry. And it is the leaders at IVD companies who have ideas about how to succeed in the IVD industry who are a testament to this fact. In this article, IVD Technology profiles three of these executives who have turned their ideas into success stories.

It would seem logical that therapeutics companies should have a vested interest in developing diagnostics, especially to help identify those potential patients who may benefit from using their products. Genentech Inc. (South San Francisco, CA) is one such company that is well aware of this fact and has been actively involved in working with IVD companies to discover tests for its therapeutic products. Robert L. Cohen, the company’s senior director of commercial diagnostics, has been a key person in coordinating and overseeing the company’s efforts toward developing diagnostics that are used in conjunction with its therapeutics.

Robert L. Cohen, MD, senior director of commercial diagnostics, Genentech Inc.

“Because of the very targeted nature of the treatments that we are trying to develop, it is entirely possible that there is a unique patient population that may or may not correspond to a pathologically or clinically recognized population that we need to target our therapy to,” says Cohen. 
“So we have formed a philosophy that while we don’t directly make or sell diagnostics, we will absolutely be proactive in identifying and promulgating diagnostic approaches that allow somebody to identify the population of patients that we think is most suitable for our therapies.”
While Genentech is committed to this philosophy of positive action and recognizes the valuable contribution that diagnostics have to offer, the company does not necessarily develop diagnostics for all of its therapeutics. According to Cohen, the decision whether to pursue a diagnostic is based on the statistical evidence and data that demonstrate one is needed to identify a particular patient population. In some cases, the need for a diagnostic is obvious.

“On the one hand, the scientific story could be so compelling that we know we’re going to have to go out and find these patients,” says Cohen. “That was the case with herceptin, for example. We knew from the laboratory that herceptin was most active against the cells that had the highest levels of overexpression. We were so compelled by that in the mid- 1990s that we only treated patients who overexpressed HER2.” 

However, it is not always so clear that a diagnostic is needed. Cohen said that sometimes Genentech might perform clinical trials in which a broad selection of patients are treated. After these trials, the company asks questions about who benefited the most from the treatment. If there is a group of patients that seems to have benefited unusually, that may create the need to identify them with a diagnostic.

“Then there are those therapeutics where all of the subgroups seem to benefit to the same extent as the main treated population,” says Cohen. “In that situation, it’s not obvious where to go in terms of diagnostic thinking. The exploratory analyses done in subgroups may not have indicated that one subgroup benefits more than any others. And if the drug has enough activity in the broad population, we’re certainly satisfied with that too.” 
Once Genentech decides to develop a diagnostic for one of its therapeutics, the company then begins working with an IVD company to develop a test. During the development phase, Cohen said that Genentech has several criteria in mind as to what it hopes an eventual test will be able to accomplish.

One of the key things clearly is that a diagnostic must be able to identify the correct patients. “That’s number one. That one we can’t trade away. If the test can’t find the right patients, it isn’t any good to us,” says Cohen.

Genentech also looks to develop diagnostics that do not present any barriers to adoption of the therapeutic. Cohen said that sometimes there are technological obstacles created by diagnostics that have to be managed. 

“For example, when fluorescence in situ hybridization (FISH) was a new test, it involved the use of a fluorescence microscope, which is a very tedious counting procedure for laboratory personnel,” says Cohen. “It was a low-throughput test that required a fair amount of investment by a laboratory. So the potential was there that this test wouldn’t be available in many places, and we couldn’t have that. We couldn’t have identification of our patient population depend on a test that people couldn’t do or couldn’t get.” (As FISH technology has matured, it has become acceptable to clinical labs, and Genentech has embraced it as a useful means of identifying patients for herceptin treatment.) 

Another potential barrier is related to financial matters. Cohen said there is obviously a problem if a test is too expensive. Interposing expensive tests that have to be done on every possible patient may ultimately prevent certain patients from getting the drug. 

“Expensive tests that identify relatively small populations are real barriers to product adoption,” says Cohen. “So one of the key things we try to figure out is, we want tests that can be brought forward at a reasonably attractive price because somebody has to pay for them.

“The bottom line is that we are interested in diagnostics insofar as they advance our therapeutic development. We are not looking to make money in the diagnostic field per se, nor do we invest our own resources in making diagnostics. But we certainly have a lot of things that we could bring to any collaboration with diagnostic companies.”

Michael J. Gausling, president and chief executive officer, OraSure Technologies Inc.

Without a doubt, it definitely helps to be in the right place at the right time. Even in the IVD industry. Take for example OraSure Technologies Inc. (Bethlehem, PA). In November 2002, the company received FDA approval to manufacture and market its OraQuick Rapid HIV-1 antibody test. This test is a point-of-care test designed to detect HIV antibodies in finger-stick whole- blood samples within 20 minutes. 

At first, OraSure marketed the OraQuick test to the nearly 40,000 qualified locations that are certified under the Clinical Laboratory Improvement Amendments of 1988 (CLIA) to perform moderately complex diagnostic tests. However, in order to allow more locations that are not certified by CLIA to conduct the test, the company planned to apply to get the test CLIA-waived, something which the government encouraged them to do.
Less than three months later, at the end of January 2003, FDA granted a CLIA waiver to the OraQuick test. With this waiver, a greater number of sites, including outreach clinics, community-based organizations, and physicians’ offices, can use this test.

“Once Health and Human Services secretary Tommy Thompson challenged the company to apply for a CLIA waiver as soon as possible, FDA collaborated with us throughout the whole process,” says Michael J. Gausling, OraSure’s president and chief executive officer. “When I use the word collaborated, I mean the agency counseled us on what it would want in order to consider us for a CLIA waiver. Each step along the way, we were negotiating the terms of the language that would be in the package insert, how to administer the test in these CLIA-waived situations, and everything else that would go through this process. It was a negotiation that occurred all the way through the process leading up to the submission.” 
Looking back, Gausling believes the entire process may have been helped by some pressure exerted from the top. 

“What we didn’t understand at that time was that not only was FDA incredibly cooperative but we couldn’t understand how they were available late at night and early in the morning and able to turn things around in a couple of days,” says Gausling. “Although I can’t confirm this, my guess is that they had orders from the highest level, from both Tommy Thompson and President Bush himself, to get a rapid test in the United States as quickly as possible. So FDA worked closely with us, so that when we submitted the test for approval, the agency had already scrubbed it, reviewed it, negotiated it, and it was done.” 

Gausling also realizes and admits that OraSure benefited from good timing by having the right product available at a time when the political climate dictated a need for it. However, despite the political pressure to approve a rapid HIV test, FDA did not cut any corners or make the requirements any less stringent for the company.

“FDA didn’t make the process any easier on us,” says Gausling. “The agency didn’t lower any standards, so the standards of the bar remained very high. We could have complained and bitched and moaned. Instead, we did what they said, and when we did what they said, we gained credibility, and they collaborated with us to get our product over the finish line.” 

From this experience, Gausling said he learned that IVD companies should try to collaborate rather than compete with the regulatory agencies. 
“FDA can be a friend, it doesn’t always have to be a foe,” says Gausling. “Companies can benefit from having a good dialogue with FDA, especially when they’re trying to change habits and introduce new practices. We’ve seen that when we consult with FDA and we seek its counsel and lock down the rules, then the agency will deliver. But companies don’t have to fight with FDA.”

Another regulatory issue that OraSure had to deal with concerned the fact that there was no FDA-cleared rapid HIV test in the United States at that time. When a predicate device exists, companies can collaborate with FDA to establish a set of protocols based on that device. If these protocols are met, then the device may be considered for approval. However, in OraSure’s case with the OraQuick test, there was no predicate device.
“Since our test was essentially pioneering space as the predicate device, we had to collaborate with FDA to define what the parameters are for testing and performance because there was no gold standard,” says Gausling. “For all intents and purposes, we were establishing the gold standard as the predicate device for rapid HIV testing.”

Gausling added that as the predicate device, it was imperative for OraSure to maintain good relations with FDA. 

“We had to open up the dialogue with FDA and find a place that both parties are comfortable with in terms of an investigational device exemption which included our studies for clinical trials to be considered for approval,” says Gausling. “We continued to have a regular dialogue with them because if we hadn’t, we would’ve been asking for more testing and prolonging the review process, and eventually the approval. So we understood up front very well the need to communicate with FDA.” 

Jim Reid-Anderson, chairman, president, and chief executive officer, Dade Behring Inc.

Suffice it to say that the past year has been a busy one for Dade Behring Inc. (Deerfield, IL). In August 2002, the company implemented a debt restructuring plan through a prepackaged Chapter 11 filing. Through this filing, Dade Behring reached a debt-to-equity swap agreement with its banks, bondholders, and owners that intended to eliminate about half of its debt and provide its creditors with equity in the company. According to Dade Behring officials at that time, the company had taken this action to free up its business operations for increased growth momentum and long-term financial health.

By October 2002, Dade Behring had consummated its debt restructuring and exited from its prepackaged Chapter 11 filing. The company also issued its first publicly tradable stock that was initially traded in the over-the-counter market. In February 2003, Dade Behring began trading its common stock on the Nasdaq stock market under the ticker symbol DADE. 

While other companies in a similar situation may try to hide such difficulties and give the false impression that everything is all right, Dade Behring took a completely different approach. The company decided to be open about what was going on, opting to let everyone know what it was going through and what it planned to do about it. In other words, Dade Behring deemed that it was necessary to make a deliberate effort to maintain transparency throughout the debt restructuring process. 

“We made the strategic decision early on to keep our customers, employees, and suppliers in the loop about our debt-related challenges and how we planned to meet those challenges,” says Jim Reid-Anderson, Dade Behring’s chairman, president, and chief executive officer. “We realized this strategy involved some amount of risk. We were also aware that many of our employees and customers worldwide would not initially understand this concept or the process. Consequently, there was a potential for widespread defections and loss of business. Nonetheless, we determined that this was a risk we had to take in order to maintain credibility and trust both inside and outside the company.”

Even during the initial period when the situation was most bleak, Dade Behring issued comprehensive press releases to communicate regularly and thoroughly with its employees, and to address issues of concern with its customers and suppliers. Even though the company’s story at that time was not easy to tell, Dade Behring purposely chose to communicate the bad news first. However, the company remained confident that it would eventually be able to tell a good story, one that could be relied on because of the credibility it had established.

“With each step we took throughout the lengthy and complex process of our debt restructuring, we told people what we planned to do, and we’d follow up by fulfilling each commitment,” says Reid-Anderson. 

The company’s decision to communicate openly about its prepackaged Chapter 11 restructuring brought on a number of challenges. Since Dade Behring is a multinational company, language barriers often interfered with communication. Moreover, rumors were rampant throughout the industry, and there remained a general lack of understanding about what a prepackaged Chapter 11 filing actually was. Dade Behring addressed these issues by getting its employees involved and making them partners in the process, which in turn motivated them to carry the company’s message to its customers.

“We approached these challenges through extensive education and training, an open discussion of issues and concerns, a true global communication effort involving meticulous and extensive translation into the various languages of our employees and customers, and a sensitivity to a variety of cultural issues,” says Reid-Anderson. “We educated our people worldwide on what this decision would mean for us and our customers. We also explained to our employees the role they would need to play in educating and reassuring our customers and suppliers.”

Dade Behring has so far been reaping the benefits as a result of completing its debt restructuring. The company reported growth in income and revenue during its second quarter ended June 30, 2003. Net income for the quarter was $15 million, or $0.36 per share, versus a net loss of $7.9 million for the second quarter of 2002. Revenue for the quarter rose 13.7% to $361.7 million. It would appear as well that Dade Behring’s strong performance might also be due in part to its decision to communicate openly throughout the debt restructuring process.

“This whole experience has taught me the importance of trust to medtech companies and their stakeholders,” says Reid-Anderson. “In the course of this experience, we have learned that the best way to protect a company’s customer base and retain the loyalty and commitment of its employees is to communicate actively and consistently. By doing so, people know they can trust what a company says. For us, relationships with customers are our single greatest priority, and our commitment to transparency has made a great difference in our ability to maintain those relationships.” 

Copyright ©2003 IVD Technology