Originally Published IVD Technology May 2005

In Person

Forays into food diagnostics

IVD companies willing to navigate the idiosyncrasies of niche markets can find a wealth of opportunities.

Scott Ballard is director of business development for Centrus International Inc. (Kingsport, TN). .

In last month’s issue, IVD Technology noted the launch of Centrus International Inc. (Kingsport, TN), a subsidiary of Eastman Chemical Co. focused on food safety diagnostics. Centrus joins a market segment already filled with such industry stalwarts as bioMérieux Inc. (Marcy l’Etoile, France); Dade Behring Inc. (Deerfield, IL); and Fischer Scientific International Inc., subsidiary of Oxoid Ltd. (Basingstoke, Hampshire, UK). Kalorama Information (New York City) estimates that the market for food microbiology testing hit $864 million in 2003 and is growing 9% annually. More-stringent quality control regulations have increased demand for microorganism screening, boosting the number of tests administered from 440 million in 1999 to a projected 625 million in 2005.

To learn more about the nonclinical IVD marketplace, IVD Technology editor Richard Park spoke with Scott Ballard, director of business development for Centrus. In this interview, Ballard talks about the genesis of Centrus and the issues it has faced as a new entrant to the IVD industry. In addition, he discusses how Eastman set up the company to accommodate expansion, and the channels that food diagnostics can provide into related IVD segments.

IVD Technology: Please provide a brief history of Centrus and how it got started.

Scott Ballard: Centrus was launched as an independent subsidiary of Eastman Chemical Co. on February 2, 2005. We started by identifying a market need, developing a comprehensive business plan and business strategy, and now we’re successfully executing it.

We began with a small team that was charged with exploring the idea of starting a business in diagnostics that would be a logical extension of Eastman’s core competencies in analytical chemistry and making measurements. We started with a very broad definition of diagnostics and looked at all the major market segments contained therein. As we moved through that process we found a very high concentration of unmet needs in industrial diagnostics, particularly in food safety diagnostics. Eastman was very familiar with the customer base there, how to do business with them and what is important to them as far as their manufacturing processes are concerned.

Is this Eastman Chemical’s first foray in the diagnostics industry, or is the company currently involved in other areas in the diagnostics business?

Centrus is Eastman’s first diagnostics business. Eastman has a long history of serving manufacturers of food, beverage, pharmaceutical, and personal care products, and we have a solid reputation for quality and reliability in these market areas. Paired with our core capabilities, such as analytical chemistry, polymer chemistry, and biotechnology, our experience with these users helps us provide the solutions that are needed in the industrial diagnostics industry. For example: faster delivery of more-accurate test results, and easy-to-use systems that help our customers ensure the safety and quality of their products.

Centrus has a unique perspective being a brand-new company in the diagnostics industry. Before deciding to enter the market, what impressions of and apprehensions about the diagnostics industry did the company have?

One of our biggest impressions about the market was the diversity of the customers and their needs. Many customers have unique and specific needs that are based around their particular operations. Our challenge was to gain an in-depth understanding, at a customer-specific level, of their processes and needs. One of the most important things we learned was that we would have to invest in deep customer relationships to attain this insight. In addition, we would have to invest in maintaining flexibility in our products and processes so that they would be robust enough to allow us to tailor our solutions for each customer based on their operations.

You’ve mentioned how you found a high concentration of unmet needs in the food safety testing area. Why, though, did Eastman decide to establish a whole business dedicated solely to developing diagnostic technologies for food safety testing? What other opportunities and potentials for growth did Eastman see in this area?

We see food safety diagnostics as a starting point. We believe it will give us insight into other markets with other unmet needs that we may not be serving. So, it creates options for long-term and other growth pathways and also provides a very solid and value-creating growth opportunity.

What relationship will Centrus have with Eastman as it pursues this opportunity?

The Envisio magnetic detection system by Centrus International Inc. (Kingsport, TN).

It’s actually a very good relationship in that the executive team of the company has decided that they are letting us operate as a wholly owned subsidiary. The diagnostics business is a bit different from the chemical business and we’ve got choices to make. At the same time, it’s Eastman’s world-class business infrastructure, financial resources, and customer-focus culture that is necessary to make Centrus a new leader in food safety diagnostics. Centrus products and services do a lot of leveraging of Eastman’s core strengths in analytical chemistry, polymer chemistry, and biotechnology, as well as its more than 60 years in food packaging, food preservatives, and supplements.

We did a gap analysis of what we had at Eastman and what we thought was necessary, and then we went out and brought in industry experts. As a result, Centrus built a management team with more than 100 years of combined experience in the industry. We also have a very experienced sales staff, world-class microbiologists in our lab, people who have been in this industry for years, and we are enjoying the experience and the relationships that come with that.

Technology and Diversity

Was Centrus built around a specific core technology?

Not one specific technology. We currently have two commercial technology platforms. Our Soleris system is based on optical detection, and our Envisio system is based on magnetic detection. Our strategy is to have portfolio platform technologies from which we can craft the best solution for our customers. This portfolio strategy requires us to remain active on many fronts. We invest a lot of resources into monitoring and evaluating emerging technologies to keep our pipeline active and to look for unique ways these emerging technologies can create value for our customers. We also have internal development projects and, of course, will look to add existing commercial technologies and products to our portfolio through acquisitions or partnerships.

Our two existing platforms also illustrate some of the ways we will be adding technologies to our line. The Soleris system came to us through the acquisition of BioSys Inc. (Ann Arbor, MI). We recognized it as an emerging company that had a strong value proposition for bioburden testing that was backed by an innovative, but proven, technology. It’s a rapid, automated optical system that measures microbial growth by monitoring changes in pH and other biochemical reactions that generate color changes. It creates value for our customers by enabling them to reduce labor costs while allowing them to assess the microbial load of their product in hours rather than days. We are very happy with the BioSys acquisition, and speaking back toward your question about adding to our team, we gained not only a great product, but also a great group of people who have brought a lot of experience.

The Envisio system is based on a detection technology that we licensed from MagnaBioSciences (San Diego). They had done the basic research, and since we’ve started working with them, they’ve focused on tailoring the magnetic detector module to meet Centrus’s commercial requirements. Centrus, on the other hand, has worked to develop the Envisio assays, the sample prep, and the enrichment media along with packaging the core detection technology into an instrument that meets our customers’ needs for easy use and reliability and low cost. The Envisio system detects E. coli 157, for instance, in an enriched sample, at concentrations much lower than other available methods. It takes advantage of this lower detection threshold in two primary ways: It is able to shorten enrichment times to give customers faster results, and it is able to enhance accuracy and sensitivity.

So, Eastman had these technologies in place and it was just a matter of finding the right time and the right moment and the right market situation to launch them?
We’ve been working on these for a while. We could have launched Centrus two years ago with a lot of promises, but we were committed to delivering on results. So, we have invested the time and the resources necessary to get us to the point where we are now before launching the company.

We completed our acquisition of BioSys in August 2004 and we’ve been actively working with them since then. The Envisio system has been under development for some time.

Gaining a Market Foothold

The Soleris 32 and Soleris 128 optical testing systems by Centrus International Inc.

As a new company in a competitive market, how does Centrus plan to establish itself in the food testing industry?

Relentless focus on customer needs, not just as it relates to product development, but particularly as it relates to customer service. A lot of early research revealed that many of these customers felt underserved and they placed a high value on consistently high levels of service. So, we’ve made a commitment to setting new standards for progressive customer support and service. We’re going to be there when they have problems, and should there be problems, our service teams are not just going to remedy the specific symptoms that might be at hand, but we are going to conduct a comprehensive diagnosis of the problem and see if there is anything systemic. We’re going to remain committed to doing that for the life of the product.

You mentioned that Eastman already had a familiar customer base that Centrus is able to leverage. How does Centrus plan to reach out to new customers?

By having a variety of products, our strategy is to build a strong sales channel. We would enjoy the efficiencies associated with doing that and have the freedom to access and get in front of many different customers, not just on the sales channel side, but also on the marketing and marketing communications side as well.

What are some of the other challenges that Centrus expects to encounter during its first year?

Like any new company, we’ll be spending a lot of time just putting a human face on the Centrus name by getting in front of a lot of these customers. We’ve also set very high standards for customer service and product quality and we’ll spend our first year delivering on those promises.

Earlier, you said that Centrus, like any good company, wants to maintain an active pipeline. Do its plans include further acquisitions, or perhaps adapting current clinical technologies to food testing and industrial purposes?

We plan to do all of the things that you’ve mentioned. Our technology strategy has a three-pronged approach: there’s the acquisition of companies, licensing of technologies, and internal development. We have a very active business development pipeline and we will be making announcements as we make advances on those fronts.

How does Centrus plan to continue growing? Will it branch off into other nonclinical diagnostic areas in the future, such as veterinary testing, biodefense, and environmental testing?

We’ll continue to develop products that meet the needs of our current customers, but we’ll also look for unmet needs in adjacent markets that might benefit from our products and technologies. We would only choose to take advantage of these opportunities if there is a clearly defined value proposition, but we’re a dynamic, growing organization and our main goal is to create superior value for our customers.

In the short term, we are actively focused on being successful in our target segments, but our longer-term strategy does include the evaluation of future options.

Copyright ©2005 IVD Technology