IN PERSON
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Patrick Balthrop is president and chief executive officer at Luminex Corp. (Austin, TX). Luminex Corp. is a life science tools and molecular diagnostics company that is focused on the development, manufacturing, and marketing of biological testing technologies for the life sciences industry. Balthrop’s career experience has included R&D, commercial operations, manufacturing, international general management and intellectual property management. |
IVD Technology editor Richard Park spoke with Patrick Balthrop, president and chief executive officer of Luminex Corp. (Austin, TX), who shared his thoughts on where he thinks the molecular diagnostics field will advance in the future. To get an idea of where molecular diagnostics is leading us, Balthrop suggests we take a look at where we’ve been. He also discusses the role of government funding in the diagnostics industry, the possibilities presented by decentralization, and the advantages of a cautious approach to theranostics and personalized medicine.
IVD Technology: What have been the most significant technological developments and advances in molecular diagnostics during the past few years?
Pat Balthrop: At the beginning of molecular diagnostics development, PCR and sequencing were the early innovations. Following that, the next wave of innovations were really focused on efficiency, things like high-throughput sequencing, amplification methods that improved reproducibility and sensitivity, and so on.
More recently, however, what we’re seeing is indicative of the way the laboratory business, whether it’s diagnostics or life science research, has evolved over the years, in that innovative companies are responding to unmet needs in the marketplace. Two areas of unmet need are primarily focused in the general categories of work-flow and multiplexing.
Such focus on work-flow and multiplexing is being driven in part by not only the need to improve efficiency and reduce labor but also the science. What I mean is the recognition that diseases often result from a variety of factors that are working simultaneously, whether they’re on the protein or the molecular side.
The ability to detect or measure those factors at the same time will deliver a more accurate result and a more accurate diagnosis.
Were those various developments and advances driven by IVD companies’ business demands or specific scientific breakthroughs that came through various channels of research and development?
It was a combination, but the overriding theme is that scientific advancements create the demand. The research identifies what the different mutations might be and what their clinical implications are, which creates demand and then the need to do testing more effectively and efficiently. This in turn drives more research, which in turn drives additional need for efficiency, and the cycle of innovation continues.
What are currently the latest trends to emerge in the molecular diagnostics area from a market or technology standpoint?
We look at the world with a particular focus on the customer. In our case, the customer is defined as the person on the lab bench who is performing the test methods. So what we’re seeing is technology addressing the need to deliver better care, and, similar to that, better clinical outcomes.
A good example of that would be the market for human papilloma virus testing. Historically, that clinical question was previously answered with a pap smear. Now, that clinical question is frequently being answered by a more specific and more relevant human papilloma virus molecular diagnostics test result.
In a similar vein, IVD companies are going forward with products like the one that Luminex hopes to receive FDA clearance for soon, a respiratory viral panel, which will in effect replace viral culture and labor-intensive methods like direct immunofluorescence assay for a group of respiratory viruses.
How does an IVD company specifically identify such trends that are emerging in molecular diagnostics?
We pay very close attention to the needs of the end-user customer. We also try to see what our technologies can do for end-user customers to their benefit. Since we’re a multiplexing company, we focus on test methods that are ideally suited for multiplexing.
Cystic fibrosis is a good example. The respiratory viral panel that I mentioned before is another good example.
In those areas where the end-user has a significant need to be able to provide many answers accurately and efficiently, multiplexing can address that need. Playing a major role there is the way we stay on the cutting edge. In our lexicon, the cutting edge is defined as products that can solve real problems that real customers have.
Taking on the Challenges
What are the primary obstacles IVD manufacturers encounter when delivering molecular diagnostics technologies and trying to do business in molecular diagnostics?
From a regulatory point of view, the regulatory authorities have taken a very serious look at the molecular diagnostics industry, and we expect incremental levels of regulation in the field going forward.
Financially, it’s a very different question. When you ask a financial question, you’re asking about both the ability to invest in R&D and, just as importantly, getting access to intellectual property. Whether that’s intellectual property on the content side—meaning the markers that you’re testing for—or the technology side—where intellectual property involvement frequently determines a company’s ability to commercialize the particular product.
That all adds a royalty cost burden, drives up manufacturing costs, and reduces the financial incentives for the investment, which can have a significant negative effect on innovation.
But the intellectual property is what it is, so you have to deal with it. However, there’s no question that the royalty stack ends up being a significant issue in terms of innovation and investment.
How do IVD manufacturers overcome such challenges, specifically having to do with development and technological issues in molecular diagnostics?
Part of it is by our own internal innovation and making sure that we have a very good and effective program dealing with the academic community, where innovation continues to flourish. This allows us to access any intellectual property or innovation that comes out of the academic community.
The regulatory challenges are a strategic issue. FDA encourages us to pay close attention to the ever-changing regulations and then respond accordingly. It’s also important to remain in a frequent, open, frank, and constructive dialogue with the regulatory authorities.
Has the investment community, such as venture capital firms, become more open to providing funding and supporting companies involved in developing molecular diagnostics?
There’s no question about that. The level of interest in companies or the molecular diagnostic spaces is real. It’s palpable and significantly different than it was just a year or two ago. However, as the regulatory landscape changes, that interest could wane.
Interest from investors is driven by the overall economics and demographics, meaning that molecular diagnostics is perceived as an investment opportunity because it has the potential to be a solution to a lot of the problems that occur as a result of rising healthcare costs.
For all those reasons, we agree with your assessment that the investment community, including venture capital firms, are highly interested in molecular diagnostics today. However, with increased regulation, that enthusiasm could cool quickly.
Is molecular diagnostics a field more likely to be driven by traditional targets, such as infectious or sexually transmitted diseases, or is the field going to start looking more toward genetic mutations as a basis for diseases?
I would say both. Multiplexing and molecular diagnostics together achieve what can’t be achieved by more-traditional methods. If you look back historically, a similar role was played by automation or detection technologies in the clinical laboratory setting to achieve what the then currently available technologies weren’t able to achieve.
We see the conversion from existing technologies in areas like infectious-disease testing to molecular diagnostics occurring for the same reason, because you can get better results.
Are both of these areas, traditional targets and genetic testing for genetic mutations, going to be equally important, and will they continue moving at an equal pace into the future?
That’s the way we see it currently. In the future, we anticipate that it may lean more toward genetic mutations as a basis for disease. But when you phrase the question “genetic mutations as a basis for disease,” in my mind, that eliminates things like pharmacogenetics. When pharmacogenetics turns into a real opportunity, it will likely be a molecular diagnostic application, but that is not a molecular diagnostic application as a basis for diagnosing disease.
But we see pharmacogenetics as a significant opportunity. For infectious diseases and other categories, molecular diagnostics can deliver better results, and for the genetic basis for disease in areas like inherited diseases, genetic analysis will be able to do things that traditional test methods can’t do. Pharmacogenetics represents a similar technological advance. We see all of those as being significant opportunities, and we intend to let the science guide us as we respond to the market opportunities that the science dictates.
What might be the role of other clinical areas in promoting the adoption and use of molecular technologies?
Molecular diagnostics has the opportunity to integrate with other areas of the labs or other clinical areas. For example, in oncology, there’s an opportunity for some convergence with the imaging technologies.
So we see some potential there. However, the major opportunity for molecular diagnostics will be that complimentary and/or replacement role I mentioned before as these different areas are identified for improvement and the never-ending search for a better answer continues.
How has the emergence of biodefense and bioterrorism concerns affected the development of molecular diagnostics?
Government funding of technology overall plays a significant role in many industries, including this one. The role that we are playing there is accessing government grants from U.S. government agencies and departments, such as the Department of Defense, the Department of Homeland Security, and the National Institutes of Health.
The work that we’re doing on their behalf with those government grants also has significant application in our core market segments of life science research and diagnostics. For example, a system that would have the ability to detect multiple pathogens that might be deployed in a biowarfare setting is an innovation for government, and a scientific application that also has application in research and diagnostics.
Also, on a government-funded project, we’ll have similar design and performance requirements as a platform for labs, such as small footprint, high reliability, low cost, and so on.
Diagnostics companies should continue to have the opportunity to access government grants that will address the needs of the government, but also be able to leverage that effort in their product development for their core markets.
Has the application of molecular diagnostic technologies, when applied properly, improved the effectiveness of biodefense and bioterrorism testing over the past few years?
I would say yes, and the thing to remember here is that bioterrorism testing is at its fundamental level a multiplexing problem. Testing for only one infectious agent is not enough. In order for any bioterrorism testing effort to be effective, you have to be able to detect a number of different pathogens. If you can’t, and you’re only detecting one or two or some finite number, then the likelihood that someone who wanted to commit such a terrible act would use one of the pathogens that you can’t detect is very high.
So it’s not so much a molecular diagnostics issue. In my opinion, it’s a problem only multiplexing technology can solve.
Defining the Next Step
How will the continuing emergence of theranostics and personalized medicine affect the development of molecular diagnostics?
It will affect the development of molecular diagnostics in a significant and favorable way. The reason for that is because of the data that have emerged.
There are real concerns about response rates to pharmaceutical therapies in large drug classes. Drug classes, such as the oncology class, statins, or COX-2 inhibitors, have response rates that are too low. The solution to that problem—the problem in this case defined as who will respond and who won’t—is a clinical and economic question that needs to be answered using molecular diagnostics.
The overriding economic considerations for the healthcare system around the world are maximizing the use of the dollars being spent and ensuring that a patient will actually benefit from an expensive therapy. So we believe personalized medicine will play a significant role in the funding and development of molecular diagnostics.
How will molecular diagnostics manufacturers contribute to the further development of theranostics and personalized medicine?
The role that we will play will involve partnerships with those that see personalized medicine or theranostics as a critical need and as a market for growth.
For instance, we have the opportunity to work with pharmaceutical companies in what is referred to as drug rescue. For compounds that will not otherwise make it onto the market because of adverse events and other issues, we can work closely with the pharmaceutical industry to commercialize compounds with a companion diagnostic.
At the same time, we also have the opportunity to work closely with the reimbursement authorities to develop applications that will determine whether a patient will benefit from a particular therapy—especially therapies that address chronic conditions, because of the cost of these therapies over time.
So working with the academic community, the pharmaceutical community, and the reimbursement authorities all represent significant opportunities for us. But the key to success will be a cooperative approach with those various constituencies rather than trying to do this all on our own.
There are a number of questions and issues that still need to be addressed. How do we get to the stage where theranostics becomes a reality?
That answer may best be served by history. There was a period of time when physicians and payers were not convinced that monitoring a diabetic’s blood glucose was effective. They became convinced with scientific data. The net result was that every insurance company in the United States now not only reimburses, but also encourages their diabetics to monitor their blood glucose level as often as possible. Why? Because doing so produced better clinical outcomes as well as better financial outcomes, because it kept diabetics out of the hospital.
There was a period of time when medical devices such as artificial joints and stents in lieu of a coronary bypass were in the same position. But with clinical outcomes and better financial results, those were also adopted. So I am not surprised a bit that physicians and reimbursement authorities are asking questions about personalized medicine.
But if the science can be performed to identify markers that would determine whether a patient goes on statin therapy for 30 years and whether or not they’ll benefit from it, and if the clinical data are powerful, physicians will respond. If the healthcare economics data are there, the regulatory authorities, the reimbursement authorities, and physicians will respond as they always have.
However, we’re in the early stages, and it’s a mistake to jump to the conclusion that physicians being resistant is a bad thing. I don’t think physicians are resistant. I think they’re skeptical, and they should be. But once the data are there for them and the reimbursement authorities, they will respond. But if the data aren’t there, they won’t, and they shouldn’t.
Do you think it’s only a matter of time to generate those results and data, and once presented to the various parties involved, they should be convinced?
I don’t think anybody’s going to do it for anything other than good solid reasons, which are a combination of better outcomes clinically and better outcomes financially. Assuming that both of those can be demonstrated, I think the opportunity is real.
Frankly, some of the ideas now may turn out to be bad ones. But at its core, there’s a reason why fewer than 80% of people are responding to statin therapy, and only 30% of people respond to the oncology compounds. If we can tell one of these patients from the other before those extremely expensive therapies are applied, then the data should be convincing.
Looking Forward
What are Luminex’s plans in the area of molecular diagnostics, and, in particular, with the acquisition of Tm Bioscience?
The acquisition of Tm Bioscience was part of the strategic process that we went through as we tried to determine the best way for us to maximize the opportunity in the molecular diagnostics market segment. We have used other commercial methods in the past, such as partnerships, to access other market opportunities. But in the case of molecular diagnostics, we chose to take an approach where we will be able to control our own destiny, make our own investments, and build our own menu or suite of products.
That’s gone very well. We have a good portfolio and the respiratory virus panel product that’s under review at FDA now. Also, we have the opportunity to more aggressively fund research and development in Toronto and build a very compelling suite of molecular diagnostics assays with a particular focus on inherited diseases and infectious diseases in the early stages, and down the road expanding into oncology and pharmacogenomics.
So we’re very pleased. The integration’s gone well, and the company is on track and poised to achieve what we believe to be some pretty special things.
What new trends can we expect to see next year and in the future in molecular diagnostics? What future challenges will emerge in molecular diagnostics?
The most significant trend will be the one that may not be particularly sexy, but we think is very important: menu. One of the phrases that we use at Luminex is “menu matters,” and what that means in molecular diagnostics is that the market opportunity becomes more compelling as more tests are developed and commercialized on a particular testing platform.
That’s been true in the IVD industry for a long time outside of molecular diagnostics, and it applies in molecular as well. As more applications become available on our platform, we believe that that will be driving growth.
There are also two other trends on the horizon. One is the regulatory issues we discussed earlier, and the other is decentralization.
The molecular diagnostics market will decentralize over time to a more significant degree than it has. In this instance, decentralization is defined as more tests being performed in hospital labs and regional labs, closer to the patient, rather than in large national and regional reference labs.
The reason for that is because of a number of favorable trends, including greater reimbursement, the ubiquitous availability of a platform technology, and expanded test menus that I talked about before. Up to this point, the molecular diagnostics market has been relatively centralized in a few labs. While those labs will continue to be important and will play a key role, much faster growth is occurring in those decentralized labs where they have not historically performed molecular diagnostics testing.
Is this decentralization trend due to the fact that hospital labs and perhaps even doctors’ offices at the point of care are demanding that they have the ability to do molecular tests? Will there also be a growing demand for less-expensive molecular tests?
Clearly, reimbursement plays a role in the financials.
So a combination of all those factors positions the market well for decentralization in the general category of ease of use. Part of it is having equipment that’s small and affordable, as opposed to a million dollars and up. Part of it is having a broad and accessible assay menu and providing the types of tests that are clinically relevant. Historically, a lot of the molecular diagnostics market has been in testing categories where things like turnaround time are less important.
For instance, an HIV viral load result or cystic fibrosis result can be processed by an offsite facility for molecular diagnosis because the turnaround time is probably not going to have a significant difference in the clinical outcome. However, for tests like the respiratory viral panel and infectious-disease assays, time-to-result becomes more important as it will affect clinical decisions. This is another factor that will position the segment well for decentralization.
A combination of menu, reimbursement, ease of use, and ubiquitous availability of affordable hardware are starting to line up, which will create an opportunity for more and more labs to start doing molecular testing.
