Diagnostics Win Wider Welcome

As customers press for lower cost and more efficient products, diagnostic companies have begun to do a host of collaborations, both within the diagnostic industry and with outside partners, including pharmaceutical companies. The collaborations also allow diagnostic companies to bundle their products with their bigger partners' sales and marketing efforts.

The diagnostics business still isn't easy, but at least their products are getting more attention from companies in higher-profit segments of the industry. New tests, new formats, new abilities to interact with and support medical systems are turning diagnostic companies into increasingly popular allies for a range of other organizations, from drugmakers to device makers, even to not-for-profit foundations. What's driving these inter- and extra-industry alliances? The same factors driving change everywhere in health care: focus on cost reduction, consolidation, and a widespread desire to collect, provide and better utilize information that can cut or more effectively guide expenditures.

The "show me the value" demands of big buyers are prompting some developers of high-tech, expensive medical products to develop diagnostics they hope will convince potential customers to use their products for at least some subset of patients. This was clearly the motive for the deal Eli Lilly & Co. recently signed with Cardiovascular Diagnostics Inc., which agreed to develop a rapid point-of-care test card to identify the patients most likely to benefit from an anticoagulant drug Lilly is developing to treat sepsis [See Deal]. The lack of a similar diagnostic is widely thought to have contributed to the 1992 clinical failure of Centocor Inc. 's sepsis drug, Centoxin.

The sheer power of some new drugs calls for diagnostics to help physicians monitor how patients are responding, says John Funkhouser, CVDI's president. In May, his company agreed to develop a rapid point-of-care test to monitor blood levels of Ancrod, the anti-thrombolytic made by BASF AG 's Knoll AG [See Deal]. Funkhouser points out that Knoll negotiated the right to distribute the diagnostic and to package it together with the drug, adding "that's a first." Big Pharma reps have rarely deigned to sell lower-margin diagnostics, he notes, and he's appreciative of the distribution such a large partner can provide. But Funkhouser said he's looking beyond opportunities to develop tests unique to any one drug, to deals that offer greater distribution potential.

The demands of consolidated purchasers are making it more important than ever for small diagnostics firms to forge strategic partnerships with larger companies that big buyers will make the time to see. If buyers for integrated health systems and hospital groups prefer to have full-service sales teams calling on them, Funkhouser is one diagnostic executive happy to put his products into a basket that will make it past their gates. That's why CVDI signed a deal with Avecor Cardiovascular Inc. [See Deal], a supplier that already has established distribution channels leading to surgical and critical care areas of hospitals. Along with heart pumps, oxygenators and other devices, Avecor will now carry CVDI's Thrombolytic Assessment System to monitor the coagulation status of patients. Currently CVDI has seven tests on that platform, and expects FDA approval on 19 more by 1998.

Some diagnostics developers are attracting distribution partners by flaunting the valuable information their tests provide. This seems to have been the lure that prompted Marquette Medical Systems Inc.to do a deal with Diametrics Medical Inc. [See Deal]. Marquette supplies 12-lead ECG monitoring equipment and Dade brings cardiac biomarkers. The collaborators won’t sell each other’s products, but they will jointly educate hospitals about how to manage these patients with a proven model that includes their products.

Other diagnostics firms are joining forces to co-promote quick test results that, if positive, get the patient started on a particular course of therapy right away, instead of requiring a second visit to the caregiver. BioStar Inc.and General Injectables and Vaccines Inc. recently agreed to jointly market BioStar's 24-minute Chlamydia Optical Immunoassay with Pfizer Inc. 's antibiotic Zithromax. [See Deal] The companies are offering the package to public health facilities, Planned Parenthood affiliates and university clinics. The parties emphasize that the cost of buying the test and treatment together is significantly less than if they were purchased separately.

Still other diagnostics companies are working with partners to establish a marketing context for their products. Metra Biosystems Inc. has worked with several drug companies to promote its bone-resorption diagnostic. More recently, it formed a consortium with Schering AG 's Berlex Laboratories Inc. and with Norland Medical Systems Inc. to develop disease management programs for menopausal women, who frequently suffer bone-related disorders. Berlex will co-promote the two other companies' products [See Deal].

Diagnostic Companies Team Up for Strategic Advantage

Partners/ (Date) Transaction

Berlex Labs/Metra Biosystems/ Metra, Berlex and Norland formed a consortium to develop disease management programs

Norland Medical Systems/(5/97) for menopausal women. Berlex is co-promoting Metra's immunoassay and Norland's bone densitometer products for use with its own female hormone replacement therapies.

Knoll/ Cardiovascular is developing a rapid point-of-care test to monitor Knoll's agent Ancrod, that

Cardiovascular Diagnostics/(5/97) removes fibrinogen from the blood, for the treatment of ischemic stroke. CVDI is using its Thrombolytic Assessment Systemdry chemistry technology to develop the test.

Lilly/ Cardiovascular will develop a POC test for a Lilly therapeutic anticoagulant under development

Cardiovascular Diagnostics/(4/97) to treat sepsis.

BioStar/ BioStar and General Injectables are jointly marketing BioStar's Chlamydia Optical ImmunoAssay

General Injectables/(3/97) with Pfizer's antibiotic Zithromax.

Diametrics/ Diametrics and Marquette are designing and jointly marketing a communications interface

Marquette/(2/97) linking Diametric's Irmapoint-of-care blood analysis system to Marquette's Unity Monitoring Network, a real-time electronic patient record.

Proctor & Gamble/ P&G and Quidel are co-promoting Quidel's QuickVue1-step H. pylori test and P&G's Helidac

Quidel/(1/97) therapy administered with H2 acid suppression medication for ulcers.

Cardiovascular Diagnostics/Knoll (12/96) Cardiovascular is developing a rapid point-of-care test to monitor Knoll's thrombin inhibitor drug PEG-Hirudin, a form of heparin. CVDI's is using its Thrombolytic Assessment Systemdry chemistry tech.with Knoll's ecarin tech. to develop the test.

SOURCE: Windhover'sPharma-Alliances