Rivulets, Diagnostics, and Growth

Walking through the East Woods the other day, I noticed dozens of little rivulets running downhill to join up into larger flows. They carried what is left of our winter snow pack (that has yet to really arrive in earnest…). Moving downstream is also a popular activity for many companies that sell research products – they view diagnostics as a neighbor to their current markets, and a profitable one at that.

They are flowing downstream with a few different approaches, and all with the same objectives of growth, leveraging current products, and, of course, profits. Here are some of the ways research product companies are moving.

• Reposition current products. Putting on a new wrapper, working with collaborators to validate assays, and getting regulatory approval enables them to leverage their current products into this new arena. This is often the lowest cost approach, and here a couple examples.

Agilent has gotten their LC and Mass Spec Systems listed as Class I Medical Devices with the FDA. This will enable them to move toward the clinical laboratories and eventually seek approval for specific assays.

Affymetrix supplies FDA-approved gene profiling reagents together with its instruments for use in development of molecular diagnostic tests in cancer diagnostics, blood and tissue-based screening, and disease segmentation.

Some companies such as Vermillion have taken this approach to the limit by transforming their whole organization into a diagnostics company, from its humble beginnings as a research tool provider.

• Bolt on a new business. Buying a complete operating unit is the fastest way to enter the diagnostics market. As long as you get approved products and complete channels, you are on your way. This is a pretty expensive approach, but may save years of development costs.

Danaher’s acquisition of Beckman ($6.8B) and Thermo’s purchase of Phadia ($3.5B) are two of the more notable examples of this approach.

• Get pulled in to the fray. Some companies are eying the opportunities in diagnostics, but are still on the sidelines. However, their hand is forced when someone moves to acquire them and their technology. With the growth in companion diagnostics, this is expected to become a more common event in the not too distant future.

The unwelcomed bid by Roche to acquire Illumina ($5.7B) is still in high drama, and the upshot is still to be determined. However, the value of new technology for the development and positioning of new therapeutics is pretty clear.

So whether your company is happily selling your products just to researchers, or is already immersed in the market, the pull of diagnostics opportunities are on everyone’s mind. Like the melting snows, your technology will eventually flow downhill and seek new applications in this arena. After all, even the glaciers succumb to the pull of gravity.