By Nicholas Borget
Independent clinical reference labs are responsible for approximately one-third of all laboratory tests in a U.S. market estimated at $36 billion in 2001.
With promises for high growth potential and the experience of double-digit revenue increases, leading U.S. reference laboratories are placing more emphasis on molecular testing than ever before. The resulting technology and partnerships point to new tests, new advances in drugs and more patient-specific care that considers resistance to therapies and foresees heritable conditions.
Quest Diagnostics
Revenues at Quest Diagnostics of Teterboro, N.J., the country’s largest reference laboratory, climbed 6 percent in 2001 from a year earlier and totaled $3.6 billion. In a deal just closing, Quest’s acquisition of American Medical Laboratories (AML) for $500 million will improve its presence in geographic areas where AML had a comparatively strong presence. According to Kelly Westfall, IVD industry consultant with Frost & Sullivan, “Quest is already number one and they are getting stronger.”
Gary Samuels, Quest vice president of external communications, said his company entered a unique alliance with Roche Diagnostics last fall. With the agreement, Quest will work with Roche’s real-time polymerase chain reaction (PCR) platform called Taqman, a next generation qualitative and quantitative PCR test with shortened cycling time.
Samuels said the agreement is already paying dividends: Quest has introduced an improved hepatitis C test which features more automation and enhanced sensitivity.
Quest is working to commercialize gene-based markers in new tests for such diseases as stroke and asthma. “We’ve always helped in vitro diagnostics companies to develop assays, “ Samuels said, “but now we’ve formalized the relationship to share in the benefits of bringing new products to market. “ Gene-based testing, Quest’s fastest growing segment, is increasing 20 percent per year. It accounted for $275 million of the company’s revenues in 2001.
Also, Quest has developed a new gene-based glaucoma test to help ophthalmologists identify high-risk patients in need of aggressive treatment. Quest performs the test, developed with InSight Vision, exclusively.
Responding to consumerism, QuestDirect has opened a store in a Denver strip shopping center. The store draws blood for a menu of 25 tests available to walk-ins, including pre-employment drug screenings and tests for cholesterol, osteoporosis, allergies and PSAs. Specimens are processed at Quest’s Denver facility. Patients can then access their results over the Internet (with a PIN number) or can call in.
Six months after opening, QuestDirect has generated very favorable response from consumers.
“The store is between a vitamin outlet and a sandwich shop. People get in and out quickly, and get the information they need to better manage their health. We urge them to share that information with their doctors,” Samuels said. “We think we’re on to a consumer trend.”
Laboratory Corporation of America
LabCorp, with 2001 revenues of $2 billion, projects 12 percent growth in 2002, reflecting an ongoing increase in test volumes in the range of 8 to 9 percent. Molecular diagnostics is among the brightest areas for the Burlington, N.C.-based company. At the lab, genomic testing is growing at a rate in excess of 25 percent a year.
The LabCorp genomic strategy is founded on developing new tests, acquiring new technology and entering partnerships with innovative companies. Recent partnerships have included EXACT Sciences and Myriad Genetics. The genomic pedigree at LabCorp goes back more than a dozen years. It can be traced through corporate acquisitions, leadership in DNA testing and creation of the Center for Molecular Biology and Pathology in Research Triangle Park and other specialized facilities. Dr. Myla Lai-Goldman, a pathologist and LabCorp’s chief scientific officer, has worked at the center from its very beginning. She has helped shepherd genomics from early test development into clinical care. LabCorp is now leveraging its clinical trials expertise to help develop more individualized medicine for the future.
In another area, Dr. Lai-Goldman said major progress is being made as LabCorp converts from pap smears to monolayer thin-layer liquid pap testing. “The monolayer pap is beneficial in a number of ways,” Dr. Lai- Goldman said. “Because it is an improved test, it is reducing the rate of false negatives. “Also, we’re able to do additional tests including for the HPV (human papillomavirus) which causes cervical cancer.” Adding tests to the monolayer liquid is more convenient for patients who can avoid return visits, and it reduces costs for the lab. By the start of 2002, LabCorp had converted 57 percent of its pap testing from conventional smears to the liquid variety. That is expected to increase to between 70 and 80 percent over the next two years. Identity testing and bone marrow typing has been another area for growth.
Drawing on its DNA and genomics experience, LabCorp worked with the government in the aftermath of the September 11 terrorist attacks in New York and Washington, D.C. in the collection of DNA specimens to help identify victims’ remains. LabCorp has sent out hundreds of kits to families in the U.S. and around the world. The kits are used to collect cheek swabs from family members of likely victims.
ARUP Labs
“We are focusing more and more attention on molecular diagnostics,” said Dr. Ronald Weiss, M.D. and director of laboratories at privately held ARUP in Salt Lake City. ARUP is a full-service reference laboratory serving other laboratories and hospitals.
Completion of genetic mapping is spurring development of new tests while collaboration between labs and pharmaceutical companies produces new drugs, according to Dr. Weiss. More complex genomic tests require labs to make new investments in equipment and staff trained to perform the testing. One ARUP collaboration worth noting during 2001 was an agreement with Nanogen, Inc.of San Diego, Calif. Nanogen installed a NanoChip Molecular Biology Workstation at ARUP for use in development of novel gene-based assays. In return for the advanced equipment, Nanogen gains some commercialization rights to assays developed by ARUP. The agreement, the lab believes, will likely lead to the creation of molecular diagnostic test protocols using the Nanogen products. Working with Nanogen gives the lab the ability to evaluate a platform “that may be able to develop, automate, and simplify the process of conducting often complex gene-based assays,” the lab supervisor said. Esoteric reference testing remains the core of ARUP’s business. ARUP has begun offering a cystic fibrosis mutations test, and high volume molecular testing includes HIV and HCV viral load as well as hepatitis C and HIV resistance genotyping. “We’re continuing to grow as a full-service laboratory with new tests and new clients,” Dr. Weiss said.
Specialty Laboratories
At California-based Specialty Laboratories, net earnings for 2001 increased more than 14 percent from 2000 for a total of $75.2 million in revenue. Ronald Blum, Ph.D., director of medical communications at Specialty, said molecular diagnostics is driving esoteric labs to improve assays across medical specialities and provide patient- specific answers to clinical questions. Right now, about $4 of every $10 in revenue at Specialty Labs results from molecular diagnostic testing, Blum said. “We are an R&D-driven laboratory, having introduced over 100 new or e
nhanced tests a year for the last five years,” Blum said. “We have created disease-specific franchises in our areas of special expertise.”
By partnering with biotech and pharma companies, Specialty is able to find clinical applications for technologies offering a faster, cheaper or better platform for test processing.
Even as point-of-care testing continues to grow, esoteric labs will continue to play an important role, said Dan Angress, Specialty vice president of marketing. Angress points out that Biosite offers a POC device for BNP. His lab offers BNP as a reference tool. Both measure the same analyte but the POC device is an ER tool for ruling out congestive heart failure (CHF) in the acute coronary syndrome patient while the reference lab BNP is used for the early detection of asymptomatic CHF. “There is a place for both tests,” Angress said. “The life cycle of testing is not always a predictable progression. Some tests over time become routine … but the reference laboratory still has a role because almost all routine tests require additional testing.” Plus, he said, many existing assays considered routine are being “retooled” and improved. “The expertise and instrumentation for these highly specialized methodologies are neither available nor practical in the POC environment,” Angress said.
Specialty is developing new tests in the areas of oncology, cardiology and infectious disease as well as osteoporosis, rheumatology and gastroenterology. With its Phenoscript (TM)HIV phenotyping assay, Blum said, Specialty became the first full service reference lab performing in-house phenotyping for HIV drug resistance.
Other advances include an SNP test for osteoporotic fracture called COL1A1 and a new BCR/ABL assay for monitoring leukemia treatment.
Esoterix
Not one of the largest, but certainly one of the fastest growing reference labs, Esoterix relies on a different model for its business development.
Sixth in size of U.S. reference labs, Esoterix, headquartered in Austin, Texas, had 2001 revenues of approximately $68.7 million. According to Gregory Stelzer, Ph.D, chief scientific officer, the overall growth rate for 2001 was 20 percent, with some business segments realizing growth of up to 45 percent. The profile of tests at Esoterix is unlike that of other reference labs: 90 percent of the tests it performs account for less than 10 percent of the tests done elsewhere. And, the Esoterix strategy for growth is to build on existing expertise by adding “disease corridors” into its portfolio rather than folding new platforms or acquisitions into the company. Each segment of testing retains the strength of recognized experts who continue to concentrate in their respective areas of specialization. The signature of Esoterix reference lab services, for example, is pediatric endocrinology, in which it is the recognized world leader.
There are all together seven disease corridors of testing: allergy and asthma; coagulation; endocrinology; infectious disease; molecular genetics; oncology; and toxicology (which is integrated through a strategic alliance). Molecular diagnostics is the most recently added of the major technologies. Esoterix has made a major investment to tie all of its testing facilities together through a centralized information system, and to offer a single, patient-focused report.
The fast-growing Center for Clinical Trials is involved in direct assay development for pharmaceutical companies. Stelzer notes in particular that cutting edge cytometry technologies are ideally positioned to test new cancer therapies targeted to cell receptors in tumors. These techniques determine whether therapeutic monoclonal antibodies are hitting their targets. The strategy of Esoterix is to enter the market in the testing phase, and then participate in intellectual property rights and licensing agreements.
Ongoing technology evaluation, looking for the next improved method for a group or type of tests, is also what led Esoterix to enter into molecular diagnostics. The mission of Esoterix molecular genetics is to “translate cutting-edge molecular genetic research techniques into new clinical assays that will ultimately enhance patient care.” According to Ronald McGlennen, M.D., president and medical director of Esoterix Molecular Genetics, “the emphasis is to look for genetic assays that will impact on the ‘meat and potatoes’ of disease management such as high blood pressure and cancer, and to develop greater accessibility to genetic lab tests. The model that Esoterix is espousing is not just the ability to do tests, but to create value within the context of other testing expertise, to find something we didn’t know before that contributes to a therapeutic decision. A forward thinking lab will keep track of which tests hang together, which are dynamic disease models where you can make the most difference.”
Nicholas Borgert is a freelance writer in Charlotte, N.C.
