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Beckman Coulter Aims to Bring Molecular Dx To Central Hospital Labs; No Content Worries

This story originally appeared in Biocommerce Week, a newsletter that has been discontinued.
 
As an ever-growing number of firms jump into the molecular diagnostics market, Beckman Coulter officials believe that the firm will be the first to establish the emerging field within the central labs of hospitals.
 
Addressing analysts and investors at the American Association for Clinical Chemistry meeting in San Diego this week, Beckman Coulter President and CEO Scott Garrett said that molecular diagnostics is a “big part of the future” for the company. While he acknowledged there are already some heavy hitters in the molecular diagnostics field, Garrett said he expects Beckman to be the first to succeed in making molecular testing routine in hospital labs.
 
Garrett also insisted that the firm has many options for novel diagnostics content despite losing out in a bidding war in May with Inverness Medical Systems to acquire Biosite.
 
Though Beckman is currently one of the world’s largest diagnostics companies, its growth in that market has been driven by its immunoassay instruments and tests. “Immunoassay has been an engine of growth for us for the last five years,” Garrett said at the meeting this week. “The growth rates continue to be very strong, and as the business gets bigger those growth rates have a bigger impact on the overall growth of Beckman Coulter.”
 
He noted that Beckman’s immunoassay revenues have been growing at a rate of over 17 percent per year.
 
While he cited immunoassay menu expansion as a key growth driver, Garrett singled out molecular diagnostics as a key part of Beckman’s future revenue growth. “We look to molecular testing as a next wave of growth to help drive us to leadership over the five- to 10-year period,” he said.
 
The firm is developing a new molecular diagnostics platform that it intends to launch around 2010 (see BioCommerce Week 12/6/2006). According to company officials, it will be a fully automated system, enabling a technician to load a sample, press a button, and get a rapid result.
 
“We expect to be among the leaders, if not the leader, in being the first to bring molecular testing to the routine laboratory,” said Garrett. “I think that real growth in molecular will come when hospitals can do the test cost-effectively in their own laboratories, without sending it out to a reference lab at a cost of $300 to $500 to $2,000 for determination.
 
“We think this can be a very valuable growth driver for us, [with] high-margin tests to have a very significant impact on disease management and will be reimbursed at a high level,” he said. “Our strategy is to simplify what is now a very cumbersome, manual process that takes up a lot of floor space … takes a lot of talent doing manual procedures, and make that into a system that literally [allows] the hospital laboratory to put a sample in and get an answer out much the way they do today with hematology, chemistry, and immunoassay.”
 
Garrett acknowledged that Beckman is not the first firm to enter the molecular diagnostics market with an instrument platform and content. “We’re not at all intimidated by what might appear to be entrenched competition,” he said. “We’ve got all the intellectual property that we need from a systems standpoint. It’s a great new market opportunity for our interest and we’ve got to be there.”
 
Garrett is confident that even though other big players, particularly Roche, are already selling molecular-based tests, Beckman can capitalize on its network of customers in hospital labs and its expertise in automation.
 
“Certainly, Roche has a strong and capable molecular business in the reference lab,” said Garrett. “But our vision is to make molecular testing routine, to take it to the routine hospital lab in a way that a med tech can run that molecular instrument just as easily as a med tech runs a chemistry analyzer, and [to] have a relatively economical approach to these tests.
 
“I wouldn’t argue about exactly how far along anybody else is versus us, [and] I think we’ll be among the first to provide that capability to our customers,” he said. “I think by virtue of the approach we’re taking and the customer relationships we have that once we do introduce it we will rapidly grow that market and be among the leaders if not the leader.”
 
Confident on Content
 
Garrett said that molecular diagnostics “is focused on some rich areas today, and I think it can be broadly focused on a lot of disease states.” He said the new instrument’s launch menu will focus on infectious disease assays, but the firm will rapidly follow with oncology, cardiology, and “many other disease states that aren’t even scratching the surface today. The market that’s being addressed today is not at all representative of what we can do with molecular-based testing.”
 

Our vision is to make molecular testing routine, to take it to the routine hospital lab in a way that a med tech can run that molecular instrument just as easily as a med tech runs a chemistry analyzer, and [to] have a relatively economical approach to these tests.”

But the question remains where the content for the new platform will come from. Beckman recently failed in its $1.55 billion bid to acquire Biosite, which would have brought Beckman markers that could have been used in the instrument (see BioCommerce Week 5/16/2007). Rival Inverness Medical Systems sealed the acquisition with an offer worth $1.72 billion to Biosite’s shareholders.
 
Asked during a question-and-answer session whether Biosite was the keystone of the firm’s content strategy, Garrett replied that it was “for about a week and half this spring. But before and after that event, we certainly see lots of opportunities for new novel content coming from sources other than Biosite,” he said.
 
Garrett also noted that the firm had a relationship with Biosite that it believes it can continue with Inverness, “looking for ways to take the attractive novel content that they’re developing to the central lab platforms that I don’t believe they have any intention to develop on their own. I think our relationship going forward with Inverness should be at least as good as it was with Biosite in the past,” he said.
 
Garrett said that Beckman has had productive relationships with small, entrepreneurial companies. “We’ve acquired a few of those — Agencourt, DSL, and more recently Lumigen — and all of that adds to our confidence that we’ll have a steady stream of very exciting new tests coming out in the future with an emphasis on pre-natal health, cardiac, and pre-eclampsia in our near-term development,” he said.
 
Analysts also asked Garrett during the meeting what effect the recent M&A activity in the diagnostics industry and GE’s decision not to acquire Abbott’s diagnostics business could possibly have on Beckman.
 
“We’ve seen a lot of M&A recently,” he said. “We’ve seen big prices paid for companies. Clearly, we were prepared to pay what I thought was a very big price for Biosite, and we got to a limit and we decided that’s as far as we’re going to go.
 
In the wake of the recent news that GE is not going to acquire two of Abbott’s diagnostic business, Garrett said, “We’re working hard to understand the potential consequences for us, but I can only speculate about what might happen, and I don’t think that’s appropriate right now.”
 
He also said he wasn’t “quite sure” if Beckman could capitalize, from a market share standpoint, on Abbott’s continuing difficulties with the FDA, the collapsed deal with GE, and Siemens’ integration of Diagnostics Products Corp. and Bayer.

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