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THE GW INTERVIEW: Cepheid s New Chief Says Diagnostics is the Best Therapy for Potential Biotech Blues

SAN FRANCISCO, April 22 - Cepheid's new CEO, John Bishop, started his job last Monday.

He is currently commuting between his home in Chicago and Cepheid's Sunnyvale, Calif., headquarters. While he is in sticker shock from shopping for a house in Silicon Valley, Bishop seems very much at home in what he sees as his role to build Cepheid from a tool concern into a "patient disease-management" company.


GenomeWeb caught up with Bishop between flights.


GenomeWeb: Why were you chosen for the CEO position?


John Bishop: A big part of where they want to go and what they are looking for from me is to bring in some additional vision on utility and focus in the clinical arena. If you look at my recent assignment with Vysis [a clinical diagnostics company which he headed], that's something that I have done, and I feel I have a good feeling for where the genomics market is going. One of the major utilities for the Cepheid capabilities is to bring all this very powerful genomic information to routine clinical use.


GW: Such as?


JB: A woman undergoing surgery for breast cancer, and there's nodal involvement, and there's a need to evaluate those nodes as to whether or not there's cancer. It's theoretically possible to take a look and identify genes that are only expressing at certain levels if in fact there's cancer involvement with those nodes. But you need the information back very quickly so the surgeon can have access to that information while the patient is on the operating table.

With Cepheid's capability ... you get an answer back within 30 minutes, so the surgeon can have that information to guide him on whether or not to leave nodes or remove nodes. And that has substantial implications on quality of life and overall survival.


GW: What's it going to take to get that vision to the market?


JB: One of the key items is getting the GeneXpert system on the market. That will be one of the first systems that will be able to put a specimen in and get an answer out. And then the next item will be working with various appropriate collaborators on getting access to the appropriate genomic target. To be able to put the individual test on the system.


GW: When will GeneXpert come onto the market?

JB: Relatively early next year.


GW: Is the data there to support this application? Sometimes the tools are ahead of the understanding.


JB: That's going to be an ongoing process. It's going to be forming a number of collaborations on looking at identifying individual genes that are involved with various forms and states of cancer. Plus there are some targets available today. In addition to that there is also the aspect of infectious disease. And of course that's where Cepheid is involved right now, utilizing the technology for identification of biological agents. Basically you're looking at bacteria or virus. Again, the issue there is making that available on a real-time basis.


GW: To get there, will you have to become a data company in addition to a tool company?


JB: Absolutely. That's all part of collaborations. People will be basically doing research to understand genes that are turned on and turned off, and then they'll be involved in clinical research asking what's the correlation there? So we'll be looking at those types of collaborations.


GW: Is there a vision then to move the company from a tool company more towards therapeutics or diagnostics?


JB: The company will be more toward what I've always referred to as patient disease management. The idea is that you need to understand what's going on with the patient, and with that information you can direct how to manage that patient, whether it's pharmacogenomics or determining therapeutic response, determining early recurrence of disease or early detection. So the idea is that the company will be focused more as a fully integrated system versus just the hardware of the tool.


GW: How is Cepheid going to become a bigger company with more revenues?


JB: That's going to be based on products the company already has. The Smart Cycler system should be able to grow pretty well. The GeneXpert will grow extremely well. The idea is going to be working with people and getting these additional disease target capabilities integrated on the system because these markets in and of themselves can be quite substantial. As you add more and more of these individual test targets onto the test platforms, you're looking at a very substantial revenue growth engine.


GW: Are you projecting any numbers?


JB: Not yet. I've just arrived so these are all things we need to be working on.


GW: There's a perception with some biotech investors that tools are yesterday's news and therapeutics are now where to place the bets.


JB: Within the sector, do you have to be and should you just be in therapeutics? My answer is no. Just as important as therapeutics is assessment of the patient. What we're now looking at by being able to go in and determine patients that will more likely respond or not respond and detecting these diseases earlier, we're looking at high medical value-added tests.

What we're going to see are products out of these kinds of companies that are going to be showing more therapeutic-like returns. And we're only seeing the very tip of the iceberg relative to the whole field of genomics. So this thing is going to be a lot of solid growth and in fact on the assessments of the patients I think that segment of the market is going to grow faster than the therapeutic side for a couple of reasons.

The overall time-to-market issues, and we can get at a correlation relative to gene function and patient outcome a little bit faster on assessing what's going to happen versus developing a therapeutic. That's going to continue to develop at a rapid pace and an expanding pace as we take the whole genomics now to the second generation and move away from just discovering genes to really being focused on what's the gene function. As more and more is learned, that's really going to expand the product pipelines and opportunities for these kinds of companies.


GW: So the industry is shifting in the short term away from therapeutics to patient assessment?


JB: I don't think the market has shifted as much as investors' awareness of the market versus thinking just therapeutics and looking to hit the big homerun on the therapeutics side.

As you go look at the genomic information, the ability to unlock and get at that information, the procedures have been tedious, time-consuming, and complex. What Cepheid has done is developed the capability to make it not tedious, not time-consuming and, from a user perspective, not complex. The steps are still complex, but that complexity will be transparent.

Now what you have is the ability to unlock the potential that the genomic information is going to provide and bring that to routine use, and also where you need answers, such as the example in the operating room, on a very rapid real-time basis.


GW: Will there be a change in Cepheid's customers?


JB: The systems will still be purchased by the laboratories. However, demand for these tests will in large part be involved with the clinician. The labs will be setting up and running these tests, but the clinicians are going to really need to be educated, they will be ordering these tests, and also you're going to have a high level of patient awareness.

So how these things will be marketed will be quite different then old line people that are used to talking about old diagnostics, the clinical chemistry, that type of thing. This is a whole new market, and market dynamics will be quite different.


GW: What do you see as the first applications?


JB: Bacterial and viral work. That business will continue to develop while we develop this focus on the medical side, and medically the lead area will be oncology as well as infectious-disease targets.