In conversation with James Howard-Tripp

As executive chairman of GeneNews (TSX:GEN; OTC:GNWSF), James Howard-Tripp is a veteran of pharma and biotech management and company creation, which included a long stint as CEO of Labopharm, where he oversaw the development and approval of three products and the launch of two, with the lead product marketed in 19 countries. A longtime member of the GeneNews board, Mr. Howard-Tripp led a restructuring of the molecular diagnostics pioneer in the summer, with a renewed focus on a new U.S. joint venture, Innovative Diagnostic Laboratory (IDL), that will initially target broader commercialization of the company’s ColonSentry blood-based risk assessment test for colon cancer. In this interview with, Mr. Howard-Tripp discusses a strategic shift for GeneNews, the game plan for IDL, and the state of its sales and marketing arrangement with Enzo Clinical Labs to distribute ColonSentry in New York and New Jersey.

Let’s begin with the restructuring of GeneNews and how IDL came together.

What became apparent at the GeneNews board was that we had a lot of very good science, but we were not satisfactorily converting that science into products and commercializing those products. So the board decided to restructure the company and transition to a commercial organization with a very strong focus on the U.S. We reviewed three options: to partner with a very large lab organization, where the experience can be positive or negative, depending on where the lab puts your product on its promotion list; build our own lab and sales organization, which is always high risk; or partner with a smaller group that has successfully done it before. That’s where we came across two private American companies – Health Diagnostic Laboratory (HDL) and a sales organization with national reach – and we created IDL in July. We also restructured GeneNews around the same time as part of our new U.S. strategy. The plan involved staff reductions and de-emphasizing our Canadian and Southeast Asian operations. Going forward, our cost structure will be about 50% of what it has been. And for the time being, the role of our Southeast Asian venture will be scientific development.

What does each partner bring to IDL?

The sales and marketing group does just that as well as prepare marketing material and train sales reps. HDL brings lab management, which includes reimbursement. And GeneNews’ primary responsibility is new products, either developed internally or in-licensed. If you go back to the restructuring, I’m heading up GeneNews, because in my previous job, I developed and commercialized new products. Heiner Dreismann, our lead director, has moved into a new role of new product supply, along with Karl Wassmann who formerly ran our U.S. operations. They’ll work with me to bring new products into IDL.

How will the profits of IDL be shared?

After a deduction for costs, each party will receive one-third of the revenue and profits generated by IDL.

Can you shed some light on GeneNews’ two partners?

In the space of three or four years, HDL has become a leader in health management, with a proven track record in offering a comprehensive test menu and biomarkers—most notably for cardiovascular disease. Our plan is to parlay that expertise into tests for the early diagnosis of cancer, which is where ColonSentry is, and to build a pipeline of traditional and genomic-based cancer diagnostics in IDL. We’ll have more to say about our sales and marketing organization after the IDL business is well underway.

What do you see as the vision of IDL?

We intend to provide physicians with personalized clinical intelligence to improve health outcomes through the early detection of cancer. The gap we see in the marketplace is what we call, find it, understand it and treat it. To accomplish this goal, we plan to provide a panel of traditional and genomic-based tests that aid in early cancer detection, guide treatment protocols, and monitor remission and recurrence. Not only do we plan to commercialize our own products, but we will also use IDL as a vehicle to bring in additional tests for cancers for a multi-dimensional view of proteins, biomarkers, and gene expression.

Does that mean you will do other people’s tests?

IDL will do three things: GeneNews tests, commercially available tests in the public domain, and partner or license-in or acquire additional tests to build up the lab.

How has the start-up of IDL gone?

We initiated start-up operations at IDL’s CLIA-certified lab in Richmond, VA in the third quarter, and they have gone smoothly. ColonSentry was rolled out on a limited basis to select states to help establish full operation of the lab, initiate the reimbursement process, and ensure everything is satisfactory before scale-up to a full launch, which we’re planning for the first quarter of 2014. Like our early experience in New York and New Jersey, interest by doctors and patients in ColonSentry has been high, with good initial uptake of the test. Importantly, while it’s still very early in the process, our initial reimbursement experience has also been positive.

What other tests are in the works for IDL?

We are currently working to add two additional tests to the IDL offering before the end of 2013, with more to follow in the first half of next year. We will announce these as they become available.

What’s the status of your distribution deal with Enzo?

Results from Enzo’s initial promotion of ColonSentry were positive. Physician and patient acceptance of the test was good, uptake was quick, and usage was building nicely. However, Enzo has found it difficult in the current reimbursement environment to meet its contractual targets. As a result, the commercial relationship has been placed on hold—at least until such time as we are confident that they will be able to satisfy the terms of their marketing partnership agreement.

How will IDL differ from the Enzo experience?

First of all, the similarities we saw with Enzo, such as positive reception by patients and physicians, and uptake of ColonSentry, are magnified with IDL. The problem is Enzo does not have much experience in molecular diagnostics and it has a particular way of dealing with reimbursement, which is not conducive to making this work. On the other hand, at IDL, we get to draw on their expertise from running the lab, to sales and marketing, and reimbursement, which is unbelievably valuable. Reimbursement plays out with the partner you have, and early days with IDL have been positive.

What’s been the impact of the new Medicare reimbursement codes?

It’s an issue affecting everyone, not just us. [Editor’s note: Effective Jan. 1, 2013, clinical laboratories began billing for more than 100 molecular pathology tests using new CPT codes, which eliminated code stacking. The new system for billing has resulted in labs receiving less than what they had been paid previously.] Medicare typically covers 30% to 35% of reimbursement, with the rest coming from private payers, who, while they may take some direction from Medicare, for the most part, do their own thing. When you tackle this issue with public and private payers, it is critical to provide compelling reasons for them to cover your tests. That’s what we’re doing at IDL, and so far, we’re making good progress.

Where do you see IDL in a year from now?

We see the lab offering multiple tests, focused initially on colorectal cancer, but expanding into other male and female cancers, all targeting early detection.