GeneNews’ IDL off to flying start

GeneNews’ (TSX:GEN) recently formed U.S. joint venture, Innovative Diagnostic Laboratory (IDL), took a huge step forward in the first quarter in its goal of becoming a leader in molecular diagnostics and personalized medicine.

“With a successful limited scale launch of IDL in the fourth quarter of 2013, full scale-up activities began in the first quarter of this year, with a ramp up in lab capacity, a quadrupling of the size of the sales force, incrementally higher sales of our flagship ColonSentry test, and a rollout of new tests,” GeneNews’ executive chairman, James Howard-Tripp, says in an interview with

A total of 14,680 diagnostic tests were processed by IDL in the latest quarter, up 346% sequentially from 3,288 tests in the 2013 fourth quarter. Of these, 12,110 were ColonSentry. In April, the lab processed 13,600 tests.

IDL was created in mid-2013 as a joint venture between GeneNews and two private American companies: Health Diagnostic Laboratory, and a sales organization with a national reach.

IDL’s initial mandate was to broaden the U.S. commercialization of ColonSentry, the world’s first blood test developed by GeneNews to assess an individual’s current risk for colorectal cancer (CRC). “Our objective with IDL is to become a world class, early cancer diagnostic lab,” Mr. Howard-Tripp contends.

Taking a “multi-view” approach to the diagnosis and treatment of cancer, he says IDL is working to assemble, through a combination of internal pipeline development, third-party licenses and potential acquisitions, a robust menu of advanced cancer assays to be offered by it throughout the U.S.

In the first quarter, IDL launched Health Diagnostic’s EarlyCDT-Lung blood test that aids physicians in risk assessment and early detection of lung cancer in high-risk patients, such as smokers.

In late April, IDL added Beckman Coulter Diagnostics’ Prostate Health Index (phi) to its menu of cancer assays and initiated a commercial roll out of the groundbreaking test across the U.S.

Mr. Howard-Tripp says the phi test is a significant step forward in prostate cancer management and IDL is the first lab to offer the test to physicians across the U.S.

The phi test is designed to fill the void left by the noise around the PSA test for prostate cancer, which has a history of too many false-positives, leading to unnecessary follow-up testing. “The phi test is three times more specific than PSA and will aid physicians in separating prostate cancer from the more benign conditions such as BPH,” he adds.

Mr. Howard-Tripp says IDL plans to bring additional tests into its pipeline this year, with planned launches in the second half, paving the way for accelerated growth.

He notes that IDL’s performance in the first quarter also reflects a shift to an automated processing system at its CLIA-approved lab in Richmond, VA.

At the end of last December, lab capacity for ColonSentry was capped at 50-to-60 tests a day. With the introduction of automation, capacity is now close to 800 tests per day and by the summer there should be no restriction on the processing limit

The lab’s ability to handle the higher volume allowed IDL to scale up the sales force, significantly, and IDL processed around 2,000 ColonSentry tests in January, 4,000 tests in February, and 6,000 tests in March. IDL doubled its sales force in January and doubled it again in March.

In April, the lab processed approximately 7,200 ColonSentry tests, with volume still growing. IDL has made a further small adjustment in the sales team “to a size we’d like it to be for the moment,” he says.

Revenue for IDL in the first quarter was about $500,000, with costs incurred of $3.1-million, resulting in a loss of $2.6-million.

Mr. Howard-Tripp explains that as a start-up, IDL does not yet have a history of collections of invoiced test revenue and therefore, recognizes revenue only on payment from third-party insurers.

As a result of the lag time between when a test is processed and payment is received, IDL’s first quarter revenue is more reflective of the testing volume in the fourth quarter of 2013, as most of the first quarter revenue is still to be collected, he adds.

“As we move forward, this lag time will narrow and revenue will more closely reflect test volumes,” he suggests. IDL is also working to obtain Medicare coverage for ColonSentry.

Mr. Howard-Tripp, who has worked in pharmaceuticals and diagnostics, believes IDL has to behave as a thought leader in the area of diagnostics. .

“It’s important to understand how fast the practice of medicine is changing, especially with respect to diagnostics, where just 2% of U.S. heath care spending informs up to 80% of medical decisions,” he says.

Take colorectal cancer, for example.

“The problem here is one of persuading patients, deemed to be in the risk group, to undergo colonoscopy,” he contends. “Although it is the gold standard and the most definitive test we have, it is invasive, expensive, and not without risk. For every 10,000 patients into the open end of the ‘screening’ funnel, we may diagnose only 20-to-30 people with colorectal cancer.”

More than 55% of patients decline a colonoscopy, he says, adding that stool based tests have very poor compliance of about 8%. “We therefore miss a large number of CRC cases, particularly at the early stage, and need some supportive way to help patients get evaluated. A simple blood test may be the answer.”

Mr. Howard-Tripp explains that a positive ColonSentry test should facilitate a decision to undergo an increased evaluation for CRC, sometimes with other, additional tests, before going on to colonoscopy and biopsy. It can help prioritize patients at greater current risk for colorectal cancer, so that they selectively go forward for colonoscopy and further evaluation.

“This ‘enriched’ sample should yield a higher result during colonoscopy, with the outcome that we are finding the CRC cases earlier, at a higher rate, and with less cost and adverse events,” he adds.

And there’s a 90% chance of survival when catching CRC early. On the other hand, 60% of cases are detected too late.

“We’re talking to several groups now where the diagnostics would look at a set of diseases that are more difficult to type,” he acknowledges, adding that “with some of these, you end up with new, tailored approaches in treatment. It will only increase the pace at which medicine is changing and, diagnostics will often be showing the way.”