Friday, Sept. 18, 2009 | While much of the biotech world is gasping for air in one of the worst economies in modern times, San Diego-based medical diagnostics maker Gen-Probe has been moving along with nary a hitch.
Founded in 1983, Gen-Probe is one of San Diego’s oldest and largest biotechs. It reaped $473 million in revenues in 2008, has little debt and $328 million in cash reserves. And unlike so many of its brethren, Gen-Probe hasn’t had to lay off one of its 800 or so workers who call San Diego home.
Gen-Probe has arrived in its catbird seat largely thanks to millions of blood screening kits it sells each year, which end up testing 80 percent of the U.S. blood supply. And the company hopes to next year be applying for FDA approval for a test that could revolutionize screening for prostate cancer.
Presiding over all of this is new Gen-Probe CEO Carl Hull. The 51-year old is quick to count his blessings, but just as quick to say that not all is well in his world. He feels that the latest version of healthcare reform unfairly targets Gen-Probe and other medical diagnostic companies.
Hull, who took over in May, set aside a few minutes this week to chat with us about battling Congress, the state of the world’s blood supply, and the good news for men with questionable prostates.
I understand you’ve been keeping a close eye on the healthcare reform debate. Tell me what you are seeing, and from your perspective what reform will look like in the end.
From the point of view of Gen-Probe the debate in Washington is critical … We have a particular concern about the funding recommendations, particularly in the (Sen. Max) Baucus framework, that are effectively an excise tax on the revenues of all medical device and diagnostic companies that represent somewhere on the order of $4 billion annually. … We feel the industry has been a little bit singled out in terms of its impact and the fee being levied, and we can talk about the politics of that later.
Why don’t we talk about [the politics] now. Do you think that industry, and your industry in particular, should pony up for some of this?
I think we all as players in the American healthcare system have a shared responsibility as part of reasonable reform efforts. But the size of the fee, we estimate, will be something greater than 3 percent of revenues. So 3 percent tax being imposed out of the blue is horrendous tax policy and horrendous economic policy in my estimation.
Why do you think your industry is being singled out?
Well, if you look at the early stages of discussions among all of the players in healthcare, the pharma industry in particular, focused on trying to provide concessions, perhaps concessions in a theoretical sense, that would be supportive of reform. And I believe some politicians hold the view that the medical device industry did not reciprocate or play in the same fashion.
Are you talking about the $80 billion deal between the Whitehouse and big pharma?
That’s right. And there was not a similar deal, if you will, with the device industry. And if you look on the surface of the treatment of these two industries within the Baucus framework, devices are being singled out.
Your company is responsible for testing much of the world’s blood supply for infectious diseases, right?
That is correct.
Obviously, keeping the blood supply safe is one of the highest priorities for health officials the world over, and in the past there have been serious issues regarding tainted blood. How safe is our blood supply now?
I think the global blood supply is safer than it has ever been in history. I think the technologies, particularly those offered by Gen-Probe, have contributed very much to that situation.
We are using molecular technologies to detect the earliest signs of infections with HIV or hepatitis that are available in the blood. And it’s precisely those patients who have been recently infected and are completely asymptomatic. … So we play an important role in closing what is known as the infection window, which is the period of time in which a donor might unknowingly donate a contaminated unit of blood. So we believe that the risks today are lower than they have ever been.
You hear often about these advances like you are talking about. Then you hear that the technology is expensive, and it doesn’t get to places, such as sub-Saharan Africa in time. So even though the technology is there to protect the blood supply, it is not in these places. Are there efforts being made to get your testing technology to places that may not be able to afford it at market value?
Absolutely. We in fact have an ongoing relationship with the South African national blood services organization for using Gen-Probe products for hepatitis and HIV infections in their blood supply over the past three years. It’s the highest rate of infection of any blood donor population that we are aware of. In that setting, we have processed almost 3 million units of blood, and there hasn’t been a single case of breakthrough transmission of HIV in the South African system.
One of Gen-Probe’s most high-profile products these days is the new test for prostate cancer. Why don’t you tell us about it and what you think it will do for prostate cancer screening.
We have developed and are commercializing in Europe and are in clinical trials in the United States a test for PCA3, which is a particular gene that is expressed in cases of prostate cancer. PCA3 helps clinicians manage patients who are in what is called the PSA dilemma.
There are millions of men who fall into this PSA category, where they have an elevated PSA screening test result. This is the common immunological test that has been used for years for screening for prostate cancer. There has been a lot of controversy surrounding it because the performance of the test is not perfect. … A lot of times men will have an elevated PSA, but when a clinician does a biopsy to look for evidence of the cancer, they don’t find it.
The PCA3 does a beautiful job of helping a physician evaluate those patients. If a PCA3 score is higher (it can) help stratify those patients are most at risk for having a biopsy-positive cancer and allow those patients to be monitored more closely. That is the good news. The better news is that if you have a lower PCA3 score your relative risk of having prostate cancer is lower, and therefore those patients can be monitored much less intensely and don’t need to incur the expense and possible side effects of a prostate biopsy.
What are your plans as far as getting it to market in the U.S.?
We are engaged in a pivotal trial in the United States, which is just underway this quarter. … We will submit our application to the FDA for clearance sometime next year. … Our expectation would be clearance in 2011.
When you look across the life sciences landscape these days you are seeing a lot of carnage. Layoffs are legion, financing is scarce. Everyone is saying we need new financing models, but people are having a hard time articulating what they will look like. What do you see out there, and how do you think things are going to change?
Certainly the events of the last 18 months have changed the world for all companies, us included. And the impact on small or early stage, companies has been particularly acute. These companies are finding themselves hit with a massive cash crunch. … Unfortunately the impact of the credit contraction will be to cause a number of those companies to fold operations and not continue the development of their technologies. … I think there are going to be fewer new ideas that come from the small company segment that ultimately succeed in the marketplace over the course over the next five or ten years.
Do you have a responsibility to ensure that those innovations continue?
Well, we certainly make a huge commitment to innovation today. … We spend 22 or 23 percent of our revenues every year on research and development — we are spending almost $110 million a year on research and development. We will continue to do that as long as the returns are available to support that level of investment.