Thursday, July 3, 2008

Genetic test firms struggling to find niche

By Ryan McBride

While genetic testing has promised to become more mainstream in health care once technologies to screen all or part of peoples’ DNA are less costly and more accurate, Massachusetts life sciences firms in the screening business are facing hurdles to market their products. 

Cambridge startup Knome Inc., a provider of whole-genome sequencing, was warned last month by the California Department of Public Health to stop offering its services in California until it obtains licenses and physician consents. Also, Interleukin Genetics Inc. of Waltham is trying to remedy falling sales of its personal genetic tests for nutrition and cardiac health.

Bay State firms are not alone. California health officials sent warnings such as the one Knome received to 13 providers of genetic tests last month (Interleukin not among them). And many diagnostic companies have been faced with the challenge of marketing genetic tests to consumers for several years. 

Several types of genetic tests exist, some to detect multiple genes to diagnose diseases such as cancer, and others to find short sequences of DNA that predict less serious conditions, said Keith Batchelder, CEO of Genomic Healthcare Strategies, a consulting firm in Charlestown. Companies must decide which marketing strategy to choose depending on the type of test they provide, he said. 

The traditional marketing model for genetic testing firms has been to gain distribution deals with major clinical lab firms such as Laboratory Corp. of America Holdings (LabCorp) of North Carolina, or Quest Diagnostics Inc. of New Jersey. Yet competition is high for such distribution pacts, Batchelder said, forcing some test makers to seek other avenues to market products.

“Diagnostic companies are going to seek alternative channels to market (products) that don’t depend on current models,” Batchelder said.

Interleukin (AMEX: ILI) has taken the direct-to-consumer approach to distribution, marketing its genetic tests through the Quixtar Inc. and Amway Corp. units of a major Interleukin shareholder, Alticor Inc. of Ada, Mich.

However, sales of Interleukin’s genetic tests — one of which predicts how people metabolize such nutrients as vitamin B and another that forecasts patients’ risk of heart disease — plunged from $2.7 million in 2006 to $779,000 in 2007.

Interleukin CEO Lewis Bender, who took over the top post in January, said the drop in sales was due to a lack of information for people about what to do after they receive the results of their genetic tests. The company plans to relaunch the heart health and nutritional genetic tests in the second half of this year with additional clinical and health information for consumers.

Knome CEO Jorge Conde said the market for Knome’s highly specialized whole-genome sequencing will grow as the price of the technology falls. With a price of $350,000 for its service, Knome is targeting wealthy people with keen interest in science and their personal genetics. While the privately held firm does not disclose sales figures, it is on target to reach its goal of gaining 20 customers this year, he said.

On the regulatory front, Conde said that his firm plans to work with California officials in order to continue to offer its services in the state.