The underlying model is that amyloid beta protein, a by-product of neural activity, accumulates in the brain over time, eventually forming the plaques that are the hallmarks of AD. The laboratory of Gary Landreth, where the bexarotene study was performed, previously showed that Apolipoprotein E (ApoE) is an essential component of the pathway by which amyloid beta is cleared from the brain, and they hypothesized that increasing the amount of ApoE would lead to more rapid clearing. Bexarotene indirectly does this by affecting a signaling pathway in a way that increases the expression of the ApoE gene.

The E4 variant of ApoE is a known risk factor for Alzheimer’s and is less efficient at clearing amyloid beta. Given the challenges of screening for excess amyloid beta in the brains of non-symptomatic patients or patients with early Alzheimer’s, focusing on individuals with known risk factors like the E4 variant may be the most cost-effective approach to identifying those who might benefit most from the drug. Duke University patented the use of ApoE4 as a risk factor for AD in 1996 by (US Patent No. 5,508,167). It’s not clear (to me, anyway) how this IP will read on subsequent patents targeting ApoE4 as a companion diagnostic. Case Western University no doubt filed IP before the disclosure, and ReXceptor, the company that Gary Landreth and Paige Cramer, the study’s first author, founded will likely also focus on this question.

At this stage there are far more questions than answers, but it’s never too early to begin associating drugs with markers. Even if this therapeutic does not make the jump from mice to men, research into this novel approach will lead to discoveries and drugs that could make a real difference for the 5.4 million in the US and millions more worldwide suffering from this horrible disease.

So, what to do? The GCS white paper “Early-Stage Life Science Company Valuation” profiles three approaches companies and investors use to assess what a company is worth. The first way is to calculate the value based on estimates of future profits. This approach is only as good as the revenue and expense input numbers, and the result is often more a test of plausibility and model building than a data-driven calculation of actual value.

A second approach is to base the value on that of similar companies that recently were sold or received investments. Each early-stage company is unique in its market opportunity, management team, intellectual property, and stage of development, but a set of comps that are broadly similar is a good starting point. The background information needed to understand each company and the deal that yielded the valuation is not easy to find. A few examples from proprietary databases or an investment bank’s client list consequently carry a lot of weight.

Finally, a number or range that comes from the investor’s collective experience may be a key element in an investment negotiation. For entrepreneurs, recognizing that these ranges exist and positioning one’s company to be at the high end of the range is a good strategy.

While entrepreneurs and investors often disagree over the value of an early-stage company, an experienced, successful VC told me, “One of the major factors driving the valuation for VCs is the need to make the entrepreneur feel like they got a fair deal”, and “There is a big difference between the junior VCs who seek zero-sum advantage and the experienced, successful VCs who seek positive-sum wins”.

You can download the “Early-Stage Life Science Company Valuation” white paper here.

Data collected through customer surveys, on-site and phone interviews with key opinion leaders is primary market research. Obtaining customer information and soliciting their feedback in a way that does not violate anti-spam and privacy laws is challenging, while data collection and compilation can be costly. To streamline primary market research for our life science clients, Growing Company Solutions is partnering with BioInformatics LLC, a pioneer and market leader in life science and biomedical market research.

A key asset for BioInformatics LLC is the Science Advisory Board, a panel of over 60,000 scientists and healthcare professionals who have agreed to provide their demographic information and research focus/application areas, and to make themselves available for surveys and face-to-face interactions. The scale of the SAB and its associated database of clinical and research interests greatly simplifies the task of identifying a target population and administering a survey or focus group. For example, BioInformatics offers a service called “Results-On-Demand” that provides answers to a defined number of questions from a defined (and guaranteed) set of respondents for a preset price. Using this tool, or similar targeted research services such as online focus groups, Growing Company Solutions and BioInformatics can work together to address your most critical market research needs.

GCS also uses secondary market research to provide a context in which to interpret primary data, including published reports, SEC submissions, competitor press releases, scientific literature and industry news. The goal is to help companies find attractive market niches, assess competitor strengths and weaknesses, and identify key market trends.

Contact Growing Company Solutions today to get the insight you need to solve your market research problems and help your business grow!

The right way to start a company is to find a significant unmet market need, acquire or develop a solution for that unmet need, then build a commercial organization to deliver the solution. Not too many first-time founders do it that way. I often work with life science companies that are started by scientists. They emerge from university and federal laboratories with an idea and a skill set that enables them to run the science project and see if the idea can be turned into a product, often with help from a Small Business Innovation Research (SBIR) grant. Some scientist/founders recruit a manager with business experience to be the CEO, but their focus and first priority is to demonstrate proof-of-concept for their science and their product.

Sometimes it works out…the product fits an important market need and the founders go off to fame and fortune. More often than not, the company’s market is elusive and not specifically articulated until the company is well down their initial development path. One common issue is that the company’s total market and accessible market are not clearly differentiated. For example, a molecular diagnostics startup with a glioblastoma prognosis test may think they have huge potential because “the market for cancer diagnostics is over $1 billion”. But $1 billion>cancer MDx>cancer prognostic tests>company’s glioblastoma prognostic test. This company’s test commercialization strategy needs to be based on a realistic assessment of the accessible market for the test, not the $1 billion headline number, if it’s going to be successful. Credulous grant proposal reviewers may let a company get away with total market numbers, but the investors they’ll need to pay for clinical trials and actually market the test probably won’t.

It’s never too late to get serious about understanding your real market. Get out of your office or lab and talk to the people you think will want to use your product. Do they return your calls? Are they excited about the concept? Do they want to know how much it will cost and when they can get it? Do they volunteer to participate in trials and beta-tests? If you find that some percentage of qualified contacts are interested, can you work out how large the number of potential customers might be? If a neurologist says he’s interested in your technology, be sure to find out why. If you talk to twenty neurologists and five say they like it, is your accessible market all neurologists or just the ones that specialize in managing glioblastoma? How many neurologists are there in the US and the world? A market estimate based on a bottom-up, company-managed survey or series of focus groups is worth far more than a big total market number plucked from a comprehensive industry report, even if that report cost $4000.

The best time to do this market research is before you start the company. The second best time is now. You may not like the answer, but at least you’ll be on solid ground and moving in the right direction.

India’s economy grew strongly over the last ten years, with the Indian healthcare system growing in parallel. This is particularly true in the private healthcare sector, which India’s burgeoning middle class appears to prefer over the overstretched public healthcare system. This preference opens new opportunities for quality products that cost more than the public system will allow.

The level of HIV infection in India is not as high as in sub-Saharan Africa, but still affects 0.3% of the population, or 2.3 million people, with Andhra Pradesh, Maharashtra, and Tamilnadu the most affected. Most HIV testing occurs in a network of over 5000 Integrated Counseling and Testing Centers run by the Indian government, some of which have highly automated HIV assay systems. There is more of an opportunity for new HIV diagnostic products in the smaller labs and clinics, particularly for diagnostic assays that can be performed by healthcare workers who are not highly trained specialists.

For companies looking to introduce nucleic acid-based HIV tests, the competition is often ELISA tests and rapid tests that detect anti-HIV antibodies in the blood of infected patients. The level of these antibodies is high once seroconversion occurs, and sensitivity is not a problem. In the early stages of infection, nucleic acid-based tests have an advantage because they can detect the virus directly, before anti-HIV antibodies appear in the patient’s blood. This is also the stage of the disease when an infected individual is most likely to infect others. To the extent that new market entrants can introduce low-cost technology that meets the need for early-stage detection, they can be commercially successful and make a significant contribution to reducing the Indian HIV/AIDS disease burden.

I appreciate the fine work that Dr. Valiveti did preparing the HIV Diagnostic Kit Market in India white paper, and on his other internship projects with Growing Company Solutions. Dr. Valiveti has a Master of Science degree from the University of Hyderabad, a Ph.D. in Molecular and Cell Biology from the University of Maryland, and conducted post-doctoral research at Rutgers University. He is currently pursuing an MBA at the University of Maryland’s R.H. Smith School of Business.

We welcome your comments.

The traditional growth rate for the industry is 7%, with certain sub-sectors like molecular diagnostics growing significantly faster. Is it still growing at 7%? My mentally integrated estimate for Kirell was 4%, but I wanted to do some homework to better validate my number.

I started by looking at the growth rates for publicly-traded diagnostics companies. The numbers in the table below are for the first six months of 2010, except for BRLI’s numbers which are for the six months to April 2010.

The overall growth rate for this cross-section of diagnostics companies is a little over 2%. Quest, as the largest company on the list, has a disproportionate effect. If Quest is not included, the growth rate is over 6%. Robert Hagemann, Quest’s CFO, said in Quest’s Q2 2010 earnings conference call that “Volume in the second quarter was 1.3% below the prior year and continues to be pressured by the general slowdown in the provisional office business. This compares to a 2.6% decrease in the first quarter.” It’s not entirely clear if the lost doctors’ office business is going away or just not going to Quest, so an average of the numbers with and without Quest, or 4%, is not a bad estimate.

The growth rate for non-public enterprises is harder to pin down but varies just as widely as those of the public companies. One thing is certain: competition is increasing and there are winners and losers. It’s not a zero-sum game, since more competition means more education (read marketing) going to clinicians, and more testing overall. Even so, labs that fail to add new tests and compete for business are at risk of being consolidated into those that do. I don’t have the primary data to prove it, but my sense is that most diagnostic labs are growing, just not as fast as they once did.

Estimates of the diagnostics market size are notoriously dodgy. It’s not always clear what elements are in and what are out. One particularly problematic area is anatomic pathology, where much of the work involves slicing tissue samples, placing the slices on slides, staining them, and looking at them under a microscope. Sometimes these tests are included; sometimes they’re not.

Another issue is whether the revenue from a test ordered by a doctor through a hospital lab and outsourced to a reference lab, is counted once or twice. In some estimates, revenue from the kits purchased by the labs to do the assays is also included.

When you factor in the confounding effects of company and laboratory consolidation, billed revenues vs. reimbursed revenues, and the difficulty of getting accurate information from private companies and non-profit institutions, the calculation gets complicated. Many industry analysts tend to go for the nearest large round number ($50 billion).

Whatever the IVD growth rate and market size might be, let’s do what we can to make sure they’re higher next year!

For markets that are technology-focused, two great sources are the USPTO and PubMed, since a growing market will often be reflected in an increase in the number of patents filed and papers published. The USPTO (www.uspto.gov) has search tools that allow you to do keyword searches of the databases of issued patents and patent applications. Since there is a multi-year lag between the publication of patent applications and when the patent is issued, the patent application database may be more relevant to a new, rapidly emerging market than the issued patent database.

Follow the USPTO search syntax carefully, and confirm that the patents that are coming up in the search are relevant. If they’re not, adjust your search strategy and keyword or phrase selection. When you’re satisfied that your search is hitting the mark, limit your search by year of issuance or publication and plot how the number of entries changes over time. You can use the same strategy to research and plot the number of relevant scientific publications in PubMed (www.pubmed.gov).

These proxies aren’t perfect, since a lot of market growth can happen without new patents or publications, but at the right stage of the market they can provide surprisingly good insights. Conversely, it’s possible to have lots of patents and publications and not much commercial activity, as is happening now in many areas of nanotechnology.

How about search engines like Google®? Google is a great source of information about the market and a way to locate free market research or report summaries, but you’ll need to check any keyword search entry totals to make sure redundancy and unexpected word uses aren’t compromising your results. The scale of the Google search results for unusual technical words or phrases may suggest the degree of interest, but the date functions for Google search are limited so it’s difficult to show a change in interest over time.

Market size estimates are often a challenge, but an estimate of small (<$50M), medium ($50M-$500M), or large ($500M, or $1B if you’re a VC) may be enough, even if the hypothetical error bars on your numbers are large. You’ll want to focus on the accessible market, that part of the market you can actually reach (e.g. the ~$200M CFTR gene test market), not a much larger market where most sales are unattainable (the ~$45B US diagnostics market).

The best way to estimate the size of the market is with a bottom-up approach, where you find out how much customers are paying for a particular product or service, find out how often, and how many customers are accessible. Even if your product development is at an early stage, you should be talking with customers and have a feel for what they do now to solve the problem you’re targeting and what it costs. More data points are better that fewer, but even a relatively small sample set can give you an idea if the responses are consistent.

The harder number to get is how many potential customers are out there. Government agencies like the CDC, U.S. Dept. of Labor, the Commerce Dept. and similar sources compile lists of how many universities, hospital, physician offices, etc. are in the U.S. With a little creative estimation guided by phone calls to people who would know, you can figure out how many potential customers you can expect per institution. Depending on what you’re selling, the authors of the patents and publications you identified earlier may be useful sources.

When you have all the information you need, run the math: number of institutions x customers/institution x units/customer x cost/unit = market size. If you want to calculate the global market size, the drill is the same but the numbers are harder to get. For most established life science markets, a good rule of thumb is that the US is 40-50% of the global market.

If there are public companies already selling into the target market, the scale of their revenues can be an indicator of the market size, particularly if they also provide an estimate of their market share. Just be sure that the reported revenues do not include grants, licensing fees, and other non-sales-related sources of funds. The 10-Q and 10-K reports that public companies are required to file with the SEC are good sources of these numbers, as are investor presentations and CEO comments in hometown newspaper interviews.

If you have the wherewithal and want market research and insight that goes beyond quick estimates, call Growing Company Solutions. We can help you design a research and commercialization plan that fits your budget and provides you with the answers you need to bring your product or service to the market efficiently.

Google Adwords and clinical diagnostics have a lot in common. In diagnostics, sensitivity is a measure of the proportion of correctly identified positives, and specificity measures the proportion of correctly identified negatives. Cast too narrow a net with your adwords and you miss potential customers (false negatives), cast too wide a net and you pay for clicks that won’t result in new business (false positives).

Google likes to have you err on the side of high sensitivity, generating lots of false positives but not missing any potential customers. But as with an assay, the cost of screening too large a target population is not economical if the frequency of true positives is low. Compared to people on the web looking for sex, drugs, and rock and roll, clickers looking for help with life science commercialization projects are rare. That means that a large number of impressions with even a small percentage of clickthroughs can still give a high false positive rate.

How do you get a large number of impressions if it’s rare for people to search with your keywords? By enabling automatic placements! This setting allows Google to decide if the context of a page or email is relevant and put up your ad. A placement report is a great tool to find out if you’re mostly generating false positives. This report lists the sites that are generating the clicks. You can run it by clicking the Reporting tab at the top of the Google Adwords web site, then Reports, Create New Report, and Placements.

I found that most of those sites generating clicks for my ads had some connection to science (e.g. a science fair site) but were not likely to attract customers for commercialization consulting. I first tried cutting down the false positives by using negative keywords, then moved on to excluding websites, and finally decided to just stop using automatic placements. My click rate is much lower, but the clicks are much more likely to be from potential clients.

If you’re one of those potential clients, please give us a call. We’d be delighted to talk with you about your marketing sensitivity and specificity issues, and how we can help you zero in on your life science target customers.

When I meet someone who wants to do business, I start my due diligence with a visit to their website and/or LinkedIn® page. How a website looks and feels sends a strong signal. Successful sites scream, “Yes, follow up!” and act as antennas attracting prospective clients via search engines. Now more than ever, the website serves as a company’s public face and is central to an effective marketing campaign.

I like my new site much more than the previous one, but what matters is whether my prospective clients find it useful and accessible. Could you tell right away what we do and how we can help? Do you want to follow up? I’ll be delighted to get your feedback.