Contributing Editor

Harry Glorikian is founder and managing partner of Scientia Advisors (Cambridge, Massachusetts/Palo Alto, California). He has 20 years of experience in healthcare and life sciences industries and is known as a leader in helping companies streamline their operations and accelerate growth.

Having held senior management positions at Applied Biosystems, Signet Laboratories, and X-Cell Laboratories, Harry has a deep commercial background in life science areas such as diagnostics, molecular biology, proteomics, cellular biology and biodefense, to name a few. His understanding of technologies, operations and strategy from both buyer and internal company perspectives has shaped Scientia's sophisticated framework and proprietary analytical tools.

He writes for industry media, is frequently quoted in periodicals, and is a speaker who advises media and industry leaders on current trends in life science, healthcare and business.

He also is an inventor who holds several patents and has patents pending in the U.S. and abroad.

Glorikian received a BA in biology from San Francisco State University and an MBA from Boston University.

Harry Glorikian Heads Scientia Advisors

BB&T: It seems like everyone connected with the medical technology sector is decrying the short-term "death of innovation" due to the falloff in venture funding. However, with the economy showing signs of resurgence, might a funding rebound in the sector be looming?

Glorikian: Well, rebound is a relative term. If you look at it historically, compared to say the dot com or the genomics bubble itself, the bottoms were in 2002 and 2004 for biotechnology and medical devices. I think we're at that level where it's logical for a turning point in 2009, maybe early 2010, especially when you consider that there's over $3.3 trillion in cash sitting on the side that needs to go back into different parts of the market. If you want to get the better returns, you're going to have to look for riskier investment. And now that the financial markets have normalized, and allow for a little bit more liquidity, the LPs are probably willing to step up to the plate. We've also heard some anecdotal reports of bankers knocking on start-up doors to rekindle interest in IPOs.

The other thing is, for healthcare in particular, I think the LPs and the VCs might be looking to healthcare to be more of a place where you have secular growth, as opposed to discretionary spending like with the Internet or the entertainment industry or something like that. There's a lot of opportunity in places like personalized medicine, electronic data capture, EMRs, clinical trial designs, CROs, CMOs, and fortunately there seems to be some enlightened policy coming from Washington around stem cells, providing funding and speeding the time to market for innovative new products.

BB&T: Yes, at least in the stem cell area, the rules are all the same now.

Glorikian: I can tell you that I just got a call from one of the largest VCs in the industry, who really wants to dig into the area of diagnostics, where they historically have not made any bets. I think we're going to see a resurgence of investment in the med-tech space. I think that, although the companies that are going to get the investments are going to be fewer, the products that are funded will be of a higher quality.

BB&T: Don't you think that the VCs will stay with their investment in a particular company a little longer?

Glorikian: I've heard that they're paring down. In other words, what they're saying is, "I have, say, 10 investments. Two of them are what I'm going to bet on and the other eight, well, they're going to fall by the wayside or they're going to get bought. That's driving a lot of the activity by the companies this year from an acquisition standpoint. A lot of them are waiting for these companies to get less expensive, and that's driving their M&A activity.

BB&T: I agree that they are paring the overall number of investments and trying to focus on the ones that they think will be the winners. But those that they are, they're getting in earlier on and staying a little bit longer.

Glorikian: Yes, I believe they're staying a little longer, and if they're willing to put in money, they're putting in a decent amount of money so that hopefully they don't have to reinvest.

BB&T: I'm somewhat mystified as to why diagnostics have not attracted more attention from the investor community. For all that's happening in healthcare, that's where it starts.

Glorkian: A lot of the healthcare reform push is weighted toward it. If you refer back to President Obama's original speech on the stimulus package and healthcare reform, the emphasis was on prevention, diagnosis and EMRs. Treatment was not discussed.

BB&T: The pace of clinical change has been a hallmark of healthcare, especially over the past two decades. Now, with healthcare reform in the wings, will that situation change?

Glorikian: If we include the stimulus package in what we would call healthcare reform, we see healthcare reform accelerating, not decelerating, the rate of clinical change. The stimulus package includes $1.1 billion in comparative effectiveness and about $19.2 billion in healthcare information technology. By investing in the ability to measure healthcare costs and quality properly, providers, payers and other stakeholders will be able to better manage cost effectiveness, and I think that standardization around best practices and technologies is likely to occur, due to which results will be studied and communicated more effectively, pushing clinical change at a more rapid pace. If you measure it, it starts to get managed better.

In talking about healthcare reform more broadly, what is really important is that the most important payer, the government, is becoming a lot more cost-sensitive. And private payers are also starting to be worried about how everything is going to change. Furthermore, if you look at what's happening with patients and employers, they're becoming more sensitive, especially because of the downturn in employment. A lot of people who think they're going to get laid off are using more of their healthcare benefits and therefore driving up costs, which in turn is driving up current healthcare costs. What we're going to see is manufacturers and payers embracing not technology for its own sake, but technology that truly improves the cost-effectiveness of healthcare.

BB&T: The sign has been flashing for years, but the message is clear now that there are no bells-and-whistles types of changes. It has got to be something that makes that particular application of healthcare work better.

Glorikian: Yes. It could be simple things, as at Geisinger Health System — they're a great example. Just by making sure that the doctor follows the standard of care or standard procedures as a checkbox, they've been able to dramatically reduce costs and dramatically increase effectiveness. If we could just implement that across the country, something very simple in a sense, it has a dramatic effect.

BB&T: They are the classic answer to those who say, "Well, we're never going to be able to rein in healthcare costs." There are examples that prove that yes we can, if we do it the right way.

Glorikian: We are looking at how the world is changing the health IT landscape, and also at how the health IT landscape is going to completely change the world in how medicine is practiced. Things like clinical decision support systems, which are going to be driven by diagnostics are going to completely change the paradigm on how you and I get diagnosed in the future. The information that allows you to aggregate and the directional pieces of information that it gives a physician in one view will be dramatic. And a lot of it will be driven by diagnostics, some of protein-based diagnostics and a lot of it genomics-based diagnostics.

BB&T: Does the coming of some form of healthcare reform automatically mean fewer opportunities for med-tech companies?

Glorikian: For us, reform doesn't mean fewer opportunities. Reform means opportunities and threats that companies need to think about. The opportunity is gleaning more profits from a broader base of covered lives, opportunities to sell products differentiated by cost-effectiveness, faster adoption due to faster standardization, and the opportunity to leverage things like EMR data to speed time to market, reduce clinical trial costs, pharmaceutical companies partnering with providers to leverage EMR data for, say, Phase IV pharmacovigilance trials, and the opportunity to commercialize innovative products like cell therapies.

The threats are when companies are not ready for this, or not willing to make a change – threats to products that are deemed to be not cost-effective, or accelerated penetration by more cost-effective products into an incumbent's market. Or less reimbursement for service providers who do not implement the right health IT tools. Despite the gloomy economic outlook and the potential for regulatory change, there are short- and long-term strategies that can help improve one's position over the next few years, and the opportunity for companies is to actively manage their products as portfolios and retool to support a long-term value equation. They can't neglect the sub-segment opportunities, because those are the ones that are going to drive growth and profitability.

Companies at this point need to dramatically increase their focus on the management of cost and quality/improvement of this healthcare equation, and that's a paradigm shift for most organizations. Only the firms that take advantage of this current situation to reposition themselves for the future are actually going to emerge from this crisis with what I would consider a healthy bottom line or a clean bill of health.

BB&T: How should companies best organize themselves – particularly insofar as development of new technologies is concerned – to deal with the new realities?

Glorikian: Given healthcare reform and other forces at work in this environment, companies really need to follow an analytically driven, experience-influenced strategy to meet the specific needs of the market when developing new products. For instance, focused product development efforts to address a specific pain point in the patient care cycle. We see a lot of companies that don't go through the details of understanding the care cycle. It's a matter of finding an unmet need that is responsible for high costs or poor outcomes. By truly understanding the need, these companies are more likely to be successful in developing a winning solution. To do that, you have to work closely with the customers and caregivers to understand the care cycle, the problem and how well your solution may fit it. Every detail counts when you're looking at this.

I would tell these companies to be technology agnostic whenever possible – understand the problem first and then start thinking about the solution. And ensure that the pain point of what they're looking at isn't just specific to the U.S. healthcare system, because the solution may be relevant to many geographic markets, and will give them access to other emerging high-growth markets. But the main points for the U.S. are definitely going to be cost-effectiveness and reimbursement. Kill a project if it's not going to be value-added or will not secure reimbursement.

Health economic exercises are now becoming standard in your strategy to position your product correctly. Understanding the care cycle is one piece of it, but understanding your sales and marketing strategy also is important. What we're seeing is that the good sales and marketing people are those who understand the care cycle and can have a real discussion with providers and the reimbursement system about the treatment paradigms. A good example of that from a diagnostic perspective is Genomic Health. What they found was that salespeople from oncology therapeutic companies like Genentech, who have experience in working with oncologists, were better-suited to selling their Oncotype DX breast cancer test than a typical in vitro diagnostics salesperson.

You have to look at opportunities. For example, peripheral vascular disease. There's a big market in compression stockings, but you're not solving the problem – you're essentially putting a Band-Aid on it, and you're creating a long-term chronic problem. Whereas we're seeing the ablation market not only driven by the docs providing the procedure, but also by educated consumers who are saying, "I don't want you to just put a Band-Aid on it; I want you to get rid of this problem." When you go in there and ablate, you eliminate the problem and essentially, you become a more cost-effective solution because now that person is not chronically in the system and developing more problems as time goes on.

Companies need to think about these sorts of positioning. If they think about it and work it out and examine their channels, their technologies and the patient care paradigm, they can be positioned to be a winner as opposed to being marginalized by another player.

BB&T: In whatever new form "healthcare" overall takes, isn't it likely that diagnostics will play an increasingly important role?

Glorikian: Yes, definitely – but not every diagnostic. We know that by appropriately diagnosing a condition, it is much more likely that you get the intervention right the first time by targeting the root of the problem and curing the disease – nipping something in the bud the first time. At Scientia, we like to call this the movement from analog diagnostics to digital diagnostics. This means less trial-and-error medicine, including fewer side effects, fewer costs of fruitless therapies, a better quality of life for the patient and dramatically lower costs for the system. This new wave of high-value diagnostics, as we call it, provides actionable answers as to how to target the root cause. They are becoming much more critically important and we believe will change the way medicine is practiced, and also change the industry dynamics.

As I mentioned before, not all diagnostics are of high value, as they do not give you an actionable piece of information that doctors need in order to make a good decision and therefore are not intrinsically cost-effective. So a diagnostic test or system that does not meet the requirements of this new environment is not going to be readily used or will fall by the wayside.

Some tests will be very much commoditized – it's going to be a check-the-box thing. "Yeah, we did the test, it was pennies. It didn't tell us what we wanted to know, but we did it." You know, the practice of medicine is not very good about throwing something out very quickly.

BB&T: Within diagnostics, molecular diagnostics seems poised for truly significant growth. And is the time for point-of-care diagnostics finally here?

Glorikian: In molecular diagnostics, tests have to be actionable to the physician and have to provide direction in how you're going to handle the patient therapeutically, and it has to provide a cost benefit. So it has to have all those pieces to be considered useful. We see molecular diagnostics, or MDx, growing dramatically. The shifts in the market are quite significant and the number of players that are looking at moving into this area is quite interesting. Over the past three or four years, we have seen a shift in the clients that are coming to us and asking for information around MDx, understanding where they can play in that space and understanding the impact that it will have on all other areas. We believe MDx will have a dramatic impact on therapeutics, and how therapy is going to get practiced. We're seeing a dramatic impact on how doctors manage their patients accordingly. Some examples are things like getting a test result in an hour, as opposed to two days. It's changing the way that the doctor interacts with the patient when they can get the answer in an hour versus a few days.

From a point-of-care perspective, the technologies are getting more sensitive and more connected and are having more of an impact on health economics. That's driven by the biology, but is also being driven by other forces like Intel releasing a more powerful microchip that requires less power. That's not being done by our industry, but it's being used by our industry. New technologies are starting to replace traditional lateral flow tests, and therefore improving sensitivity. Some of these technologies are going to rival the sensitivity of lab analyzers and therefore, if you can get the same result in the lab or near-patient, then you're not going to get a lot of pushback from the doctor to not use it.

Health IT, specifically point-of-care data management solutions, are going to aid in the adoption of point of care because many providers that we're talking to won't buy a point-of-care technology if there's no connectivity for routing a point of information to EMRs. We're seeing that manufacturers of point-of-care technologies are finding ways to lower the cost of manufacturing, which is also going to help speed the adoption of some of these technologies.

BB&T: Let's shift over to genetic testing and take a trip into the future with personalized medicine. Where truly are we headed, and how fast will we get there?

Glorikian: From where we're sitting, personalized medicine in a sense already is here. Segmenting patient populations by test results is a revolution in how to market therapeutics. There already are many tests today that direct and/or influence therapies. Genomic Health's test can be classified as a test that is influencing a therapy or therapy class. That test and other tests already are here, and there are other tests that are in the pipeline. We have been tracking the number of tests entering the regulatory and/or clinical trials pipeline, and over the last three years, the number of tests on the front end of the funnel has dramatically increased. We used to be able to depict them on one slide, and now we can't fit them because there are so many. In other markets, we segment a population by demographics – by age, sex, income, etc. In healthcare, we use tests to put people in one bucket or another. Now we're starting to get the right tests and the right segmentation, and by getting the right segmentation, it's changing the way we therapeutically approach the patient.

We're already seeing some of the advanced hospital systems that understand future impact of this, implementing genetic or genomic-based clinical decision support systems so they can inform doctors of what these genomic tests mean and what they need to do or how to treat the patient next. It's even coming into some of the advertisements by cutting-edge hospitals. We've got Mass General here across the way, coming out on the radio and saying, "We've got the genomic and genetics tests to better target therapy and therefore be a better group for you to come to."

It's very interesting to see the changes that are happening in the market right now. There are tests coming on the horizon that we believe will have a dramatic effect on the market as we know it today, and the interesting thing is that many companies don't fully understanding the impact of this and the impact that it will have. We expect to see a shift in the economics and the control point within the system because of these sorts of products.

One of the big shifts that has happened in the past several years is that at one time there was one way to do one thing, and one way to look at one thing. And now there are multiple modalities of looking at the same thing, multiple technologies that may allow you to look at the same thing, multiple ways to come at the same problem. And companies are having a hard time keeping track of what may blindside them, of what may come out of left field.

BB&T: How about jumping over to imaging, a medium where technology truly dominates? Can you peer into the future and give us an idea of what future advances we might expect?

Glorikian: The big change in imaging is going to be what I'll call molecular imaging, which is the convergence of imaging today and molecular diagnostics, in a sense. Right now, imaging alone can give a lot of false positives, owing to the fact that a discoloration on an image can be caused by a number of factors outside of the presence of a tumor. With molecular imaging, we will have a much higher degree of accuracy that a spot on an image is because there is a tumor there. This will allow for new applications of imaging such as determination of the molecular typology of a tumor. It will lead to more minimally invasive medicine and potentially eliminate the need for many biopsies, although that's much farther off into the future.

But one of the things that imaging needs to be worried about is overuse. Technologies can get ahead of themselves, where there's a lot of overuse happening, and reports like the one from the Medicare Payment Advisory Commission on overuse of imaging obviously are not going to positively impact the revenues of companies that are playing in that sector.

The other potential threat to imaging is these blood-based molecular tests where, instead of doing the screening on the front end with an imaging modality, you may be able to do a blood-based test, which would be much simpler and less expensive, but that could give you a pretty accurate answer about what's happening, and we are seeing companies coming out with blood-based diagnostic tests that are information-rich and can tell you specifically or regionally where to look.

Another issue is portability, which allows you to potentially place a patient in a different position and be able to see something that you might not be able to see with a large imaging system. The other thing about portability is that it really works well in other countries. If you talk about China, with such a large rural population, they need portability and flexibility. There is a tremendous opportunity outside the U.S. for non-traditional systems.

BB&T: There is much talk – but so far not a huge amount of action – about nanotechnology. It has been said that we are years – perhaps decades – from the time when nanotechnology truly impacts healthcare. Your views?

Glorikian: The promise is potentially earlier detection of disease, more effective diagnostics and therapeutics, novel biocompatible materials, and better medical devices. For instance, medical devices that don't require sterilization because of the coating that's on them, or something to that effect. Examples today are something like silver nanocrystals in the wound care market.

In general, we have to understand that nanotechnology is an enabling technology that's only as good as it helps solve a specific problem. Things like tissue engineering scaffolding appear to be promising – cells like to grow on nanostructured surfaces, and grow better on them. We've been speaking to people in the world of fluidics, and nanofluidics appears to have utility in areas, especially point-of-care diagnostics. But we do have a long way to go with nanotech, especially in understanding the potential — not only the promise, but also the potential harm.

BB&T: Is there a question you wish I had asked, but haven't?

Glorikian: One key point we like to make is that companies really need to do their homework when they're thinking about their strategy in this environment. It's really being driven by the turnover in technology. For example, the timeframe that it took immunoassays or clinical chemistry to grow from nothing to what we would consider a sizable market took decades. The timeframes that technologies now are taking is becoming shorter and shorter, and therefore companies don't have the luxury of not digging in and looking at the subsectors where they can have an impact. Making the wrong decision these days is catastrophic.