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IMPATH Buys Tamtron In Surprise Decision - The Dark Intelligence Group

IMPATH Buys Tamtron In Surprise Decision

Further consolidation among providers of anatomic pathology software systems

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CEO SUMMARY: In an unexpected announcement, IMPATH, Inc. announced it would purchase Tamtron Corp., the largest remaining independent vendor of anatomic pathology systems. It was just months earlier that Cerner Corporation acquired Dynamic Healthcare Technologies, Inc. and its CoPath™ product. IMPATH’s goal is to implement Tamtron’s PowerPath™ System throughout its network of pathology clients.

REMEMBER VICTOR KIAM? During the 1980s, he was that crazy guy seen in commercials saying “I liked the Remington electric shaver so much that I bought the company!”

It’s the same story at IMPATH, Inc., which announced on January 8, 2002 that it would purchase Tamtron Corporation. Tamtron was the largest remaining independent vendor of anatomic pathology software systems. Its PowerPath™ System is used in 350 sites throughout the United States.

“IMPATH was looking to upgrade its anatomic pathology software system and implement a single solution across all our facilities,” stated Richard Adelson, IMPATH’s President and COO. “The further we went into the RFP process, the more we liked the company, its people, and its products. There were compelling reasons why purchasing Tamtron was a good business decision for both our companies.”

That Tamtron has been acquired is not a surprise. In recent years, larger healthcare information companies have regularly scooped up smaller companies with innovative products, but limited revenues. Tamtron fits that description and has long been seen as a likely takeover target.

What did surprise many in the lab industry was Tamtron’s buyer: IMPATH. IMPATH’s primary business is providing sophisticated diagnostic services to community hospital-based pathologists and oncologists. To acquire and operate a software vendor was an unexpected development.

“Within the laboratory industry, Tamtron has a good reputation,” said Adelson. “That fits squarely in our strategy of enhancing patient care. As we learned about Tamtron, we could see that it had a solid base of pathology clients. Because of its size, it had limited access to the capital it needed for continued growth.

“As part of IMPATH, we can provide the resources Tamtron needs to expand its share of the market and add new features to its software products,” he continued. “At the same time, PowerPath will be implemented in all the pathology laboratories within IMPATH.

Tamtron President and CEO Steven Tablak confirmed these plans. “It was certainly unexpected that a potential PowerPath customer has become Tamtron’s owner,” he noted. “However, during the ‘get-acquainted’ process, both our companies recognized their mutual strengths and common interest in advancing the profession of anatomic pathology.

“More specifically, we both believe that pathologists must adapt and use increasingly sophisticated information management capabilities to remain effective clinical partners with the physicians they serve,” declared Tablak. “This will be especially true as molecular diagnostics expands with advances in genomics and proteomics.”

This statement is the key to understanding why IMPATH and Tamtron believe they make a good fit. As Tablak notes, “anatomic pathology is moving from a clinical model where the pathologist simply issues a report to the physician to one where the pathologist becomes a consultative resource to clinicians who are increasingly overwhelmed by the sheer volume of new diagnostic and therapeutic technologies. The pathology information system is the platform which will enable this shift to occur.

“That is why IMPATH’s acquisition of Tamtron has synergy. Tamtron’s pathology customers primarily perform pathology in support of general clinical surgery. IMPATH offers these pathologists the next level of case work-up after the referring pathology makes a primary diagnosis. These two segments are not competitive, but complementary,” explained Tablak.

Adelson concurs. “Because IMPATH primarily provides diagnostic support to pathologists working in com- munity hospitals, our strategic business need is to develop, over time, a better information bridge with our clients,” he said. “We want to be able to seamlessly pass data back and forth. This would also support our services in clinical trials and tissue banking, which are currently under active development. These are logical extensions of our primary business relationship with these same pathologists and physicians.

Strong Development Team

“Here is where Tamtron gives us a unique business advantage,” he continued. “They have a strong development and service team. In parallel with PowerPath’s ongoing development, we want to tap these development resources to develop a sophisticated information network with our clients.”

That is a long-term objective. In the short-term, IMPATH intends to operate Tamtron as a stand-alone business. After the expected closing of the sale, sometime in the next 45 days, Tamtron will continue to operate from its existing offices in San Jose, California.

IMPATH plans no major changes for Tamtron and its existing pathology customers. IMPATH will develop collaborative sales and marketing programs with Tamtron so that IMPATH sales reps can help identify and introduce prospective customers to Tamtron.

What will be most interesting to watch, however, is how IMPATH may possibly develop future capabilities that allow PowerPath to create a two-way flow of information between IMPATH and its referring pathology groups to support business activities in clinical trials and tissue banking. That would support additional revenues to IMPATH and its clients from those same activities.

Clinical Trials and Tissue Banking Require Sophisticated Informatics

In certain areas of cancer testing, IMPATH might be described as a pathology “juggernaut.” For example, in breast cancer, it’s estimated that IMPATH currently holds a 30% share of the 194,000 new cases diagnosed annually in the
United States.

As a business strategy, IMPATH wants to leverage its access to such high volumes of cancer cases and create additional services and products which have value to clinicians, drug companies, and biotech firms. Ways to do this include participating in clinical studies and establishing a tissue bank.

IMPATH’s tissue bank is called GeneBank. The goal is to collect 50,000 tissue specimens which are linked to data about treatment protocols and outcomes. Here is where enhanced informatics and Tamtron’s in-house team of developers, becomes a potential asset for IMPATH.

“As we get case referrals from our clients,” stated Richard P. Adelson, IMPATH’s President and COO, “we would like to have a fluid, seamless information link that would allow us to support these clients in identifying patients appropriate for clinical studies and tissue collection.

Informed Patient Consent

“Ideally, this information system would also simplify obtaining informed consent from the patient, hold relevant documents, track specimens and medical records, and provide support services necessary to participate in such activities,” he explained.

With this mission, IMPATH joins the pursuit for the Holy Grail of many pathologists: the ability to get permission, then access downstream data about treatments and outcomes which can be matched with the pathology diagnosis and tissue. As blinded data, this information is expected to find ready buyers among pharmaceutical companies and biotech firms throughout the world.

There are any number of companies pursuing this Holy Grail. They range from the two blood brothers, Quest Diagnostics Incorporated and Laboratory Corporation of America, to AmeriPath, DIANON, IMPATH, USLabs, and tissue banking start-ups, including Genomics Collaborative, Aradis, and Tissue Informatics. (See TDR, April 9, 2001.)

Strong Development Team

What gives IMPATH a strong hand in this poker game are two things: 1) the sheer volume of cancer cases it handles annually, and 2) the ongoing business relationship it has with hundreds of community hospitals. But to capitalize on these assets, IMPATH needs to develop an information management system that allows it to economically and effectively support these smaller hospitals in placing patients into clinical trials and providing tissue specimens.

If it can accomplish this, it helps itself and its clients make money through these activities. But to play the strong cards in its hand, it needs a viable informatics system which can tie these diverse data sets together and allow them to be easily managed.

Over time, IMPATH is working to create an integrated line of healthcare services which start with the advanced diagnostics performed on “difficult-to-diagnose” cancers and include clinical studies support, tissue banking activities, and a sizeable repository of data about cancer cases.

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