CEOSUMMARY: Bio-Reference Laboratories has just placed an unexpected bet on the wide-open opportunities in genetic testing. The acquisition of GeneDX brings it a respected team of geneticists, capabilities in full DNA sequencing, and a proven track record in testing for rare and complex hereditary diseases. It also opens a new lab testing market niche for Bio-Reference Laboratories to develop.
LAST TUESDAY, Bio-Reference Laboratories, Inc. (BRLI) surprised the laboratory industry with an announcement that it would pay up to $17 million to acquire GeneDx, Inc. of Gaithersburg, Maryland. On the same day, BRLI also released its third quarter, fiscal year 2006 earnings report.
BRLI’s acquisition of GeneDX caught financial analysts by surprise because GeneDX offers tests that diagnose rare and complex genetic disorders, by definition a small segment of the diagnostic testing marketplace. In fact, GeneDX has annual revenues of approximately $5 million.
GeneDx is a specialty genetics company which was established in 2000 by two geneticists who worked at the National Institutes of Health (NIH). The lab offers specialized tests for more than 147 hereditary conditions built around the technology of full gene analysis by DNA sequencing.
The sale is expected to close within three weeks. After the sale, Founder and President Sherri Bale, Ph.D., FACMG, and Founder and CEO John Compton, Ph.D., will continue at GeneDx.
“GeneDX fits perfectly in our strategic business plan, in ways that are obvious and in ways that are not,” explained Marc D. Grodman, M.D., CEO of BRLI. “In our conversations with analysts, most recognize that GeneDX opens up a new market niche that has great potential for us. They also recognize that BRLI has a demonstrated track record at developing such diagnostic testing niches.
Giving Meaningful Answers
“It is the not-so-obvious reason for our acquisition that is the real key to understanding our interest in GeneDX,” he added. “Bio-Reference Laboratories wants to be recognized and respected as a laboratory that gives physicians and patients meaningful answers— information that supports accurate diagnoses and aids in the patient’s ongoing course of treatment.
“We are partial to tests that are capable of contributing to the clinician’s diagnosis—tests that are essential in the primary diagnosis of a patient’s condition,” observed Grodman. “We are most interested in offering the types of laboratory tests that a physician would use in making the primary diagnosis.”
Basis Of The Disease
“GeneDX adds precisely those types of tests to our menu because it is a genetic laboratory run by geneticists,” he noted. “To provide an answer, GeneDX utilizes geneticists and full DNA sequencing to understand the basis of the disease. The ordering physician is getting meaningful information about the patient.
“On the spectrum of diagnostic tests, we view the testing services offered by GeneDX at one end and assays like pharmacogenomic testing and molecular tumor marker testing at the opposite end of the spectrum,” continued Grodman. “If you accept my characterization of full DNA sequencing being at one end of the spectrum and pharmacogenomic and tumor marker testing being at the other, then you’ll probably agree that the goal of all these diagnostic tools is to move to the middle ground, that promised land where a physician is able to diagnose and successfully treat all diseases.
Genetic Variation In Disease
“We prefer to be at that opposite spectrum with GeneDX, because we want to know how to identify the genetic variance in common diseases,” explained Grodman. “This gives us the opportunity to be one of the first laboratory companies to close the gap between what’s known in science and what is used in clinical practice.
“GeneDX is at that intersection of what science knows and how that knowledge enters clinical practice,” he added. “Bringing GeneDX into the Bio-Reference family provides us with three powerful business assets: credibility, scientific rigor, and recognized expertise.
“Our strategic objective with GeneDX is to participate in the most promising discoveries involving DNA and RNA as they move from basic science into accepted clinical practice,” revealed Grodman. “To that end, BRLI’s business strategy is guided by two business principles and GeneDX meets both.
“First, as I’ve noted, genetic testing needs to provide meaningful answers to thoughtful and clinically relevant questions—questions that are well-vetted by the scientific community,” he noted. “Further, these meaningful answers should support an actionable course by clinician and patient, whether it be a drug, a lifestyle change, or other therapies.
Demand By Docs, Patients
“Second—and this is an important principle—because the answers are meaningful, there is a demand for the genetic test by physicians and patients, who are willing to pay, directly or indirectly, for that test,” offered Grodman. “When the information is clinically rel- evant and useful, then it is a genetic test that offers recognized value and payment for that test is not an issue.”
Pathologists and laboratory administrators will recognize that Grodman has articulated a very sophisticated business strategy for a commercial laboratory company. Board-certified in internal medicine, he continues to see patients and views the potential of lab- oratory testing services with a different perspective than most of today’s lab industry executives.
Moreover, Bio-Reference Labs has consistently executed its growth plan. From revenues of $53.9 million in 1999, the lab company is on track to post sales of $185 million this year. With that track record, odds are that Grodman’s strate- gic vision for GeneDX is likely to prove successful.