Genomic Health, TriPath Imaging, Bio-Reference Labs, Canadian Patient Registry

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PREDICTIVE TESTING FOR RECURRENT BREAST CANCER

LABORATORY TESTS DESIGNED to predict the recurrence of breast cancer are picking up momentum. First to market was Genomic Health Inc.’s Oncotype DX™ breast cancer test. Now TriPath Imaging, Inc. is reporting favorable results from studies of its ProEx Br markers for breast cancer.

Since introducing Oncotype DX in 2004, Genomic Health has seen a steady increase in specimen volume. Through the end of September 2005, it had tested 5,000 patients. List price for this test is $3,460. Last Friday, January 13, Genomic Health announced that Medicare would cover the test, beginning February 27, 2006.

The company says that Oncotype DX is “the first genomic test that has clinical evidence supporting its ability to predict the likelihood of cancer recurrence, the likelihood of patient survival within 10 years of diagnosis and the likelihood of chemotherapy benefit.” Of the 230,000 women diagnosed with cancer each year, approximately 125,000 are candidates for this test.

TriPath Imaging’s entry into the field is called ProEx Br. This panel of biomarkers consist of monoclonal antibodies “designed to detect over-expression of unique cellular proteins that are predictive of breast cancer recurrence.”

Last month, researchers from the Albany Medical College in Albany, New York reported the results of a retrospective study of 217 archived breast cancer tissue specimens taken from women with early stage breast cancer who have been followed for at least five years since the original diagnosis. Researchers learned that, if all biomarkers tested negative, patients had a 30% chance of recurrence. If one biomarker was positive, the recurrence probability was 40%. If two of the five biomarkers in the panel studied were positive, there was a 70% probability of recurring cancer in that patient.

Based on these results, in combination with internal studies, TriPath Imaging is developing a version of its ProEX Br biomarkers to be used on the Ventana Medical Systems’ BenchMark XT automated staining system. TriPath intends to conduct the clinical trials necessary to support a submission to the Food & Drug Administration.

The rapid acceptance of Genomic Health’s Oncotype DX, along with the favorable study results involving TriPath Imaging’s ProEx Br biomarkers, show that molecular technologies are maturing at a swift rate. If TriPath gains speedy regulatory approval to come to market, that will be an additional indication that regulators are growing comfortable with the capabilities of next-generation molecular diagnostics.

CUTS IN FLOW CYTOMETRY REIMBURSEMENT AFFECT BRLI EARNINGS

IN RESPONSE TO THE NEWS IN 2004 that the Medicare program would reduce reimbursement for flow cytometry by approximately 60% at the start of 2005, owners of US LABS, Inc. and Esoterix, Inc. made decisions to sell their companies.

Now comes an opportunity to gauge the impact reimbursement cutbacks have had to labs with a substantial volume of flow cytometry cases. Bio-Reference Laboratories, Inc. (BRLI) of Elmwood Park, New Jersey announced 2005 earnings.

For its fiscal year ending October 31, 2005, BRLI reported revenues of $163.9 million, compared to $138.2 million for FY2004, an increase in revenues of 18.8%. This rate of growth was not matched in net income after taxes, which was $7.6 million, “resulting in fully taxed EPS of $.58 for the year compared to $8.5 million and $.67 in the prior fiscal year.”

BRLI stated that its net earnings had been affected by “the effects of reimbursement cuts for Flow Cytometry testing, a key diagnostic used in a substantial percentage of the cases reviewed by GenPath, the Company’s oncology / hematopathology laboratory.” Back in 2004, BRLI was the first laboratory company to publicly disclose that reimbursement cuts for flow cytometry would have a material impact on the company’s profits.

It was this disclosure that caused professional investors to pay closer attention to labs which performed high volumes of flow cytometry tests. The sale of US Labs was announced in late December 2004 and the sale of Esoterix was announced on March 30, 2005. (See TDRs, January 3, 2005 and April 18, 2005.)

The basic economics of laboratory operations are aptly illustrated in BRLI’s 2005 financial performance. Despite an 18.8% increase in net revenues, the reduced reimbursement in flow cytometry testing triggered a reduction in the company’s net income after taxes, which declined by 10.6%.

The financial impact of Medicare’s reduction in flow cytometry reimbursement is highly visible, particularly given the fact that directors at both US LABS and Esoterix decided to sell their lab companies in the months following the news of those cutbacks. What has yet to be determined is the impact on clinical services and access to flow cytometry services as a consequence of these deep reimbursement cuts. It will likely take several more years to learn whether these cutbacks have caused a significant number of laboratories to reduce or even cease offering flow cytometry services.

NEWFOUNDLAND AND LABRADOR NOW OPERATE PATIENT REGISTRY

IN CANADA, the provinces of Newfoundland and Labrador have been first in the country to implement a provincial patient registry.

This registry is a database that contains information on all residents of the two provinces, as well as their eligibility for healthcare coverage. It is used by all hospitals, community health facilities, long term care facilities, and the government health system offices.

Known as the “Unique Personal Identifier and Client Registry,” the first working system was introduced in 2002 and the final version was introduced last year. Efforts are now underway to connect clinical records to this system.

The population of Newfoundland and Labrador is about 500,000. By comparison, in the United States, Alaska, North Dakota, and Vermont each have between 600,000 and 700,000 people.

Like all Canadian provinces, Newfoundland and Labrador are working to develop a universal electronic health record. Steps are underway to create a pharmacy network that connects to the patient registry. Systems for accessing province-wide radiology information and laboratory test data are also under development in both provinces.

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