CEO SUMMARY: There are few examples of laboratory companies focused on a single medical specialty,a business model that is expected to become more common in coming years. One such company is Athena Diagnostics. For 12 years, this company has concentrated on providing diagnostic testing for neurology specialists. It grew steadily throughout the 1990s and is continuing to expand its diagnostic testing services.
TRADITIONALLY, NEUROLOGISTS have ordered few laboratory tests. For that reason, commercial laboratories generally don’t target neurologists as clients.
But neurologists are the primary sales target for Athena Diagnostics, Inc., located in Worcester, Massachusetts. Athena Diagnostics has created a small, profitable market niche by focusing almost exclusively on the diagnostic testing needs of neurologists and other physicians dealing with neurology- related disorders.
“Within the field of neurology, there is a growing number of laboratory tests which are useful in diagnosing the most common neurologic disorders,” said Robert Flaherty, President and CEO at Athena Diagnostics. “Since our founding 12 years ago, Athena Diagnostics has developed into the primary diagnostic laboratory resource for most neurologists in this country.”
Athena Diagnostics maintains a low profile within the laboratory industry. Its parent company is Elan PLC, a public company based in Dublin, Ireland (NYSE: ELN). Elan is primarily in the pharmaceutical business. In 1996, it purchased Athena Neurosciences, Inc., a neuropharmaceutical company, of which Athena Diagnostics was a division.
As a specialty laboratory, Athena Diagnostics represents an emerging business model for diagnostic testing. By focusing on the diagnostic needs of one medical specialty, it differentiates itself from other laboratory providers.
Because Athena Diagnostics has an ongoing customer relationship with neurologists, by serving their sophisticated diagnostic needs, it tends to support its sister divisions at Elan, which markets pharmaceuticals to the same physicians.
“Over the past ten years, we’ve grown by doing two things,” observed Flaherty. “First, our sales and marketing programs have steadily increased the number of neurologist-clients who regularly order tests from us.
“Second, we’ve introduced new assays for neurology testing,” he continued. “We collaborate with several research laboratories and work with them to develop promising technologies into diagnostic tests which can be used in general clinical settings.”
Developing New Assays
In this respect, Athena Diagnostics has much in common with the Nichols Institute of the 1970s and early 1980s. During this time, Nichols Institute maintained close ties with a number of academic research centers. It helped move innovative diagnostic testing technology out of the research laboratory by financing clinical trials and gaining FDA clearance. It would then provide the sales and marketing resources necessary to educate clinicians and encourage them to use these newly-approved assays.
“Because of our close work with neurologists, we’ve developed a solid reputation for quality diagnostic test- ing,” noted Flaherty. “That is the foun- dation for our ongoing efforts to bring additional new tests to market and offer therapeutic drugs as appropriate.”
As a laboratory business model, Athena Diagnostics has much in common with such diagnostics companies as UroCor, Inc. (focused on urology), IMPATH, Inc. (focused on oncology), and Prometheus, Inc. (focused on gastroenterology). These companies do a national business, but organize their diagnostic services around the needs of one medical specialty.
Laboratories like these will be the first to develop more sophisticated information products, based upon laboratory test data. THE DARK REPORT has long predicted that lab information, presented in a different way than the traditional lab test report, will be the source of added-value for the clinical laboratory industry.
Because these lab companies are so closely involved in meeting the needs of a single medical specialty, it will probably be labs like Athena Diagnostics, UroCor, and their peers which are the first to bring such enhanced lab information products to their physician-clients.
Signposts Of Change
For that reason, lab companies like Athena Diagnostics are useful signposts of change in the healthcare marketplace. Athena demonstrates that it is possible to carve out a specific niche within the overall clinical marketplace and turn it into a financially stable business.
Laboratory companies organized, like Athena Diagnostics, to serve a specific segment of the medical community may represent tomorrow’s best business model for clinical laboratory operations. Increased specialization of medical services, a flood of yet-to-be introduced new diagnostic technology, and ever-shrinking reimbursement for routine testing are the trends which will drive this process.
Athena Diagnostics, Inc.
• Division of Elan Corporation, PLC (NYSE Symbol: ELN)
• Main Laboratory: Worcester, MA
• Founded in 1989 as Genica Pharmaceuticals, Inc., offering Dystrophin testing
• In 1995, Genica was acquired by Athena Neurosciences, Inc.
• In 1996, Athena Neurosciences is acquired by Elan Pharmaceuticals
• Offers these testing services:
1. Alzheimer’s disease
2. Neurogenetic disorders
3. Paraneoplastic neurological disorders
4. Peripheral neuropathies