“November 1, 1999 Intelligence: Late Breaking Lab News”

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Well-run hospital laboratory outreach programs continue to thrive. Last week THE DARK REPORT was in Chicago to visit Genesis Clinical Laboratory. Located in Berwyn, Illinois, Genesis is a for-profit subsidiary of McNeal Hospital. During the last two years, Genesis President Eugene Heidt has kick-started the sales program and reports steady growth in outreach revenues along with strong doctor loyalty. Genesis Clinical Laboratory represents one more example that hospital outreach programs remain a viable way to strengthen hospital laboratory operations.


Here’s an illustration of how legislators can pass laws that distort the free market for healthcare. California Governor Gray Davis signed a law last month which will regulate nurse-to-patient ratios in the state’s hospitals. According to the 1999 Dartmouth Atlas of Healthcare, nurse staffing ratios in California hospitals are the 49th lowest in the nation, eclipsed only by Washington State. Ratios will be set by the Department of Health Services.


Remember that question? Critics of technology used to produce liquid prep Pap smears said the healthcare system would not bear the increased cost associated with this technology. For third quarter 1999, Cytyc Corporation, maker of the ThinPrep® thin-layer Pap smear prep system, reported revenues of $21.3 million, compared to $12.3 million for third quarter, 1998. Multiply this by four, and Cytyc has reached an annual revenue run rate of $85 million. This certainly indicates that someone in the healthcare system is willing to pay for enhanced Pap smear technology.


Cytyc’s main competitor, TriPath Imaging, Inc. (formed from the merger of AutoCyte, Inc. and Neo-Path, Inc.) is now in the marketplace pushing its thin-layer Pap smear technology. Although TriPath reports just $4.8 million in sales for third quarter, FDA approval of its thin-layer technology was only forthcoming earlier this year. The sales effort is now shifting into high gear. Total revenues generated by these two companies will provide a good benchmark as to whether the healthcare marketplace is truly embracing enhanced Pap smear technology.

IMPATH, Inc. of New York City announced another strategic relationship. This time it’s with ILEX Oncology Services, Inc., the clinical trials division of ILEX Oncology. IMPATH becomes the preferred provider for anatomic and molecular pathology services. The objective of both companies is to advance international drug development. ILEX has expertise in developing oncology drugs. IMPATH brings diagnostic and prognostic tumor analysis to the relationship. This partnership demonstrates that diagnostic information has value, and that IMPATH is willing to invest capital and management resources to convert that value into revenue.


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