An interview with Dr. Richard Janeczko and Dr. Thomas Schlumpberger,
For over 25 years Dr. Richard Janeczko has dedicated his career to the in-vitro diagnostics(IVD) industry. With a PhD in biochemistry and BSc in microbiology, Richard started his professional life working in a technical capacity but soon after established himself as a leader in business development, focused on global healthcare economics as a driver of new technologies.
At the end of last month, it was announced that Dr. Janeczko led IVD marketing firm DxEconomix Inc.(DxEx) had entered into an agreement with a Canadian medical device developer (ChroMedX Corp.) to lead the Company to a potential high-value transaction of its flagship blood analysis technology.
The Companies announced that the initiative would be directed by DxEconomix CEO Dr. Janeczko and seasoned Point-of-care(POC) executive and DxEx director Dr. Thomas Schlumpberger.
Initial Thoughts on Technology
Q: How did this relationship come about with ChroMedX and what were your initial thoughts when you were introduced to the HemoPalm technology?
RJ: ChroMedX initially engaged DxEconomix to explore the economic value of the HemoPalm and assist in identifying the ideal path to market for the technology. After I conducted my preliminary due diligence I brought Thomas and another colleague with experience with ISTAT and Epocal to take a closer look and it was then that we determined this was an opportunity that we had to take a more active role in.
TS: “Wow, this is a game changer!” Pretty much instantly, we saw it as the next or 3rd generation of POCT blood gas analyzers with real potential to further improve management of critically ill patients. It represented the next logical step in the evolution of diagnosis in this area, and it was the response to a well-recognized, unmet need in the blood gas domain. Specifically, it is, the combination of blood gas analyses and co-oximetry on the same device, using the same patient blood sample for both!
Dr. Thomas Schlumberger was appointed a Director of DxEconomix when Dr. Janeczko founded the Company in 2013. Dr. Schlumpberger has worked in the diagnostics field since the early 2000’s and has a rich history in the blood gas diagnostics sector, having played a leading role in the launch, commercialization and sale of blood gas titan Epocal to Alere in 2010.
Q: Dr. Schlumpberger as a leading expert in the sector of medical point-of-care devices worldwide. What can you tell us about this industry and what attracted you to it?
TS: The main idea of point-of-care testing (POCT) is to provide rapid diagnostic results at or near patients to speed up real-time clinical decision-making. The advantages of this are earlier initiation of treatment, better patient compliance and improved cost-effectiveness. In our current healthcare reform environment, the attraction of POCT is powerful. The sector has been growing quickly over the last 20 years and now has an estimated 29% share of the diagnostic market, expected to be worth $23 billion by 2018.
At Epocal I felt their approach represented the best in class POCT for the critical care market and so when the opportunity to join their team came up I jumped at it. It was exciting to be part of a company recognized by most of the strategic players in the market as the best and having a real competitive edge. In the end this turned out to be the case and from my position as the transaction guy it was great because it resulted in an “auction” scenario with several potential buyers at the table.
DxEconomicx’s agreement with ChroMedX centers around an in-development, patented, blood diagnostics platform known as the HemoPalm Blood Analyzer System. The system consists of a handheld device and single–use disposable cartridge where the sample is collected.
Q: What does the HemoPalm offer the medical system from an economic perspective? Also, how does this change or enhance patient care compared to what is used now?
RJ: Based on our experience at DxEconomix with diagnostic technologies from many different areas of clinical use we believe HemoPalm will be significantly more cost-effective than current approaches to the management of the critically ill, especially in the hospital setting. We see the consolidation of the key testing menus (blood gases, electrolytes and co-oximetry) playing out in a simplification of the work-flow with a reduction in labor costs as well as down-stream saving from more effective clinical management of the patient. Of course, we will have to quantify this empirically by constructing an economic model and measuring changes in clinical outcomes and associated costs to establish the actual economic impact of HemoPalm.
For the patient, HemoPalm means more rapid diagnosis and earlier therapy, which leads to improved patient outcomes e.g. more rapid and complete recovery.
TS: In the specific case of critical care patients (often very high-risk situations) the introduction of POCT for blood gases can improve patient outcomes e.g. reductions in overall mortality, lower re-admission rates, lower average length of stay for ICU’s as well as improved patient experiences.
Competitive Landscape of the Blood Gas Market
Q: How would you say the HemoPalm stacks up to its competitors in the space, specifically the other handheld devices?
TS: ChroMedx has a strong advantage over its competitors. On the highest level, HemoPalm does with one device, what competitors do on two.
The big differentiator here is the combination of the blood gas analyses and co-oximetry to measure hemoglobin on one device. Most clinicians prefer a measured result and the on-board co-oximetry provides this capability. ChroMedX achieved this advantage by simply combining all the established success components for a critical care POCT system (single cartridge based calibration, connectivity, workflow, etc.) with the measured co-oximetry solution. This is a high impact competitive advantage as clinicians deal with only one device, compared to at least two with all other approaches. We are confident this competitive advantage will accelerate market entry and adoption of HemoPalm for a broad group of clinical applications.
RJ: The co-oximetry piece of the puzzle is important because unlike competitive systems where hemoglobin is a calculated result, with HemoPalm it is actually measured, something clinicians much prefer. We believe it is well positioned to lead another round of transformation in clinical practices for the critically ill and attract significant interest from healthcare providers, payers and strategic players in this sector.
One other competitive advantage of HemoPalm is its ability to use capillary samples for analysis. This is especially important for testing in newborns, particularly in critical or intensive care situations. Safely obtaining sufficient amounts of blood from babies can be very challenging so the use of capillaries really opens the door to broader use of HemoPalm not accessible to current handheld devices.
State of the Industry
The blood gas industry is largely made up of household names in the medical technology industry. In October 2017 Abbott Labs completed the acquisition of global POC manufacturer Alere Inc. for a reported US$5.3 billion. In connection with the transaction, Siemens Healthineers acquired POC blood gas Company Epocal Inc. from Abbott to clear an antitrust barrier related to the billion–dollar acquisition.
Q: Thomas, you played a major role in the transaction when Epocal was acquired by Alere for US$295MM. Abbot Labs bought ISTAT at approximately USD~$400MM in 2003 and since then there has been further consolidation of the space with Abbotts US$5.3B acquisition of Alere. What does this mean for ChroMedX and the HemoPalm?
TS: The field has undergone some changes since that time but based on our previous experience and our understanding of the dynamics of this space we believe the unique advantages we’ve already described and the improvements HemoPalm offers from both a clinical and economic perspective will command a high-value transaction for ChroMedX.
As far as companies that would see ChroMedX and HemoPalm as a good strategic fit, I think they can be broken down into three categories. First, there are the usual suspects, the established players. These are the large companies in the blood gas markets that will want to defend their business and assess any emerging technologies that could impact them either positively or negatively. Then there is a group of relatively new entrants, for example, companies with large POCT franchises and with sufficient capital to enter the blood gas markets with the 3rd generation POCT ABG devices or companies with other assets, especially those with relevant channels. For this group, ChroMedX and HemoPalm could represent an excellent opportunity to leverage their assets into profitable new business. And finally, there are companies we define as those from “new geographies”, those from geographies that show sustained economic growth, have an expansion strategy inside/outside of their geography. This group often have large domestic opportunities as healthcare systems in these parts of the world move to upgrade and modernize.
Working with ChroMedX
The terms outlined in the November 24, 2017, announcement stipulates an initial 24–month term where Richard and his team would lead business development initiatives to “increase the Company’s profile, maximize the HemoPalm’s value proposition and initiate engagement with important strategic industry players.”
Q: Richard, can you elaborate on how your relationship will function with the ChroMedX team outside of the transaction based agreement?
RJ: We are taking an active role as part of the ChroMedX team, defining and implementing the product development plan, the clinical trial and regulatory approval plan and the product launch plan. The DxEconomix team will be working seamlessly with ChroMedX to increase value for its stakeholders and employees and fully unlock the Company’s potential as the next generation of POCT blood gas analyzers that has significant potential for transformation of clinical practices. We are also focused on utilizing our networks to build- out the ChroMedX team and fortify the Company as we move through development and commercialization milestones.
FDA and 510(k) Submission
Q: ChroMedX recently announced the capability of mass producing the biosensor in-house at the ChroMedX lab and potential technical simplification of the biosensor. How does this factor into the technologies development path and FDA process?
RJ: The ability of ChroMedX to manufacture the biosensor in-house simplifies our production processes and represents a big step forward in preparing the company to enter clinical trials that will form the basis of an FDA 510(k) submission. Dx Economixs’experience with the FDA approval process and our network of clinical trial sites will help expedite this important part of the product development plan.
Q: For readers who may be unfamiliar with the FDA process what is meant by 510(k)?
The 510(k) clearance process requires proof that new devices are substantially equivalent to an existing FDA cleared and marketed device. We refer to these as “predicate devices”. Substantial equivalence is shown if the new device has the same intended use and the same analytical performance as the existing device.
For the HemoPalm there are many predicate devices on the market from leading diagnostics suppliers such as Abbott, Radiometer, Siemens and IL. ChroMedX will use one or more of these devices to meet the FDA requirements. In contrast to the very rigorous FDA approval process applied to drug submissions, diagnostic devices follow a simpler process where the data requirements are significantly less reducing time and cost. In the EU the equivalent process is CE marking which is a self-certification.
Commercialization Process and High Value Transactions
Q: In the press release about the engagement of ChroMedX/Dx Economix, we learned of the scope of a potential high value transaction. At what point in the commercialization process are these transactions are most beneficial for shareholders?
TS: We are now in the process of reviewing and updating the technology roadmap and product development strategy. This includes identifying major milestones with timelines required to achieve transaction readiness and position the company for a high-value outcome. Among the major milestones identified in the roadmap are first, lockdown on the fully developed product, that is the blood gas panel plus measured co-oximetry, then completion and submission of clinical studies for FDA 510(k) and other regulatory agency clearance, completion and presentation and publication of market evaluation studies and finally a detailed, vetted plan for large-scale manufacturing.
With respect to our corporate development plans, at this point, the team is still assessing different strategies to determine which are most likely to offer our shareholders the best ROI in a reasonable timeframe. At the same time, we want to be flexible and try to keep our options as open as possible.
Overall, we think the timing is right, the product is right and there are some excellent opportunities out there for ChroMedX.
According to the issued November 24, 2017, press release on the DxEconomix/ChroMedX Letter of intent(LOI) the companies are now working to establish a definitive agreement within 60 days of said announcement. The announcement further outlines a success fee–based contract for transactions up to CAD$250MM that would provide DxEx with 10.5% of the transaction value.
As of the date this article was published, the Companies have not yet announced the execution of the definitive agreement.