Arkansas Genomics Shifts to Molecular Medicine to Find New Customer Base

by Luke Jones  on Monday, Apr. 8, 2013 12:00 am  

Arkansas Genomics was founded to be the state’s first and only dedicated forensic DNA testing lab. But despite filling a niche, the business has had trouble turning a profit, and founder Jimmy Threet is pushing the lab in a new direction: personalized medicine.

The 6,000-SF lab in Little Rock came into being in 2011. Threet is a veteran chemist, having worked for the Arkansas Department of Health and the U.S. Food & Drug Administration. His first experience with DNA testing was at the FDA, where he started doing research on mad cow disease by examining animal proteins found in cattle feed.

During this experience he realized there was a market for labs that analyze DNA samples from crime scenes for use in criminal investigations. Having no business training at all, Threet went to the Arkansas Small Business & Technology Development Center at the University of Arkansas at Little Rock and took two $25 classes.

“I bought three new suits, this projector and a laptop,” Threet said. “I wrote a business plan and started pitching it to people.”

Threet found a handful of private investors willing to support his project. He sold about 40 percent of his project for $780,000 and secured a $600,000 Small Business Administration loan from the Bank of England.

Threet had to spend the lab’s entire first year on the expensive and time-consuming process of accreditation.

“From 2011 to 2012 we were basically under the radar performing a year’s worth of accreditation studies,” Threet said. “In the forensic world, you have to do thousands of DNA tests on sample matrices.”

Sample tests could be semen on a bedsheet, blood on cotton, blood on a linen shirt and so forth. So because the lab couldn’t make any money that first year, Threet depended entirely on his investors.

“We needed a lot of money to do a lot of testing that wouldn’t generate any revenue at all just to do DNA testing for state crime labs,” he said. “It was a huge, huge mountain to climb. Hundreds and hundreds of thousands of dollars. Testing kits are expensive, and we had to do testing to prove that instruments and staff can do what they need to do to generate probative DNA results.”

Once everything was ready, Arkansas Genomics had a staff with about 50 years of combined experience and was prepared to perform about 23,000 forensic tests per month.

The Challenge

Unfortunately, finding clients proved difficult.

To make a profit, Threet needed high-volume contracts that required multiple tests. Threet knew a client like that didn’t exist in Arkansas, because the Arkansas State Crime Laboratory did most of its DNA testing in-house. But when Threet started marketing nationally, he discovered that those high-volume contracts were nearly unattainable for almost anyone but the huge testing labs like LabCorp of Burlington, N.C., which also has an office in Little Rock.

“The contracts were worded to rule out the small man like me,” Threet said.

High-volume contracts had difficult stipulations, Threet said. Some contracts required a DNA lab to have been in business five years, for example. Mostly, though, the big crime labs were reluctant to shift to a new vendor.

During its first year of actual business, Arkansas Genomics’ revenue was around only $60,000, Threet said. Most of that came from private contracts or from the Innocence Project, a nonprofit that helps wrongly convicted felons seek DNA testing to clear their names.

The New Approach

Things weren’t looking good for the fledgling lab.

But a new hope appeared at the end of 2012 when several local physicians and pathologists pointed out a different niche that Threet could exploit. They told him about molecular diagnostics and personalized medicine: DNA testing to help analyze diseases and determine what types of drugs are safe to use.

Threet looked into the industry. Other hospitals in the state do molecular diagnostics, but Threet would be the only dedicated lab in the state. He decided to take Arkansas Genomics down that path. Unfortunately, this meant more accreditation.

“I started climbing another hill,” Threet said.

Threet brought in Brent Staggs, a pathologist and partner at Pathology Labs of Arkansas, to be medical director at the lab. When the new approach is fully realized, Threet said, the lab will probably hire four or five more staff members. The lab can perform about the same number of tests per month as it did when it was forensic-focused. The new direction is total enough that Arkansas Genomics will be changing its name to Diamond Clear Diagnostics.

Threet said molecular diagnostics is extremely important for doctors prescribing pain medication.

“The liability on the doctor’s back is extremely high,” Threet said. “He wants to alleviate the pain on patients, to give them better health care, but at the same time you’ve got the toxicity levels of all the medicines the patient has taken, and with certain drug-to-drug interactions the patient could overdose and literally die. It’s important for this test to be conducted for a physician to know how to better dose his patients.”

One example of where this comes into play is with cancer patients.

“Like say a doctor uses drug ‘X’ for cancer,” Threet said. “The cancer isn’t going away; the patient’s hair is falling out. So now they use drug ‘Y’ or drug ‘Z,’ and the insurance company has spent $2 million in cancer drugs, the patient’s almost dead, his last six weeks of life are miserable and nothing’s worked. Finally, through the process of elimination, the doctor prescribes a certain drug that finally starts working.”

Because of how precisely personalized medicine works, Threet said, that type of trial-and-error prescription process can be reduced or eliminated.

Ahmad Brown, one of the doctors who advised Threet to enter molecular diagnostics, said the technology is growing in importance.

“Molecular diagnosis is sort of the wave of the medical future,” Brown said. “The idea is that we can figure out molecular fingerprints and tailor-make therapy for patients for their disease process or their immune system.”

Brown himself uses the process for patients with serious skin diseases like lymphoma. When he needs molecular diagnosis, he has to use a lab in California, but he said he hopes to use Threet’s lab once it’s ready.

“I’d like to keep things local,” he said.

Staggs, Threet’s medical director, received specialty training in molecular diagnosis during his residency.

“Everything will be molecular diagnosis in the next — maybe even 10 years, certainly by 20 years,” Staggs said. “We already sub-classify nearly every tumor type by molecular diagnosis.”

The new path isn’t without difficulties, however. For a test to be marketed, it needs to be “online.” That means the test is validated and has been proven to get accurate results.

“In doing so, we spend a lot of money on samples necessary to do it with no revenue associated,” Threet said. “There are a lot of costs in just preparing to offer the tests.”

This results in a Catch-22 for Threet. The tests need to be online to attract customers, but Threet can’t afford to bring them online until he has a customer.

“What we want to do is let physicians know if they bring a test online, we’ll use it,” he said. “If I had unlimited funding, I’d just go and bring every test online.”

Still, each time the end seems nigh, more clients show up, Threet said.

“A lot of times, I’m afraid this business is going to fail, and then some doctor says, ‘I didn’t know you were there. If I knew it, I would have brought tests to you,’” he said.

Diamond Clear Diagnostics is set to be started by mid-May, Threet said. As for Arkansas Genomics, Threet said there’s still a market for his original business model. It will just be in the background.

“Arkansas Genomics is not going to dissolve,” Threet said. “We’ll still do forensic DNA testing.”

 

 

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