Medical Device Link.

Padfield: Since I joined this company a little over a year ago, we have been thinking beyond just making pictures. We need more and more information extracted from conventional pictures. We need to know what happens before symptoms appear and how to use what we learn therapeutically.

We need to move away from seeing anatomical pictures of hearts and brains to the molecular level, inside the cells. These gene-based diagnostics will very much characterize the future. They will be able to identify the link with genetic predisposition to whatever you and I are going to suffer from before the symptoms show up. This will enable people to undergo medical intervention through surgery or new drugs, as appropriate.

What we have now at Nycomed Amersham is the coming together of the pieces necessary to achieve our vision. What Nycomed Amersham has, particularly with the genomics part, is the ability to link the genotypes with the phenotypes.

The Human Genome Project has given us enormous understanding of what our makeup is. We can see the ticking time bombs within us that ultimately will show themselves in symptoms. We can't wait for those symptoms to appear because then it may be too late to have a major impact on the health of the patient and the total cost of healthcare.

By looking at the underlying disease processes. Let's take Alzheimer's disease. We believe Alzheimer's disease is accompanied by a plaque in the brain called beta amyloid plaque, and it is the formation of that plaque that leads to memory impairment. That plaque is deposited over a number of years, presumably in people who have one or more genes that trigger this deposit. The environment allows this to happen in these patients. We have to know early enough when that plaque is forming in order to have an effect on the patient. If we could develop a diagnostic product that will recognize when the gene has been expressed such that the protein, which is the plaque, has started to be produced, then we can intervene at an earlier stage.

Nycomed Amersham Imaging CEO John Padfield shown here with George Battersby, director of human resources at Nycomed Amersham plc.

Where does AP-Biotech fit in regarding the development of gene-based imaging?

AP-Biotech is a leader in genomics. It builds the instruments for genome protein analysis. Who better to work with when trying to go from genotype to phenotype? There are scientific opportunities for us to bring this information together. That is one thing that distinguishes us.

The work on spin-signal technology has been done by academia for 20 years. We were watching it, and in 1999 we bought MITI, which had done a lot in developing this technology and with whom we had been collaborating two years earlier. We take a gas such as xenon, excite it, and then use it in the patient to create fantastic pictures.

That remains to be proven, but we believe these noninvasive products might dissolve in some of the plaques in the brain or in atherosclerotic plaques in the blood vessels. If so, then we will have an enhanced MRI product that could show when and where the plaque is being produced. We might be able to see disease at a very early stage. We simply don't know at this point. What we do know for sure is that we have a massive patent stake in this area and that we will be able to exploit this and others will not.

In the imaging business, we are developing these spin-signal products and among them is carbon 13. AP-Biotech would like to replace the radioactive carbon 14 it uses in its life sciences applications with carbon 13. In drug metabolism studies, taking readings with a nonradiolabeled C-13 compound is a big advantage. So there are business synergies.

AP-Biotech has the leading gene sequencers in the world, and a variety of other tools and technologies. It is the ideal opportunity for us to work together. It gives us the tools, and being part of the same company enables one to talk much more freely.

AP-Biotech was formed in August 1997 through a merger of the life sciences division of Nycomed Amersham plc and Pharmacia Corp. (Peapack, NJ).

We have always said that we would be prepared to partner with or acquire appropriate companies. We acquired MITI in 1999 for spin-signal technology. We acquired a Dutch company in the early 1990s, which is where our Datscan product for Parkinson's disease came from.

So we have always been prepared to embrace this corporate activity appropriately. And I believe there are a number of small biotech companies that could look particularly attractive as partners with Nycomed Amersham. Our products cover all the modalities in the very important disease areas of cardiology, neurology, and oncology, and those companies might well find us a very useful commercial outlet for their ideas. We are always talking to companies like that.

Part of our strategy is to work with academic groups—clinical groups—to help develop the clinical protocols for our new products in the medical devices area. Some new products come from the clinical community. We also have a history of working with equipment manufacturers, but we have not been close enough. It has not really been a partnership. The end result has been a product—a new piece of software, new piece of hardware—but the links between these products and our own need strengthening. Neither have we had a very close relationship with the makers of therapeutic drugs, but we hope to change that. We want to build partnerships to make sure our products get used in the broadest community possible.

In many ways, pharmaceutical companies thought that diagnosis was a bit of a dirty word. It is only in the past two years, or even the past year, that therapeutic companies have begun to recognize that diagnostics can have great value to them. That value pays off not only in the early stages of clinical research, but also in developing data that will convince payers that in a certain group of patients, the use of a certain drug is worth its asking price.

We have to identify the key companies in cardiovascular, neurology, and oncology—our three top priorities—and sell them on the significance of our existing products, future products, and technological capabilities.

For instance, we have world-class knowledge of technetium chemistry linked to peptides. Pharmaceutical companies don't have that. The pharmacokinetics of technetium-based peptides are very different from those of unlabeled peptides. Therefore, if we can bring something into that field, then we need to go sell that capability to companies. They don't know what we do unless we tell them.

So there is a lot of cold calling to identify partners. You just have to keep going through that process and identifying companies with the right products, and then finding out who the decision maker is in those companies. That's the usual stuff of business development, and that's what we do.

In my experience, you have to identify the top two companies and talk to them. And then if you are not successful there, you go down your list. You can't use a scattergun approach. You have to be focused. But there is a lot of information about who is doing what.

Also, you have to look at the technology platforms and read what companies are doing and saying. We have to know, for instance, which companies are particularly interested in gene-based treatments of disease. It is a time-consuming process, but one that companies have to go through.

If you look at how we have changed in our approach from a modality standpoint to a disease standpoint, we use collaborations to diversify. But in a technological sense, we are strengthening and building on our existing products. We have been taking our core products and core competencies and making sure that the knowledge about them is made available to a wider audience.

When we go to other pharmaceutical companies, we are talking to people who don't really know what we sell. Most of the pharmaceutical companies don't have a clue about products like Visipaque and Omniscan for the diagnosis of cardiovascular and neurological diseases.

In the case of Datscan—a nuclear medicine agent that is changing medical practice in Europe in the early diagnosis of Parkinson's disease—we have shown pharmaceutical companies developing Parkinson's drugs that they can have, for the first time, an objective, early-stage assessment tool for monitoring the effectiveness of their new drugs. Up until now, they have had to rely on symptomatology. Datscan, therefore, is an asset.

One in three people die of cancer. And cancer isn't just one disease. It is a whole range of different diseases, so it makes all the sense in the world for us to have that as a strategic priority. One approach is to look at the growth of blood vessels that feed the growth of tumors as a way of identifying cancer early on. So one of our research goals is to identify diagnostic imaging agents that would identify the beginning of blood-vessel growth. This approach actually has a spinout into cardiovascular disease. We think that by studying the formation of blood vessels and learning how to stop that formation, we can learn something about cardiovascular imaging in general, which may help us in identifying people who are at risk of another major killer.

And if we are fortunate enough to live longer, none of us want to be debilitated in that longer life by neurological disorders. There is no point in retiring at 60 years of age if some form of dementia has taken away your memories.

The economic and social costs of these chronic diseases are colossal.

We are not organized on a modality basis. Our focus is on disease, and the modality has to be fitted to the biology—not vice versa. We care about finding the best diagnostic aids in cardiology, neurology, and oncology. And we want to engage the neurologists, oncologists, and cardiologists because they are the first to see the patient, have to make the final diagnosis, and are responsible for the patient's treatment.

We try not to have competing products—ones that tie into the same indication in different modalities. There are cases in which we might have such competition, such as with nuclear medicine and MRI, where we might have products for tackling cardiac perfusion. In these cases, we have to look at how they segment the market. In the development of new products, we have professional and technical reviews.

And then, of course, we do a lot of research and we also sponsor a lot of research in small biotech companies and academia to see what they have. If we are addressing Alzheimer's disease, we will want to understand the basic biology so that we can develop a diagnostic and a therapeutic product. In this way, we might be able to partner with pharmaceutical companies and biotech companies to share the risk—to develop one route for diagnosis and therapy. With a diagnostic and a therapeutic in hand, pharmaceutical companies will have an easier time convincing payers to pay because they can demonstrate that they have the right drug to target the condition.

A diverse portfolio is an asset, not a liability. We conduct regular portfolio reviews of what we have in our R&D pipeline and in the market—how we can best extend the utility of that product through new clinical uses and new formulations. That part is relatively easy and quick to do. It's just basic life-cycle management. The regulatory process is becoming more challenging, and we must always be aware of the changing needs of the regulators so that we leverage our skills to the best of our competitive advantage.

But the clinical community is conservative. They want to use a product for a long time. By working with the clinical community and conducting clinical trials, we get more information and add to the knowledge of disease management. If we can partner with the clinical opinion leaders, we can create new indications that continue the life of these products beyond their patent expiration.

As a public company, we are constantly in the eyes of investors who have increasing expectations of growth. We need to make sure in terms of current business that these expectations for the top and bottom lines are what the market wants to see.

We clearly are going to make sure leadership in x-ray and radiopharmaceuticals is maintained, because everybody wants to knock off the person on top of the perch—and right now we are on top in these two areas. Meanwhile, we want to grow our position in MRI. We would like to further strengthen our leadership position in MRI agents. To do that, we need to drive our commercial efforts in the group purchasing organizations in the United States and to supplement our product range.

But we are very much a global company. Through our partners in Japan, end-user sales of our products there exceed sales in the United States. The future of that market and what is going on in the way of government regulation and clinical practice is very important for the use of diagnostic agents and our bottom line.

By working with current and future business leaders and making sure that we are working with opinion leaders and clinical leaders—those who can formulate regulation in governments around the world; people who understand the importance of diagnosis. I can't think of a time in our lives when diagnosis is more important. Without it, how would we choose where to put our dollars in healthcare?

It is our responsibility to look into the future and try to figure out how the world will be 20 years from now. It sounds like a long time away, but if we have an R&D process that starts out in discovery now and won't be in the marketplace for 10 years, and we need to exploit that product for another 10 or 15 years, we are talking about a quarter of a century.

It is, especially if you look at what the last 25 years have brought us. If we were to go back to 1975, would we have imagined the role that the Internet is now playing? Back
then, we were batch-processing punch cards.

When trying to look ahead, the most important thing is to be aware and flexible so that you can adapt to change, whatever that change might be. It is probably not going to be staring you in the face, but what you hope for is an idea. And if you can see it before your competitors, then you become a first mover. And that is the crucial thing. That is why we need the best people, the right people, with their ears open, not with closed minds, to look at opportunities.

The most important thing for us and for healthcare is the increased role that diagnostic imaging is going to play in predictive and preventive medicine. This role is going to revolutionize the practice of medicine. There is absolutely no question about that.

Nycomed Amersham is the global leader in diagnostic imaging, and as such we are very well placed to build upon the foundation of all the products we have now so as to bring new products to the market. We will move from anatomy to molecular imaging. We will use these products to understand the impact of gene-based biology as it affects diagnostic utility. And in doing that, we will be well positioned for the future.

Building a Global Image Nycomed Amersham (Amersham, UK) has climbed to the top of the in vivo diagnostics industry through a savvy combination of corporate consolidation and technological innovation. Its major component, Nycomed Amersham Imaging (also Amersham), was formed in October 1997 by a merger between Amersham Healthcare and Nycomed's imaging business. Its life sciences unit, Amersham Pharmacia Biotech (Uppsala, Sweden), was forged from the merger of Amersham Life Sciences and Pharmacia Biotech in August 1997. Nycomed Amersham holds 55% of the business; Pharmacia Corp. (Peapack, NJ) holds the remaining 45%. With 8500 employees garnering £1.3 billion (about $2.08 billion) in annual sales, Nycomed Amersham is a world leader in in vivo diagnostic imaging and in life sciences. The imaging business is represented by Nycomed Amersham Imaging, which makes imaging and radiotherapy agents. It holds the leading global market shares in x-ray and radiopharmaceutical diagnosis through its major branded products, Omnipaque, Visipaque, and Myoview. Nycomed Amersham is developing a range of diagnostic imaging solutions, some current, some future. Coronary angiography uses a traditional anatomical approach with Omnipaque, a contrast agent that can be used to indicate blockage or obstruction in the coronary arteries (left). At the functional level, perfusion ultrasound can be performed using Sonazoid, a contrast agent that increases the strength of the ultrasound signal (center). To address future needs, the company is developing diagnostic products that target disease at the molecular level, selectively combining with receptors found mostly on certain types of cells such as cancer cells (right). AP-Biotech is a leading global provider of biotechnology systems, products, and services used in gene and protein research, drug discovery and development, and biopharmaceutical manufacturing. Imaging sales in 1999 accounted for £729 million (about $1.17 billion), which represents about 57% of the company's total corporate income. Operating profits were £178 million (about $285 million), which constitutes 71% of corporate profits. In the first half of 2000, sales were up 8% and operating profits were up 19%. The company generates most of its revenues in North America, which accounts for 46% of sales, and Europe, which accounts for 28%. Japan contributes 19% and the rest of the world 7%. Nycomed Amersham is the leading vendor of imaging products, far outstripping its competitors. Company estimates indicate that Nycomed Amersham holds 36% of the world market share for these products, compared to 20% for Bracco (Milan, Italy), 13% for Schering-Plough (Madison, NJ), 11% for Mallinckrodt (Hazelwood, MO), 8% for DuPont (Wilmington, DE), 1% for Guerbet (Paris), and 11% split among a variety of other players. The company is second, however, in the sale of MRI products. Schering-Plough holds a commanding lead with a 55% global share. Nycomed Amersham has 30%, Bracco 10%, and Guerbet 5%, according to Nycomed statistics. Overall, the sale of imaging agents is growing. In 1999, the company achieved sales growth of 24% from patented imaging products and another 3% from those not protected by patents. Life sciences sales in its drug discovery business are also rising. In that year, the company recorded growth of 37% in this area. This success has sprung from a diverse product line, which continues to expand through the development of new technologies and the extension of existing ones into new applications. Exemplifying new products is the radiopharmaceutical Datscan, which is approved in Europe for the diagnosis of Parkinson's disease, and futuristic spin-signal technology, which uses hyperpolarized xenon or helium to generate magnetic resonance images of the lungs and blood. Demonstrating the company's commitment to extending the diagnostic grasp of products is the MRI contrast agent Omniscan, whose applications were once restricted to oncology but now include visualization of blood flow. About 28% of the company's current portfolio is derived from branded patented products. In total, the company has a patent portfolio of 951 granted patents and 1160 patent applications, with 46 patent applications filed this year. Stoking this R&D mill is a budget equal to about 10% of sales. Future product-line expansion depends in large part on keeping R&D focused on opportunities in key fields of medicine—namely cardiovascular, oncologic, and neurologic applications. Nycomed Amersham Imaging is focusing R&D on the creation of agents that might accurately show if a patient has acute myocardial infarction or even identify individuals most likely to develop heart disease. Researchers are trying to find ways to detect the earliest signs of cancer, as well as identify the biological properties of lesions that predict the clinical course of the disease and patient response to interventions. Also in the works are the means for the differential diagnosis of dementia, particularly the early diagnosis of Alzheimer's disease, and improved early diagnosis of acute ischemic stroke so that debilitating consequences might be avoided.

AP-Biotech Stakes Its Claim In the California gold rush of the mid-1800s, two types of people got rich. One was the prospector whose persistence, skill, and good luck led to a vein of wealth buried in the ground. The other was the businessman who sold picks and shovels. Amersham Pharmacia Biotech (Uppsala, Sweden) is selling the picks and shovels for the gene rush of the early 21st century. The tools in its shop are the reagents, analyzers, and software being used by pharmaceutical, biotechnology, and agrochemical companies, as well as research institutes, universities, and medical research centers. AP-Biotech is also offering a valuable resource that the forty-niners of the 19th century would have surely appreciated—guidance on how and where to use its tools. The company's staff offers advice in detecting the right target molecule and in choosing the right equipment to produce, separate, and process the finished product. The pot at the end of this rainbow is filled with drugs and diagnostics likely to be specific and effective for a range of human diseases. These drugs will be the end result of research in one of two areas—genomics or proteomics. In essence, genomics is the study of genes, while proteomics is the study of proteins expressed by the genetic code. AP-Biotech addresses both areas to uncover the molecular information about cells in relation to diseases and potential treatments. Figure 1. The market for high-throughput DNA sequencers, which totaled $300 million in 1999, is dominated by Applied Biosystems (Foster City, CA) and AP-Biotech (Uppsala, Sweden). The company, owned by Nycomed Amersham plc (Amersham, UK) and Pharmacia Corp. (Peapack, NJ), has annual sales of $860 million and 4500 employees worldwide. A major market for the company is high-throughput DNA sequencers. For all vendors, this market contributes annual sales of about $300 million and is growing at about 25% annually. AP-Biotech has about 35% of this market; its competitor Applied Biosystems (Foster City, CA) has about 65%. Total sales by all vendors of high-throughput screening assays and detection instruments account for about $160 million annually. AP-Biotech is the leader of this market segment, with a 35% share. The company is also a major player in several other segments, most notably the one involving reagents and systems for labeling, detecting, and analyzing biomolecules. The total annual market for these products is about $2.5 billion. The company has a strong competitive position in technology, exemplified by its ongoing defense of a key patent in DNA sequencing. A U.S. District Court judge in California ruled that a key part of the technology in products sold by Applied Biosystems and used by Celera Genomics (Norwalk, CT) infringes a patent held by AP-Biotech. This technology was employed on the equipment used, along with AP-Biotech's MegaBace system, to decode the human genome, an accomplishment announced on the world stage last June by U.S. President Clinton and UK Prime Minister Blair. (At press time, this case was scheduled to move to a full trial.) How the legalities will ultimately play out is not known, but the strength of the company and its technology will likely boost the fortunes of an anticipated initial public offering (IPO). Nycomed Amersham, which owns 55% of AP-Biotech, has proposed to sell 10% of the company on the open market. A registration statement was filed in October 2000 with the Securities & Exchange Commission. With this IPO, whose date has yet to be determined, the first vein of gold in the AP-Biotech rush may be mined on Wall Street.