Hedge funds have been making waves in the clinical development industry for years, snapping up contract research organizations (CRO) with publicly-listed shares and putting them in private hands. Now the game appears to be shifting to undervalued technology firms. Genstar finalized the $400 million purchase of ERT, the #1 cardiac core lab, earlier this month.
This week, Genstar wrote a second check. For an undisclosed sum, the private equity group added a top electronic patient diary provider, Pittsburgh’s invivodata, to the ERT portfolio. Based in San Francisco, Genstar is no stranger to clinical research. It purchased PRA International for $790 million in 2007.
Genstar isn’t telegraphing whether it is considering a potential combination of PRA and ERT. That move would mirror some of the assets at Parexel, which Wall Street does appear to understand. It may not be clear for years whether such a move would please customers in pharma (by combining services and technology more seamlessly) or irritate them (by making it harder to mix and match solutions from multiple suppliers).
In financial terms, Genstar will be gauging how to maximize its future bonanza when selling ERT and PRA to other private investors or relaunching the companies in warmer, friendlier public stock markets. But in the intermediate time frame, for a few years at least, ERT executives will be spared the indignity of having to sweet-talk Wall Street analysts and answer their repetitive and predictable queries.
Getting back to basics, ERT says it will build on its core strengths and combine its own sizable electronic patient-reported outcome (ePRO) business with that of invivodata. ERT has long dominated centralized electrocardiogram (ECG) services for clinical trials, and acquired respiratory leader Carefusion in 2010, notes ERT head of marketing Patrick Hughes. But it was difficult for ERT to broaden its reputation. Hughes believes that since some respiratory projects are also patient-reported, ERT may now (with invivodata's book of business) have bragging rights to be the top provider of patient-reported data in the industry.
The firm is not resting there. ERT will now be pushing into a different strategic direction, emphasizing clinical outcomes assessments (COA) across all offerings. That market could expand by 50 percent over the next few years, the company projects. Even if the R&D community may not have appreciated all of the nuances of suicidality monitoring or patient diaries, Hughes says, any or all of ERT’s tools could prove useful in routine patient care. “The company now has the opportunity to talk about all the many types of outcomes data that are being collected,” Hughes says.
The health outcomes sector is a larger industry than the clinical trial niche, with competitors that dwarf ERT. But Hughes says ERT’s products are well-positioned to help insurers determine if therapies work or make a difference in real-world circumstances. The FDA has embryonic interest in outcomes as well.
“We're just not going to grow from the things we're doing today,” he says. Health outcomes are “going to be how the business interacts and communicates and messages with clients going forward.”
Era of Disappointment
With the absorption of invivodata into a cardiac safety powerhouse, it’s likely that the patient-reported outcome sector will become more obscure. The largest diary firms that remain independent (PHT, CRF, Exco InTouch) are prosperous. But they have struggled to make using gadget-based diaries a no-brainer. That may be because the handheld diary trials are complex to launch—or because the business and scientific case for them has gotten lost amid prominent electronic data capture (EDC) companies that relentlessly promote themselves.
In some ways, the ePRO industry could turn out to be a curious footnote to the story of a clinical trial sponsor community with a few too many honorable, adorable Luddites. There is no doubt that electronic patient diaries provide cleaner, more accurate data. Here's a Wyeth case history which hints at that.
Nor is there any doubt that data from paper diaries is scientifically problematic if not specious due to a complete lack of certainty around when any patient completes any entry. The founders of invivodata were academic thought leaders in proving that repeatedly prior to going into the R&D diary business. (See some of our previous invivodata coverage here and here.)
The pressing question is why electronic diaries have not been more widely adopted. Is it just the approximately $1,500 price tag per handheld device? The logistical hassles of globally shipping and supporting so much hardware? The implosion at Palm, upon which the industry became overly dependent? The difficulty and cost of properly validating that new electronic instruments are measuring exactly what paper instruments measured? All of the above?
To be fair, the limited usage of electronic diaries could be laid at the door of regulatory indifference. Officials in the U.S. and Europe have made only a token effort to nudge industry to use modern PRO collection techniques. Paper is king in pharma. Politicians don't yet grasp the connections between cleaner data, safer patients, and lower public expenditures. Public and private communications from regulators have been sufficiently gentle and nebulous that a majority of trials using patient-supplied assessments still rely on thousands of sheets of crinkled, coffee-stained paper.
Such projects also require hundreds of hours of human effort to decipher the glorious squiggles of errant human penmanship. So in an age of iPads and Android phones, paper-driven patient-reported R&D remains an anachronistic and spectacularly inefficient debacle. It would not be tolerated by a serious company or industry. Whether a hedge fund based in the San Francisco epicenter of American technology can alter that dynamic will be interesting to watch.d9A2t49mkex