Frank,
Here is article from a local newspaper reported on another thread:
Copyright c 1997 Horvitz Newspapers Inc. 11/5/97
® NeoPath at a crossroad
By Jeanne Lang Jones
Journal Business Reporter
REDMOND -- NeoPath Inc. is a Redmond-based biotechnology firm that
believes it can save lives by making cancer tests cheaper through an
automated screening device.
To do that, the company must first await a decision from the U.S. Food
and Drug Administration that would allow NeoPath to market its AutoPap
device as a primary screener for cervical cancer.
The FDA has already rejected NeoPath's earlier bid a year ago. It has
until February to decide on the company's latest bid.
That decision could very well determine NeoPath's ability to survive
as a company.
Some analysts say NeoPath can't afford another setback like the FDA's
earlier rejection, which caused the company's stock to lose nearly
half its value.
While NeoPath's plans have been put on hold, a rival firm,
Massachusetts-based Cytyc Corp., has been winning converts to its
alternative to the Pap smear, with the help of a co-marketing
agreement with Mead Johnson & Co.
Some analysts say that many labs that have already bought Cytyc's
system probably won't be willing to fork out the additional money for
NeoPath's device even though the two products could be used together.
Founder remains confident
Despite the setback, NeoPath founder and chief executive Alan C.
Nelson remains confident in his company's prospects. The 185-employee
company has spent $1.4 million during the past year on a comprehensive
study analyzing the performance of its AutoPap System on the basis of
more than 31,500 slides.
The device combines high-speed microscopes and mapping software to
check Pap smear slides of cervical tissue for abnormal cells and rank
them.
The study closely follows new guidelines from a group of medical
societies and proves the AutoPap is more accurate than manual
screening, Nelson said.
Currently, the AutoPap is approved in the United States only as a
rescreener -- basically, an automated quality check on laboratory
technicians. Overseas the AutoPap is also used as a primary screener,
able to set aside some slides as normal without further review by
humans, chopping costs.
'' If they are denied the right to use the AutoPap as a primary
screener, NeoPath will depreciate to near cash value,'' said Ryan
Rauch an analyst at Oppenheimer & Co. in L. A.
Why? Rauch believes rescreening alone, while improving accuracy, does
not offer enough cost savings to induce laboratories nationwide to
invest nearly $450,000 a pop in an AutoPap.
Significant market
Sandy Hollenhorst, medical technologies analyst at Vector Securities
International in Illinois, is less dour on NeoPath's prospects, seeing
a significant market overseas.
But, because the United States is by far the biggest market, she
agrees FDA approval is critical.
While primary screening approval could bring in as much as $150
million in revenue over the next five years, NeoPath will remain
viable whatever the FDA decides, Nelson said. He believes his company
will turn a profit, regardless, by the end of 1998.
Some analysts are not so easily convinced. They say NeoPath and its
competitors first must hurdle some stumbling blocks: insurers
nationwide who are uncommitted to reimbursement; consumers who are
unaware of the advances and aren't pressuring the health industry to
adopt the technology; and laboratory directors who've decided to wait
for a clear market leader before buying equipment.
In addition, pathologists are novices in competing for budget
allocations, said Dawn Grohs, vice president of business development
at Massachusetts-based Accumed International Inc., a NeoPath
competitor.
'' They're not used to working with technology and they have no
budgetary processes for it,'' said Grohs.
Then, too, half of the 5,000 women who die from cervical cancer in the
United States each year, never had a pap smear, according to Rauch.
'' How much money are people willing to spend to save a small number
of lives?'' said Rauch. '' That may sound bad, but that's the way they
look at financial aspects from Wall Street.''
But, to some, NeoPath must look good. In September, the Soros
Investment Group, affiliated with renowned investor George Soros, took
a 8.73 percent stake in NeoPath.¯
eastsidejournal.com
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