Little Money Where Mouth Is: SB Still Spitless

SmithKline's deal with Epitope to sell its saliva diagnostic for AIDS fell victim to physician's office economics: why pay for the saliva sampling device when they were drawing blood for other reasons anyway?

It seemed like a better-than-average bet—an accurate saliva test for HIV, useful in the physician's office, public health clinics, and, eventually, with luck, homes. It would solve one of the big problems associated with most HIV diagnostics—the need to draw blood, often from people reluctant to get tested.

Certainly, SmithKline Beecham PLC thought so when Epitope Inc. got clearance for its OraSure saliva test in December 1994 (approval for the confirmatory test came a year later). Two months later, it had signed an exclusive US marketing agreement with the small Oregon-based company [See Deal]. SB would start by using its pharmaceutical sales force to introduce it to state clinics and facilities, then move into physicians' offices and eventually seek an over-the-counter application. The agreement marked SB's entry into the consumer diagnostics business.

The pilot program, in which SB reps talked about the product to local governments, went well enough. State health clinics liked it, too. And enthusiastic support came from the Centers for Disease Control, which was eager for the test to be used on people who would not under other circumstances check their HIV status, thereby enabling the government agency to get a more accurate sense of the disease's prevalence.

But the deal, like others in the fickle field of consumer diagnostics, fell victim to the caution which surfaced in the wake of Johnson & Johnson 's disappointing experience with its home HIV test, and, just as importantly, to physicians' office economics. Doctors in private practice weren't ready for it. They didn't see a need to pay for a sampling device when they were drawing blood for other reasons anyway. They weren't certain they or their patients would be reimbursed and they weren't, under managed care contracts, free to send the saliva samples back to SB Clinical Laboratoriesfor analysis, as required.

As a result, the SB-Epitope relationship became another inter-industry diagnostics deal gone sour and another nail in the coffin for novel OTC diagnostics (see "The Promise and Pitfalls of Home Testing,"IN VIVO, November 1997). SB terminated the agreement in July 1997, freeing Epitope to sell OraSure wherever it wanted, and in the process taking a $1.5 million stake in the company in order to keep a window on its technology [See Deal].

Some industry experts remain enthusiastic about OraSure, noting that it is useful in a variety of non-traditional settings like prisons and college campuses—although only Epitope's financial performance will tell if people are putting their money where their mouths are. Epitope has since built up its own direct sales force, hiring away some of SB's people, who are focusing their efforts on life insurance companies and state health clinics, reportedly with some success.