Innogenetics' New Chief Speaks Out

Philippe Archinard was one of the top executives at bioMerieux, the eighth largest diagnostics company, and a potential heir to Alain Merieux, the company's founder, when he left following disagreements with the new head of the company. He took a position as CEO of Innogenetics, a once high-flying biotech company with a strong emphasis on vaccines and molecular diagnostics. His mission: to fix the company's infrastructure so that it could grow, refocus its resources, and beef up its distribution in the wake of a disruption which occurred when its distribution and alliance partner International Murex was acquired by Abbott Labs in 1998.

When Philippe Archinard, PhD, left bioMerieux SA to take the helm of struggling biotech company Innogenetics NV last winter, the news was a surprise. Archinard had been at bioMerieux, the world's eighth largest diagnostics company, since the 1980s and was one of founder Alain Merieux's top lieutenants (see "Focused Consolidator: bioMerieux, IN VIVO, May 1998 [A#1998800111, and "bioMerieux's and Pierre Fabre's Surprise," IN VIVO, October 2000 [A#2000800180). He was widely perceived to have a shot at running it. Innogenetics was a comparatively small Belgium company, with a hybrid interest in niche areas of diagnostics and therapeutics. It had been selling some cutting-edge molecular diagnostics tests for several years, but its real goal is to get an HCV vaccine through clinical trials and into the market.

Archinard says he left bioMerieux because he had strategic differences with that company's newly anointed CEO, Francois Guinot, whom Alain Merieux brought into the business in 1999. And while his experience has been in diagnostics, Archinard was interested in working with a biotech start-up. When Innogenetics offered him the job of CEO, he wasn't unfamiliar with the company. BioMerieux had been interested in doing a deal with Innogenetics after Abbott Laboratories Inc. bought its distribution partner, International Murex Technologies Inc. in 1998 [See Deal]. But Innogenetics didn't want to put its fate in the hands of another mid-sized company that could be acquired.

The board of directors at Innogenetics, for its part, was looking for a replacement for co-founder and CEO Hugo Van Heuverswyn, PhD. Last fall, the board asked Van Heuverswyn to resign because it felt that he didn't have the skills to run the company as it expanded. The science was excellent but marketing was weak, says Archinard. Moreover, Abbott's purchase of Murex left Innogenetics bereft of distribution capabilities overseas; Abbott declined to pick up most of Innogenetics' tests. The company spent most of 1999 and 2000 building its infrastructure, forging some limited distribution deals, and gearing up to transfer manufacturing to new facilities in Ghent.

While Innogenetics' long-term goals are to develop innovative pharmaceuticals, it has built a $40 million business selling DNA diagnostics kits for several niche markets, including HCV drug resistance, HLA tissue typing, and HIV drug resistance. Ten products account for 80% of its sales. Its profitability, however, has been elusive; it posted a profit of $10 million in the first quarter of 2000, but that was largely due to a one-time gain from the sale of 106,031 shares of Rhein Biotech NV . This year to date, sales are up 30% and the goal is to become profitable on an operating basis as soon as possible. But the stock is trading in the mid-teens, only modestly higher than its price of $12 at its IPO [See Deal] on the EASDAQ.

Archinard's job is to reinforce management, strengthen regulatory and marketing on the diagnostics side, and hire people with experience in pharmaceutical development. In diagnostics, the company is looking to de-emphasize its small blood bank screening business because it just doesn't have the clout it needs to play there. Instead, it wants to focus on what it feels it is really good at: therapeutic monitoring and confirmatory tests for infectious diseases. In this regard, it has picked an area that is of increasing interest to the diagnostics and pharmaceutical world but has yet to be turned into big revenues.

The big rewards, however, will have to come from the pharma side of the house, where the priority is the HCV vaccine, now starting Phase I trials. In January of this year, the company received a US patent covering exclusive rights for the structures of the HCV virus required for developing a therapeutic and prophylactic vaccine, possibly giving it a negotiating tool against Chiron Corp. , which has a significant HCV patent portfolio. Analysts believe this gives the company freedom to work on HCV vaccines and could have favorable implications on the diagnostics side of the business, where Innogenetics sells a drug resistance test. The company also is moving ahead with its wound care business, where it has several niche products on the market, notably AutoDermand TransDerm, which are cultured epithelial sheets for the treatment of serious burns and chronic ulcers.