Amersham's Push for High-Value Diagnostics

Amersham Health is applying Big Pharma marketing and R&D strategies to the traditionally stodgy, highly price-sensitive field of diagnostic imaging contrast agents. It has been far more aggressive than competitors in working to make innovation the basis of competition. But some analysts question whether the company can maintain near-to-mid-term growth as it awaits results of its risky, long-term effort in molecular imaging.

Can Amersham Health convert a stodgy near-commodity business into a high value high growth proposition? It's the goal of many in vivo and in vitro diagnostics companies—but successes to date are few and far between.

By Wendy Diller

• Amersham Health is applying Big Pharma marketing and R&D strategies to a traditionally stodgy, undervalued field, arguing that imaging's crucial role in therapeutic decision making justifies an improved valuation for its products.

• The company has been more aggressive than competitors in working to make innovation the basis of competition. By linking diagnostics closer to therapeutics, it hopes to convince customers that its products are worth more.

• Amersham's highly visible play in cutting-edge molecular imaging is a way of supplementing its own R&D spending, but some analysts see that as a risky long-term bet and wonder how the company can maintain growth in the near- to mid-term.

The diagnostic imaging agent business has long been considered, at best, a step-child of the branded pharmaceutical industry, closer to generics or even in vitro diagnostics. Lacking the protection of meaningful patents or regulatory approvals for specific, therapy-related indications, imaging agent manufacturers operate largely in a near-commodity world. Prices, which had been falling steadily, stabilized following an industry-wide shake-up in the mid-1990s, and changing demographics—notably the aging of baby-boomers—fueled demand, somewhat altering the scenario. But suppliers are still are struggling with ways to differentiate their products and get the pricing and valuations they think they deserve.

At an analyst meeting last November, top executives of Amersham Health , a subsidiary of Amersham PLC , were blunt: their company generates growth and returns as robust as some pharmaceutical companies during the height of the pharmaceutical boom, and their products deserve to be valued like therapeutics. Technological advances linking diagnostic imaging agents closer to therapeutic decision-making are making the agents more valuable then ever. The agents are safer, capable of capturing more information—functional, not just anatomic images—and applicable to an expanding number of indications. The increasing number of procedures driven by an aging population is creating double-digit financial growth.

They argued that Amersham's products are poised to go beyond imaging pictures to helping to understand what is going on in the body before symptoms occur—thereby improving physician decision making. "We are a pharmaceutical company with an opportunity to change mainstream therapeutics as we show value through improving clinical outcomes," says John Padfield, PhD, chief executive of Amersham Health. "We have concentrated in the past on identifying symptoms, but the future is about understanding disease before symptoms show. If we create the right products, we will be the beneficiaries. Timely intervention using effective diagnostics will be the key to our success."

This is an argument many companies in the in vitro diagnostic sphere have been making for some time, with, so far, limited success. (See BioSite's Play for High-Value Diagnostics, IN VIVO, April 1999 (Also see "BioSite's Play for High-Value Diagnostics" - In Vivo, 1 Apr, 1999.). But for price-pressured contrast agent companies, it's new. Amersham Health is the first imaging agent manufacturer to publicly opine about the technology's potential role in so-called personalized medicine—tailoring therapies to individual patients' needs, based on highly specific diagnostic tests—and to outline a strategy for capitalizing on it. Perhaps because of its past missteps, perhaps because several executives at the helm come from the pharmaceutical industry, it seems to realize the importance of moving to a value-driven competitive model that champions innovation and education.

Enjoying a leading market position amidst a healthy industry environment, Amersham appears to be achieving what its executives hoped for when it was formed in 1997 from the merger of Amersham and Nycomed [See Deal]. It has the resources and focus to take advantage of what it and others believe will be a plethora of opportunities in cardiac magnetic resonance imaging (MRI), ultrasound, and nuclear medicine. Near-term, it is relying on its management of the lifecycles of existing products, critical in an industry where growth is expected to come as much from expanding indications of the existing portfolios as it will from introduction of innovative products.

Longer-term, it is betting on molecular imaging, a field that allows scientists to image processes and particles at the cellular and even genetic levels. Unlike traditional imaging, which relies on contrast agents with broad indications applicable to a range of diseases, molecular imaging utilizes ligands that bind to specific targets on the premise that observing these targets can provide information about the state of a disease or effectiveness of a drug. Amersham is devoting a significant portion of its R&D efforts to molecular imaging and has established a series of creative, inter-industry alliances to help it. The goal, says William Clarke, MD, Amersham Health's EVP, R&D, is to link Amersham's products closer to therapeutics, increasing their value to physicians. Moreover, the company can get involved early on in a segment of diagnostic imaging that is likely to place more than average reliance on imaging agents and probes—and therefore, theoretically, provide greater demand or better pricing for Amersham products. (See "Imaging in its Heyday: Research Applications, Part I," START-UP, March 2002 (Also see "Imaging in its Heyday: Research Applications (Part 1)" - Medtech Insight, 1 Mar, 2002.) and "Imaging in its Heyday: Clinical Applications, Part II," START-UP, April 2002 (Also see "Imaging in its Heyday: Clinical Applications (Part II)" - Medtech Insight, 1 Apr, 2002.)). Molecular imaging, because it is so specific, will play a key role in Amersham's efforts to link diagnostics tightly to therapeutics.

Amersham is doing what the contrast agent business needs done: focusing on innovation. And therein lies the rub: much as it tries to distinguish itself from the pack, most of the world still considers Amersham to be an unexciting contrast agent company. The Nycomed-Amersham deal made sense strategically, analysts say, though they carp that it hasn't produced cost savings to the extent promised. Yes, pricing is stable for now, but given the industry's history and the instability of leading suppliers, that could change in a flash. Amersham is trying to make education a more important component of the selling process, but, despite its leading position, it has limited ammunition against a full-fledged price war. Nor are analysts impressed with the company's near- to mid-term pipeline, noting that several new products have had mediocre launches and an MRI agent was dropped in late stage development because it was outmoded by an advancement in hardware. Molecular imaging, they contend, may eventually be a goldmine, but fruits of the effort are at least 7 to 10 years away. Diagnostic imaging with contrast, they fear, can never be more than it has been.

Riding a Rising Tide

If contrast agent companies have been slow to take up the mantra of high-value diagnostics it may be partly because many of them have recently undergone management turmoil and are still sorting out their internal affairs. That's an advantage for Amersham, which has had more time than most of the others to reorganize and stabilize.

The turmoil came about as a by-product of the past decade's pressures. After flourishing in the 1980s, with the introduction of new X-ray/ CT imaging agents, followed several years later by a similar cycle in MRI, the industry hit a wall in the 1990s. Pricing pressures and the advent of managed care played havoc with manufacturers' profits. Manufacturers began to undercut each other to gain access in the US to group purchasing organizations (GPOs), which control 75% of the market. Mallinckrodt's (now a division of Tyco International Ltd. ) winning low-ball bid for a sole-source contract with Premier Inc. for X-ray imaging agents in 1996 was perhaps a turning point. It battered the already shaky industry, leaving Nycomed Imaging, the predecessor to Amersham Health, and other competitors wondering if contrast media could ever be a viable business. (See "The Contrast Media Wars Get Hot" IN VIVO, June 1996 (Also see "The Contrast Media Wars Get Hot" - In Vivo, 1 Jun, 1996.).) Meanwhile in Europe, government agencies, eager to reign in growing health care expenses, also squeezed suppliers, forcing them to ratchet down prices.

The result is that, of the five key players today, two have new parents—both troubled—and one has a new capital structure. Tyco now owns Mallinckrodt, but some wonder if Tyco's s own precarious finances will force it to deprive Mallinckrodt of much-needed R&D funding [See Deal]. EI DuPont de Nemours & Co. Inc. 's contrast business became part of Bristol-Myers Squibb Co. last year when BMS acquired DuPont's entire pharmaceutical line [See Deal]. BMS had already gotten out of contrast media once in order to concentrate on pharmaceuticals, selling Squibb Diagnostics to Bracco SPA [See Deal]. Now, BMS is struggling for survival. Bracco itself had a change in ownership when long-time stakeholder E. Merck (now Merck KGAA ) also wanting to focus on therapeutics, divested its shares, selling them back to the Bracco family. The latter may not mean an immediate change in strategy, but as a privately held family-owned company Bracco doesn't have Amersham's access to public capital markets, points out John Babich, PhD, CEO of Biostream Inc. , a start-up which is working on imaging agents for the cardiac market.

Only Schering AG has remained committed long-term to the field, but its strength is in one segment, MRI. There, its key agent, Magnevist, has more than 50% market share, but is soon to go off-patent in Europe. In an era in which customers want broad product lines, Industry analysts point out that Schering was late to enter the large X-ray market, has little presence in ultrasound, and is just beginning to build a nuclear medicine business through a series of small acquisitions and alliances. It could catch up in those areas, but Amersham senses a gap. Moreover, Schering gets less than a fifth of its revenues from its diagnostic imaging division.

Amersham Health, itself, is no stranger to this era of musical chairs. But unlike most of its competitors, its current ownership structure was created as part of a consolidation, not a divestiture, strategy. And the merger that created it took place more than five years ago, giving it enough time to stabilize and focus its business.

The 1997 merger that created the current company put together Amersham, a UK company with a market-leading presence in radiopharmaceuticals (nuclear medicine) and also in life science supplies, and the Nycomed subsidiary of the Norwegian company Hafslund Nycomed. Nycomed was a traditional imaging business, involved in X-ray, MRI, and nuclear medicine. Its major invention, introduced in the early 1980s, was the first non-ionic X-ray contrast agent, Omnipaque. Sales were and continue to be robust, but the price wars of the mid-1990s hurt margins.

The new Amersham—then called Nycomed Amersham PLC—consisted of two subsidiaries, nearly equal in size—Amersham Pharmacia Biotech, a joint venture with Pharmacia Corp. in life sciences supplies—and Nycomed Amersham Imaging. The subsidiaries have had little to do with each other but executives say they will work more closely together since Amersham in March purchased Pharmacia's 45% interest in the biosciences business [See Deal]. Imaging and life sciences have different customers but similar technologies are driving their future, points out Sir William Castell, CEO of Amersham PLC. Bioinformatics is a case in point—the biosciences portion of the business has experts in bioinformatics, whose skills can also help Amersham Health and are notably applicable to its evolving positron emission tomography (PET) imaging network, IMANET, which helps pharmaceutical companies evaluate their drugs in development, he adds.

The merger aimed to create product-line breadth. Together, the companies could offer customers, notably GPOs and European government purchasing agencies, the purchasing efficiencies of a broad portfolio of products. With 37% worldwide market share, they wouldn't have enough clout to guard completely against price wars. But they could build stronger relationships with buyers that would allow them to convey the value of their offerings and take advantage of production and distribution efficiencies. Thus, they could maintain margins, even in the face of pricing pressure.

Today, Amersham Health's market share is nearly double that of its nearest competitors, Bracco and Schering. Its sales in 2001 were £922 million, up 13%, and slightly more than half of Amersham PLC's £1.6 billion revenue totals. Schering Diagnostics, in contrast, had sales growth of 8% (Bracco doesn't disclose financial performance). Amersham has operating margins exceeding 25%, comparable to some drug companies. The future looks promising, too: 40% of its sales comes from patented products, protected at least through 2008, and growing at roughly 20% a year. Even the unpatented portfolio faces little generic competition and is performing well—sales of Omnipaque, the X-ray contrast agent, which went off patent in 1999, were up 10% last year, thanks to the increasing number of X-ray and CT procedures. The company has less competition than it has had in the past six years, notes Max Hermann, an analyst with ING Barings in London.

Indeed, Amersham has been able to take advantage of its competitors' lack of strategic leadership. It's also benefited from healthy external drivers, including demographics, refinements in hardware and software, new therapeutics that require imaging, and better understanding of information gleaned from imaging. Pricing is stable in most segments these days and where it isn't, such as in X-ray, increased utilization offsets decreasing prices. For example, placement for multi-slice CT, an X-ray machine with a number of detectors that can visualize the entire body, are up 48% this year, thanks to equipment improvements and the growth in procedures that require it. And that increase in placement helps imaging agent manufacturers, particularly X-ray/ CT market leader Amersham, because multi-slice CT requires high volumes of contrast media. As Padfield acknowledges, "We're riding a rising tide."

Paying Attention to Specialists

But Padfield says that's not enough for Amersham. He aims to take healthy margins and bolster them further by revamping the way his company functions. That means investment in clinical trials to prove the clinical and economic benefits of products in development. It also entails organizing the company by disease state, rather than by hardware modality, as the industry traditionally has done and still does. Thus, R&D now works according to four high-priority disease groups, rather than by X-ray or MRI: the groups are central nervous system (CNS), oncology, cardiology, and pulmonology. Projects are based not on modality, but on unmet needs in particular diseases. "The doctors don't care what modality is used in the end, as long as it provides the best outcome for his or her patient," says Jean-Michele Cossery, PhD, EVP, product strategy.

This disease orientation extends to Amersham's sales and marketing strategy. Such an approach allows it to offer options across the board in response to customer needs. This way of thinking fits better with how physicians approach their jobs, Cossery points out. And while Amersham's sales and marketing efforts once focused on radiologists, they now increasingly pursue referring specialists because these specialists drive demand for procedures—a far cry from the days when the main concern was GPOs and managed care.

A former top executive at Glaxo and CEO of Chiroscience Group PLC, John Padfield is determined to impose a pharmaceutical mentality on Amersham—orienting the company towards diseases rather than instrumentation and hardware, and encouraging a consultative educational sales approach—and to convince others to see it in that light. In the diagnostic imaging arena, where new product introductions are few and far between, product extension strategies are even more important than in branded pharmaceuticals. Amersham's already taken steps to implement more sophisticated life cycle management—that is, fully exploit existing products by seeking expanded indications for them and improving their packaging.

The company has several recent examples: its nuclear medicine cardiac agent, Myoview, approved in the US in 1996 for cardiac imaging, got expanded approval last fall. The new indication allows it to be used for pharmaceutical stress testing as an aid in diagnosis of coronary artery disease, making it the first direct competitor to a best-selling BMS drug, Cardiolite. Myoview sales were up nearly 30% in 2001 and are likely to rise even faster this year. An example of its strength: Myoview accounts for 48% of the more than $50 million in annual revenues flowing from Novation Inc. to Amersham, a substantial increase since the large GPO awarded Amersham Health a sole source contract for the agent about four years ago, says Robert Benson, Novation's VP, contract and program services.

Visipaque, an X-ray imaging agent introduced in 1996, also exemplifies how Amersham is trying to add value to its existing product line. Visipaque is a somewhat modified version of Omnipaque, which is off-patent. It is safer, less uncomfortable, and easier to administer than Omnipaque and other first-generation X-ray agents. Amersham is thus charging a premium for it—and getting the price it wants for selected applications, notably in cardiac imaging.

Also on Padfield's list is something he calls "maintenance"—the ability to get people to use the same product repeatedly for one or different indications, much like people take medicine on repeated basis. An imaging agent could possibly be used separately for diagnosis, staging, and monitoring of disease in a patient, but that's not happening yet, he says.

\ Amersham's evolving disease orientation mirrors that of pharmaceutical companies. It has targeted cardiology, neurology, oncology and internal medicine as priorities for research and sales and marketing and is placing greater emphasis on establishing relationships with specialists in those fields. These doctors not only order the tests—they are increasingly likely to perform some of them rather than referring patients to radiologists. A case in point is cardiology, where the use of contrast-enhanced imaging procedures is rising rapidly. Radiologists and nuclear medicine specialists handle the bulk of myocardial perfusion and other basic exams, but cardiologists handle coronary angiography, echo stress testing, and are battling radiologists for control of cardiac MRI.

Amersham's push into this field exemplifies its strengths and vulnerabilities. Within cardiology, it already offers products in every modality, although not for every indication. The breadth of products not only provides convenience to buyers, it gives Amersham a hedge since no one knows yet which technologies will emerge as leaders for some critical indications. For example, while Myoview, is a popular choice for gauging myocardial perfusion, clinicians also are using non-radioactive alternatives like ultrasound and MRI. No one is sure which of these approaches will predominate, since MRI and ultrasound are still experimental. But if study data holds up, Amersham will be at the forefront of a new paradigm. If it doesn't, Amersham always has Myoview.

Yet, Amersham remains vulnerable in a modality that only recently has begun to play an important role in cardiac diagnosis—MRI. Of 23 million MRI procedures done a year, today only an estimated 500,000 are for cardiac diagnosis. But it's a growing segment, says Robert Weiskoff, PhD, of Epix Medical Inc. , which is co-developing an MRI agent, MS-325, for cardiac applications with Schering because MRI now has the speed, sensitivity, and capacity to image a beating heart [See Deal]. That capacity makes it feasible for many cardiac applications. Unlike X-ray angiography, which involves injecting media into a catheter running from the groin into the heart, it isn't invasive and, unlike nuclear medicine, it doesn't expose patients to radiation. For these reasons, some top clinicians are already using it with existing MRI agents like Omniscan and Magnevist in select cases to replace X-ray angiography—although the technological complexity of administering these agents in such applications limits their use to highly skilled experts.

Amersham, the number two player in MRI, faces stiff competition from Schering, which has maintained its grip on the market, despite Magnevist's age, and now is waiting for results from late-stage clinical trials for MS-325. The agent is likely to receive approval first for imaging aortoiliac arteries (peripheral vascular disease), with cardiac to follow. MS-325 could launch as early as 2004, Epix executives say, although others note the company recently reported delays in pivotal trials.

Amersham doesn't have an immediate counter for MS-325. It stopped work on Clariscan, its most promising MRI agent in development, when it decided the agent wasn't significantly better than already available technologies. But it is seeking to broaden usage of Omniscan, its major commercial MRI contrast agent, by applying it to new indications and designing for it more flexible packaging. Also, it is considering in-licensing niche products and is making a play in other areas of cardiology. Moreover it is conducting research on the use of MRI for diagnosing coronary artery disease and vulnerable plaque, for which no diagnostic is currently available. MRI hasn't been sensitive enough to be used for diagnosing coronary artery disease, but here too that is changing due to equipment improvements. And MRI's ability to identify vulnerable plaque could be critical to preventing heart attacks. Vulnerable plaque is diseased plaque in arteries that gives no indication of its presence until it ruptures and causes a heart attack.

Spinning Signals

Most important, in the long-run, it is making a bet on an entirely new MRI program revolving around technologies related to spin signals. Padfield sees this as a vehicle for gaining leadership in the MRI field, much in the way that Schering captured the current market a decade ago with the introduction of Magnevist. It was the first MRI agent based on gadolinium, which offered better sensitivity and it is used in all of the current generation of MRI agents, including Omniscan.

Amersham acquired spin signal technology in 1999, when it bought Magnetic Imaging Technologies Inc., a North Carolina start-up formed by Duke University and Princeton University professors to capitalize on medical uses of hyperpolarized gases [See Deal]. Hyperpolarized gases consist of atoms that have been excited by a laser into an electrically polarized state. Spin signal can polarize the atoms on a large-scale basis, that is, put them in a special high-energy state that emits a strong signal picked up by MRI. For medical purposes, scientists are experimenting with helium 3 (He-3) and xenon 129 (xe-129) because these gases generate clear, easy to read images of air space in the lung and other body cavities, something that isn't possible with current MRI contrast, which detects signals in water-soluble tissue. The images are clear enough to be read comfortably by non-expert clinicians, says James Brookeman, PhD, a physicist at the University of Virginia Medical Center, who has been conducting Amersham-sponsored research in the area.

Amersham and others believe clinicians could apply spin signal to pulmonary imaging, impossible with current MRI or other water-dependent technologies because the lungs consist mostly of gas. Clinical trials are underway for a variety of applications of spin signal with helium. Amersham is studying, for example, early diagnosis of lung transplant rejection, a treatable condition with no accurate way to detect it. Likewise, it is looking at early detection and assessment of lung damage in patients with emphysema and firefighters suffering from smoke inhalation; such patients have a better prognosis if treated earlier. The technology isn't yet useful for cancer or heart disease, on the other hand, because it can't image solid tissue—although Amersham has internal programs involving a novel approach to spin signal that may allow it to be applicable to cardiovascular disease and cancer.

The problem is, that while scientists agree that hyperpolarized gases for MRI presents beautiful, easy-to-read images, not everyone thinks they have such a rosy future. Skeptics impatiently point out that the technology still hasn't demonstrated utility, although it has now been studied in humans for several years—a contention, proponents say is misguided because technologies can take much longer to sort out. PET took more than a decade from the introduction of the first cameras to getting reimbursement, notes Padfield. Still, "it's a solution looking for a problem," says one thoracic radiologist who has worked with hyperpolarized gases and says that until the technology is further refined, it will be limited to monitoring pulmonary functioning and won't have widespread applications. Moreover, he points out, it will require aggressive education and marketing because imaging hasn't been a big part of pulmonary disease assessment.

Optimism About Ultrasound

Ultrasound contrast, on the other hand, is a more immediate opportunity, partly because people have been working in the field for more than a decade. Moreover, Amersham is not alone in trying to commercialize the field, as several companies are pursuing regulatory approvals for the first of what they see as a series of clinical applications, mostly aimed at cardiology. And while this means the company has competition, it also has help informing its customer base. Not that it is relying on such support: to educate cardiologists, it has organized a dedicated sales force for cardiac ultrasound.

In cardiology, Amersham expects cardiologists to prefer ultrasound, all things being equal, to other modalities. Traditionally, cardiologists already use ultrasound without contrast agents for preliminary evaluation of patients with arterial disease. They can do it in their offices, its inexpensive and increasingly fast. However, in its current iteration, the equipment alone doesn't always offer adequate visualization of the endocardial surfaces, leading to inconclusive results that require further assessment.

Contrast-enhanced ultrasound addresses these limitations, but researchers and scientists pursuing the technologies have been sorely disappointed. Ultrasound contrast consists of microscopic bubbles, mostly made of perfluorocarbons and filled with air or gas. The bubbles make their way through the bloodstream, congregating at particular sites in the body, where ultrasound signals bounce off of them, generating images. Several companies developed agents in the mid 1990s, only to see them falter at the FDA or in the marketplace—and, as the products fizzled, so did the companies involved with them. It's debatable whether the chief obstacle has been technological (early agents, not newer ones, lacked robust bubbles—the bubbles dissolved or scattered; the ability to control bubble size, however, has been more problematic) or overly stringent regulatory policies. (The FDA's indecision about categorizing these as drugs or devices led several companies to sue it in the mid-1990s.)

These days, however, a sense of optimism pervades the field following the FDA's approval in the past year of three products—two as drugs, one as a device—and their subsequent launch. Many experts say the contrast agents have overcome their early technological problems. "From what I've seen, I feel comfortable saying that given the newer agents, ultrasound will play a key role in diagnosis and assessment of therapies," says Barry Goldberg, MD, director of the division of diagnostic ultrasound at Thomas Jefferson University Hospital in Philadelphia, and past president of the American Institute of Ultrasound in Medicine, who works with a variety of experimental ultrasound agents.

Still, many scientists aren't sure that ultrasound contrast, at least in its current iteration, will be successful in some of the more complex—and widely used—cardiac applications. All three approved products have a narrow indication for endocardial border delineation—that is visualization of the heart chambers and wall motion. But nothing, as yet, is available for what people assume is likely to be the much bigger opportunity: ultrasound imaging of myocardial perfusion. SPECT, a nuclear medicine technique, is currently the methodology of choice for this test, although Amersham and others are looking at MRI alternatives as well. But, both of these are expensive and have limitations, which ultrasound might be able to address.

Amersham's strategy in this market is to get in early with proprietary technology. Thus, in 2001, it purchased the ultrasound patent portfolio of Sonus Pharmaceuticals Inc. , which got out of the business after its agent failed at the FDA [See Deal]. Several months later, it struck an agreement with Mallinckrodt that gives it exclusive rights to Optison, an agent initially developed by Molecular Biosystems Inc. under a marketing agreement with Mallinckrodt and one of the three recently approved contrast agents [See Deal]; [See Deal]. Molecular Biosystems was sold to Alliance Pharmaceutical Corp. and Mallinckrodt wasn't interested in the ultrasound market, according to industry experts [See Deal]. Amersham launched this product in the US in January and expects to do so shortly in Europe. Moreover, Amersham is supporting clinical trials of Optison for myocardial perfusion—it won't say much about results to date, but many believe myocardial perfusion may be ultrasound's killer application.

Just as important to Amersham is its internally developed agent, Sonazoid, which is in Phase IIb trials in cardiology for assessing heart muscle perfusion and also has begun Phase III clinical trials for differentiating metastatic from non-cancerous liver disease. Although Amersham hasn't publicly released data from the Phase II liver study, some scientists speculate that this could be one of contrast-enhanced ultrasound's major opportunities, if it is found to provide information similar to that produced by CT and MRI. All things being equal, says Goldberg and others, people are going to use ultrasound with contrast because ultrasound is more widely available, especially outside of the US, and much less expensive.

Ultrasound is also an important part of Amersham's efforts to link diagnostics more closely to therapeutics. Intriguingly, it has potential beyond imaging diagnostics. Ultrasound microbubbles could be used for delivering targeted therapies to specific sites in the body or even combinations of diagnostics and therapeutics. Thus, Amersham's deal late last year to distribute Corixa Corp. 's radioimmunotherapy agent Bexxar (tositumomab and iodine I 131 tositumomab) for non-Hodgkin's lymphoma in Europe makes strategic as well as economic sense [See Deal]. Bexxar combines a built-in radio-diagnostic with a therapeutic, and while it doesn't use microbubble technology—it relies on radioisotope labels to take the therapy to its target, then images the target—it will get Amersham comfortable with the concept of combining diagnostics and targeted drugs, executives say. Amersham, as part of the deal, committed to buy $15 million of Corixa stock.

The Key to Innovation

Even as Amersham works to strengthen its traditional businesses, it is generating excitement about a technology that it believes will play a major role in its future, molecular imaging. As Amersham sees it, molecular imaging will play a key role in personalized medicine, which will enable individuals to get the medicine best suited to them.

The new technology will also advance one of the company's key goals for building high-value diagnostics; linking the diagnostics more closely to therapies. As such, molecular imaging is a shift for Amersham because contrast agent utilization is traditionally based on generalized indications and broad markets for a few products. Molecular imaging, on the other hand, will result in new kinds of imaging agents aimed at very specific targets. In short, it is likely to involve the introduction of more products, each with small markets. Still, notes Amersham's William Clarke, "molecular imaging will help convince payers and regulators that the patient is getting the right drug." And thus, one surmises, allow Amersham to demand higher prices for its products.

Publicly, Amersham has embraced molecular imaging much more aggressively than its competitors, entering into a series of high-profile inter-industry alliances and pushing the first of what it calls "molecular" products into the market. It won't say how much money it is putting into this effort, although the proportion of revenues it spends on R&D remains a steady 10%. But Clarke insists that the company is making a major commitment to the field.

By taking these actions, Amersham figures it will it get access to cutting edge technology, which will in the near term help its relationships with key customer accounts and make it an attractive in-licensing partner to fill near-s and mid-term gaps in its product line. Further down the road it will get access to "content"—new markers with potential diagnostic applications—from novel kinds of partners. And it will have a greater opportunity to stay in touch with the pharmaceutical industry upon which so much of its future depends.

That's because the cornerstone of Amersham's molecular strategy is IMANET, its two-year-old PET imaging network. IMANET is Amersham's version of a "content" driven deal in the therapeutic world—a way for it to get access to new markers without making the huge upfront investment needed for basic research. Through IMANET, Amersham hopes also to gain insight into the promising therapeutics that will eventually drive use of its diagnostics. IMANET is the foundation for what Amersham expects to be a global network of PET research centers, which pharmaceutical companies can use to assess their therapies in development. PET is particularly appropriate for molecular imaging because of its sensitivity—it can capture extremely small images that can't be picked up by other modalities. Moreover, it provides information about function, not anatomy, and thus can image molecular processes, which some scientists believe might provide important diagnostic insights. Pharmaceutical companies are interested in using PET to speed up evaluation of their drugs because PET can image, in real-time, uptake of foreign substances by cell receptors.

So far, Amersham has two PET centers under the IMANET umbrella, at Hammersmith Hospital and the Uppsala University PET Centre in Sweden. It has set up joint ventures with the institutions that control each site—it formed Imaging Research Solutions Ltd. (IRSL) with the UK Medical Research Council , the government research agency that runs Hammersmith Hospital [See Deal]. MRC agreed to partner with Amersham in exchange for a substantial infusion of funding to upgrade PET facilities at Hammersmith. And, just this spring, Amersham formed Uppsala Research Imaging Solutions AB (URIS) out of the Uppsala PET Centre, which also needed funding for expansion. URIS is a 75%-25% joint venture with the Uppsala University Holdings, with Amersham the majority owner.

Both Uppsala and Hammersmith are highly regarded as PET research sites, which has helped to attract pharmaceutical companies interested in PET imaging. The Uppsala researchers, led by Bengt Langstrom, PhD, who was just named IMANET's chief scientific officer and interim managing director of URIS, are experts at microdosing and utilization of carbon-11 as an imaging label for PET. Scientists at Hammersmith Hospital are leaders in research on receptor occupancy, that is, imaging used to see if a drug is occupying the intended receptor on a cell surface.

Partly because of their reputation, Pfizer Inc. this January signed an R&D collaboration agreement with Amersham in which it is using IMANET facilities and expertise to help evaluate its drugs in development in exchange for Amersham's access to exclusive rights to diagnostics that might result from Pfizer's work [See Deal]. And while Amersham views IMANET as a business, it doesn't expect the network to make large profits. Rather, Amersham considers IMANET to be a self-funding part of its R&D group, says Clarke.

The Pfizer deal is particularly exciting for Amersham. It's a way for Amersham to leverage Pfizer's R&D investment using Pfizer's dollars and Amersham's imaging expertise. The imaging company may be able to find target markers that didn't make good pharmaceuticals targets but are possibly useful diagnostics. It also gets earlier insight into the direction of pharmaceutical research, a critical element if Amersham is to base future programs on targeted therapies.

Amersham is well positioned to move into molecular imaging since it is already a key supplier of nuclear medicine radioisotopes, which are widely used for molecular research. The company's competency in radiopharmaceutical R&D, production and distribution, including its network of 178 radiopharmacies, which distribute its radioisotopes, gives the company an edge in research, and will help with commercialization down the road. It is the world leader in SPECT, which is the most widely used nuclear medicine technology—Myoview is a SPECT agent—and it is getting into PET, which is likely to be the dominant technology for molecular imaging because of its high spatial resolution. (SPECT is much easier to use, less expensive, and more widely available, but lacks PET's resolution.)

In the past year and a half, the company has also signed a deal with GE Medical Systems Inc., a subsidiary of General Electric Co. , to develop easier methods of synthesizing and labeling radiopharmaceuticals used in nuclear medicine [See Deal] (see "GE and Amersham Sharpen Their Molecular Image," IN VIVO, December 2001 (Also see "GE Medical and Amersham Sharpen Their Molecular Image" - In Vivo, 1 Dec, 2001.)). "PET is incredibly complex to use and Amersham wants to change the way PET is done, making it fast and simple," says Clarke. GE makes the cyclotrons needed to synthesize radioisotopes used with PET, and tracer boxes for labeling them and measuring doses. While current labeling boxes are built to work only with a specific compound—notably F-18 labeled FDG, the most common compound used with PET—next-generation boxes will have more flexible applications. They will most likely be able to apply F-18 labels to a broad array of compounds, some of which Amersham already has in development. When general-purpose boxes are widely available, Amersham will be able to get its products onto the market much faster, since it won't have to ensure placement of new boxes for every assay it introduces, says Eric Stahre, GE Medical Systems' general manager and technology leader of genomics and molecular imaging. He points out that GE's strong position in MRI may help also help Amersham when it rolls out spin signal technology.

Can Amersham Be More Than It Has Been?

Five years after the merger of Nycomed and Amersham, Amersham Health is one of the most stable contrast agent companies, with an aggressive strategy of pursuing innovation. While several of its major competitors are still struggling with organizational shake-ups, Amersham is poised to confront the future. Led by former Big Pharma executive John Padfield, it is undertaking a series of initiatives aimed at linking its diagnostic imaging agents closer to therapeutic decision making and in some cases specific therapies, thereby obtaining higher values for its products In doing so, it is trying to promote the value of its products during a period of robust industry growth and protect itself and others from the vicious price wars of the past.

It has a variety of R&D initiatives, and spends a steady percentage of sales on R&D—about 10%—in line with the pharmaceutical industry. While it won't discuss how much it is spending on molecular imaging, it has engaged in some high profile projects in the field with top-flight university researchers. The issue is just how long will it take for molecular imaging to become a business. Certainly, other industries that have been pursuing genomic targets for several years have found their efforts take longer to come to fruition than any one expected, and the failure rate is high. Not to say that their efforts won't pan out. But it is taking longer than many thought.

Other companies in the industry are also pursuing similar opportunities, but Amersham has been more aggressive and somewhat more innovative. There's a lot of innovative R&D and strategic thinking going on at Amersham. The company has laid the groundwork for what it hopes will be a new series of contrast agents and a new way of valuing them. But what's needed now are results: it is far too early to declare success on any front. Investors—and customers—are going to have trouble revising their perception of Amersham and its products until it produces solid clinical trials or sales data for key products. The new products that came to market in the past few years were either aimed at niche applications or require an education effort that slows their sales ramp-up. As for molecular imaging, experts say it is a long-term, risky bet. No one yet knows which imaging markers will be most beneficial, and discoveries emanating from it are unlikely to reach market in the next year or two. Amersham doesn't want a repeat of the mid-1990s' price wars. But if it wants customers to pay more, it's going to have to convince them that it has products everyone wants.