The MX Q&A: CardioGenics’ Yahia Gawad

Yahia Gawad has designed his company’s cardiac diagnostic test for that moment. The founder and CEO of CardioGenics (Mississauga, ON, Canada) claims the QL Care Analyzer offers highly accurate, rapid results at a sensitivity level heretofore unavailable in the POC immunoassay market. The device is the first of its kind to use chemiluminescence outside of a large lab analyzer, he says. This capability is particularly acute at a time of evolving definitions of ischemia, a growing need for more-sensitive tests, and increasing pressure to pare healthcare costs.

“Cardiologists and emergency room physicians are demanding more than just yes/no answers,” Gawad says, adding that “market penetration figures testify that the climate requires more than the existing cardiac test offerings.”

A physician, Gawad has been taking the pulse of the cardiac diagnostic test market for nearly two decades, having taken cardiac diagnostic devices from concept to commercialization for the past 18 years. Combining his training in cardiology, biochemistry, and immunology, he founded CardioGenics in 1997 after cofounding Skye PharmaTech (Toronto), a stroke diagnostics firm where he was vice president of medical affairs. The company changed its name in 2000 to SYN X. Before his stint at SYN X, Gawad was director of clinical research at Spectral Diagnostics (Toronto), a manufacturer of antisepsis diagnostic products. As of mid-December, CardioGenics Holdings reported a market cap of $83.8 million on the Over-the-Counter Bulletin Board (OTCBB), a quotation service for securities not listed or traded on NASDAQ or a national securities exchange.

In this exchange with MX, Gawad touches on the technical and market challenges of developing the QL Care device, the rigors of the FDA approval process, IVD trends, and the investment climate for immunoassay products following CardioGenics’ recent business agreement with a European firm.

MX: You say the QL Care Analyzer is a leap forward for immunoassay point-of-care cardiac diagnostic treatment. What was the nature of cardiac diagnostic treatment before the introduction of the device?

Yahia Gawad: The QLCA is a leap forward in POC diagnostics. It is the first POC platform to bring chemiluminescence to the POC immunoassay testing market for those seeking quantitative results. Fundamentally, the QLCA is an immunoassay analyzer that is set up to perform one test at a time in whole blood samples. It is not a miniaturized lab analyzer, in the sense that the technology was imported from lab-based machines. The core technology was specifically developed for the QLCA and works in tandem with numerous other technologies inside it.

Other POC platforms on the market employ fluorescence. Light emission from a chemical involves either fluorescence, in which an existing light source is used to elicit light from a chemical, or chemiluminescence. That involves the emission of light through a chemical reaction and does not use a pre-existing light source. Historically, chemiluminescence is difficult to perform in the absence of large laboratory analyzers because it’s a demanding technique that requires technically sophisticated design. With regard to current cardiac diagnostics, all are either qualitative, giving simple “yes” or “no” answers, or they employ fluorescence, which has a low detection limit.

MX: What business and technological changes or challenges have you seen in the IVD business since you were director of clinical research at Spectral Diagnostics?

YG: Back in the Spectral days, there was a trend to push for cardiac POC products, just to provide the yes/no answers for acute cardiac care. Currently, cardiologists and emergency room physicians are demanding more than just yes/no answers. Although many companies are still developing these products, the market penetration figures testify that the climate requires more than the existing cardiac test offerings.

As for the technical changes and challenges, the new data and definitions of acute coronary syndromes focus on pushing the sensitivity level of any analyzer, even central lab analyzers, to the limit to detect the lowest level of markers of cardiac damage. This is evident by the introduction of second- and third-generation cardiac diagnostic test products.

The definition of acute myocardial ischemia has evolved in such a way that the boundary between heart attack and unstable angina has been blurred. Any small damage to the heart muscle is now considered a heart attack, and this has large implications for the required testing sensitivity, let alone the economic implications.

MX: Cardiogenics is seeking FDA approval for the QL Care Analyzer and three additional tests in three-month intervals. What is the thinking behind this business approach for your company?

YG: The thinking behind the business plan and series of test product offerings is as follows: the first launch product has a predicate device. This means two things. Approval will be in a 510K equivalency, and, as a first test, it will diagnose a heart attack quickly in those patients whose EKGs do not reveal clear evidence of one.

The second test, the PIA-1 test, is a triage test for optimizing the performance of tPA, even though cardiac markers are not the indicators for administering tPA. Currently, the patient is diagnosed with a heart attack by means of the EKG and thereby becomes a candidate for tPA. The physician must decide whether the patient should be given tPA. Although the benefits of tPA are very clear, the failure rate is high. This new test is a treatment triage test.

The third test product is the HFRS, which targets another group of patients—those with heart failure. In 90% of heart failure cases, the patient had suffered a previous heart attack. This test paves the way toward the pre-selection of optimal treatment for heart failure patients, in contrast to the current trial and error approach.

The logic behind these three tests is to diagnose those with no clear EKG evidence of heart attack, to triage those with clear evidence, and to assess biochemically the risk borne by those who have had a previous heart attack.

MX: How did you determine the timeline of 12 to 14 months for the 510k application for the troponin l cardiovascular test?

YG: We based our estimate on the time for each of the steps required to take the TnI from its current state to FDA submission. The time for each step has a 25% contingency.

MX: Speaking of FDA, how is the regulatory climate for immunoassay products in general?

YG: In general, FDA is reviewing its current test approval practices. From my experience with Spectral and having taken products through FDA, informing FDA during the data collection phase is important, both from a strategic viewpoint as well as in terms of pre-approving the protocols for speedy approval.

MX: In January 2009, Cardiogenics signed an agreement with Merck Chimie to develop paramagnetic beads. How did the agreement come about? Was it difficult finding a partner in this economic climate?

In the very beginning, we were looking for beads for our QL Care Analyzer. We approached all kinds of suppliers. Knowing that the product needed to be custom-built, we took the initiative to develop the beads in-house, and this was driven mainly by cost issues. We developed the beads and generated enough data to demonstrate their value. Merck invited us to present our data at an international conference hosted by them, and we realized the commercial opportunity for the beads as a standalone product. We subsequently expanded on the data set and presented the data in 2007, which sparked the real interest.

Doing an agreement with a multinational partner is always an exercise in patience, and the corporate strategies of the large multinationals are not always disclosed. The fundamentals of needs, and specifically who needs whom more, drive the outcome of discussions and negotiations as in any other market segment.

MX: Regarding the economy, how would you describe the investment climate and its effect on Cardiogenics?

YG: The investment climate over the last few years has been very difficult for companies without revenue, let alone private companies in the developmental stage. The difficult economics have delayed our product launch by a few years, although the needs of the marketplace are very clear, as illustrated by numerous meetings with the various multinationals.

How have immunoassay products performed in the market over the past two to three years? What IVD trends do you see in the near future and how will these affect business?

Immunoassay products represent the fastest-growing segment of the IVD market, as reported by various market researchers. This trend will continue over the next decade or so, although the format might differ slightly. Almost every major manufacturer has an immunoassay platform, and they continue to add to their offerings menu. As for the IVD trends, the push for novel products and miniaturization will be a key in new product offerings.

Because Cardiogenics is based in Canada, you have a perspective on the difference in healthcare systems between it and the U.S. What are the advantages and disadvantages of both countries’ systems for a device manufacturer?

The answer to this question could take pages and pages. Although I’m no expert on healthcare policy, it’s my opinion that neither system is perfect. In both North America and Europe, disease predominance, [and the] economic and political climates dictate the major portions of healthcare offerings. The systems in the U.S. and Canada will have to close their gaps for providing healthcare in terms better than the currently existing ones. This is clear from the new healthcare reforms on the table in the U.S.

MX: There has been talk of including a device tax in the U.S. healthcare reform bill. Critics of the proposed tax say that it will stifle innovation by reducing profits, while supporters say device companies will make more money because they’ll have many more customers. What are your thoughts?

YG: I think both sides are right and both are wrong, as it all depends on the size of the IVD company. Large IVD companies will benefit in the end. However, for smaller IVD firms, the up-front hurtles to product development and commercialization are increasing.

You recently sent a letter to shareholders on three key initiatives. What response have you received from shareholders regarding your business strategy going forward?

Overall, the shareholders understand that the strategy is solid, and Cardiogenics will be profitable in the long term.