Ashton says reaching that goal sometimes requires divining what customers don’t realize they want until it’s offered to them. Discussions at hospital clinical labs revealed that directors and healthcare workers were looking for a simple, inexpensive test for diagnosing common acquired infections, he says. “We wanted to provide a product that was just exceptionally easy to use—one or two steps, walk away, get a result. Because they are in fact starting to face a labor shortage in hospital labs, they need easier-to-do products, and they need to be able to run tests for infectious disease on all three shifts.”
"People talk about FDA being difficult to work with. That certainly was not our experience."
Ashton believes that Great Basin’s FDA-approved test for clostridium difficile fulfills that need. It is the first test developed by the company. Three additional tests for staph, nasal MRSA, and fungal pathogens are approaching the trial stage, Ashton says. All the tests will use the same cartridge but different reagents.
Great Basin started with a “clean slate” when it developed the c. diff test, which enabled the company to design the platform as a low-cost alternative to popular infectious disease tests from companies such as Cepheid, Ashton says. The company launched with $3 million in private funds. The combination of institutional investors’ reluctance and the economic collapse led the new CEO to tap the investment largesse of former colleagues at Megahertz, a manufacturer of laptop modems where Ashton was senior vice president of sales and marketing. Ashton also was senior officer at the information services company Inari, and CEO of Printelligent, a managed print provider.
In this interview with MDDI, Ashton discusses common user needs across industries, how c. diff became Great Basin’s first product, his biggest adjustment in moving from high-tech, and why he believes molecular diagnostics are now driven more by products and less by IP and regulatory concerns.
MDDI: You’ve said there are two keys to success: understanding market opportunity and ensuring your product makes a difference in people’s lives. In practical terms how did you apply that philosophy at your previous companies, and how did you transfer it to your position as CEO of Great Basin?
Ryan Ashton: That’s kind of a big question.
MDDI: Well, are there commonalities? You worked in high-tech, and now you’re in life sciences….
RA: There always are [commonalities] in every product company. Whether it be an in vitro diagnostic or a modem for a laptop computer—to name two of the products I’ve been involved with—ultimately what you have is a user need, and you’re trying to fill that need as best you can and do it with a great product. I think the thing that applied most for me was learning how to really listen to your customers and understand that it’s not always what they tell you they want but reading between the lines to understand better what they might want if they knew they could get it. (Laughs.)
There’s an old Henry Ford saying: “If I’d asked my customers what they wanted, they would have told me, ‘a faster horse.’” And I think that applies everywhere you go. In the case of Great Basin the thing we realized early on was that work flow and ease-of-use were critical unmet needs in a hospital clinical lab. We wanted to provide a product that was just exceptionally easy to use—one or two steps, walk away, get a result. Because they are in fact starting to face a labor shortage in hospital labs, they need easier-to-do products, and they need to be able to run tests for infectious disease on all three shifts.
That was what Robert Jenison, our CTO, and I identified really early on as a key opportunity for us. We did that in part by going out and visiting customers and listening to what they had to say. It was interesting how they talked.
MDDI: Can you give me a specific example?
RA: Our target right now is the hospital clinical lab. Our first test is for clostridium difficile, which is a gut bug that can cause life-threatening diarrhea in patients who have had…antibiotics. We’ll be following that with tests for staph infections of the blood, MRSA screening, and fungal pathogens. We’ve been visiting a lot of hospitals. I’ve spent a lot of time over the last five or six years just sitting down with the heads of microbiology in a lab and with the heads of infectious disease at hospitals talking to them about their needs, what they’re frustrated with in their current labs and processes, and so on.
We’re not the first-to-market with a system like ours; a company called Cepheid is. Cepheid has a wonderful system that is very, very simple and easy to use. However, it’s extremely expensive, and our other recognition was what this market needed was a much lower-cost solution than was presently available. That’s the thing we heard most from these guys: “We love Cepheid. We would love to use their tests more, but we’d like to have another competitor, someone perhaps at a more affordable price point.” That became our focus early on.
MDDI: How were you able to meet that challenge? Did it look something you could do right off the bat or was it something you really had to dig into to figure out ways to reduce the cost of this type of test?
RA: In a sense it was a nice place [to be in], because we had a clean slate. When we started there was no instrument, there was no cartridge for doing the assay, so you had to look at the problem as a clean slate. What we recognized pretty early was that if we engineered the thing correctly we could make it much lower cost than a lot of the companies out there that were looking at the problem. Most of our competitors save one are using PCR as their method for doing molecular testing, which requires thermal cycling. Well, thermal cycling is the standard in molecular testing, and it has been for 20 years or more. And it’s a beautiful way to do testing in a large, expensive, high-throughput system. But when you look at infectious disease you’re talking about one or two tests coming in every one or two hours for patients who are sick. And you want to get a result right away, so you want to do the tests one at a time. You don’t batch them up in groups of 50. That might take 24 hours to even get a batch together.
So we had to do it on a cartridge basis, and we realized that if we made the right engineering decisions we had a real opportunity to reduce cost. Instead of using PCR we used helicase-dependent amplification, which is isothermal. In other words it’s single temperature. We heat the sample to 56º C; it requires a simple, inexpensive heater inside the box rather than a thermal cycler. We use endpoint detection [and] run the helicase-dependent amplification, get product, and then put that product on a chip that’s very inexpensive and easy for us to manufacture, and we get a visible result. All these things lead to a much lower-cost solution than our competition. That was the advantage we had, which was to start with that clean slate to engineer for cost.
MDDI: And the competition didn’t have that clean slate because of the products they already had and the overhead that entails.
RA: They took a technology they were already experienced with—PCR—and they applied it to the problem. In our case when you’re two guys in a half-formed lab you feel like you’re at a disadvantage, but in some ways those moments are the great advantage, right? They [give you] that chance to think. Or, to quote Steve Jobs, “to think different.”
MDDI: Why the initial focus on c. diff? Because of the prevalence of it? The virulence of it?
RA: A couple of things. Honestly, in a start-up you don’t know what the future’s going to hold, right? Part of it was two guys in the lab got started on c. diff—that was the last product we started working on—and they nailed it. From start to finish it took us nine months. Our other tests that are close to coming to trial now have actually been in development much longer. But c. diff is a great market. And because the disease has high prevalence and because it’s well-known to FDA, we also knew it would be a simple, fast trial, and we weren’t going to have a lot of issues with FDA. For a company doing it for the first time that mattered a lot. You don’t want to take a lot of risk on the regulatory front when you’re first time through the process. The test has been extremely well-received in the marketplace. We got approval in April.
MDDI: In terms of competition what market share would you need in order for Great Basin to make this a profitable test?
RA: You know, I’ve never looked at that question from that angle, so I’ll have to think about that for a minute. Most hospitals have not yet gone molecular on c. diff, so we look at this small but fast-expanding pie of molecular for c. diff. If I don’t think in terms of molecular I think in terms of how many customers do we [need], how many tests do we have to be doing? We anticipate that we’ll be profitable sometime next year, probably in Q3, if things go well. We’ll need about 250 hospitals as customers in order to be profitable.
MDDI: What’s the status of the three additional tests you’re working on? The Journal of Clinical Microbiology recently published a study about your staph test, I understand.
RA: Yes. Our tests speciates. Nanosphere now has a test that also speciates, but before that the test our other competitors Becton, Dickinson and Cepheid offered gave a MRSA-only result. In other words, they took a positive blood culture, you could run their test, and you could say, “Yes, it’s MRSA, or it’s methicillin-sensitive staph aureus.” Our test adds not just staph aureus but other staphs as well, which can be causes of infection or can also be contamination. It allows a hospital to get a more definitive result, because in the case of a MRSA-only test, if it came back negative, they still have a sick patient, they still know something’s growing in the blood, now what is it?
So now you’ve got to run more cultures to find out if it’s [other types of] staph infections or hominis—whatever it might be. We realized early on that this is actually the third leg of our product stool—ease-of-use, cost, and the third, content. We’re absolutely committed to providing a broad range of answers with each test so that if you have a blood bottle pop positive in the lab you run one test and that gives you the answer as to what it is. You don’t have to say, “Oh, it’s not staph aureus. Now I’d better find out if it’s something else.”
MDDI: These tests all use the same platform, right?
RA: Yes, same instrument, the same basic cartridge with just changes in the reagents inside.
MDDI: Will they be as fast? Your goal is ease-of-use and rapidity. Are you aiming for the same hour or so test results?
RA: There’s some variability there depending on how many copies of a given pathogen are in a typical sample, but the test will take anywhere from 45 to 85 minutes. There will be some that’ll be a little faster than that.
MDDI: As a start-up the company raised $3 million in 2005. How would you characterize Great Basin’s financing in the last seven years?
RA: The last seven years? We’ve raised a lot more money than that.
MDDI: Can you give me an idea?
RA: I’ll tell you this: It’s under $30 million total that’s gotten us to this point. We’ve run this thing really leanly, and we’ve been funded by private investors. No institutional money.
MDDI: Did you pursue that investment strategy specifically?
RA: No. We went out to the institutional community, to the venture community. Venture capitalists have not had much success with diagnostics companies, so they were pretty hesitant. You know, I’m out looking for money in 2007 and 2008. (Laughs.)
MDDI: God help you.
RA: Need I say more?
RA: The three major investors were the founders of Megahertz Corp., where I was vice president of sales and marketing back in the late ‘80s and ‘90s. They did very well by Megahertz, and they have stood by us through thick and thin.
MDDI: That leads me to ask what your biggest adjustment was when you moved into life sciences.
RA: The product cycle is so much longer. In high-tech if you’re not launching a new product every eight to 15 months you’re going to get crushed.
MDDI: That’s right. I’ve covered the semiconductor industry.
RA: Yes, Moore’s Law, right? Every 18 months [the number of transistors doubles on an integrated circuit.] That law has held up now for more than 30 years.
MDDI: They’re pushing the physical limits of microchip technology, but the industry still believes it can eke out smaller features.
RA: Every time they think they think they’ve hit the wall, there’s another change in technology and it just continues. I can’t speak to life sciences generally but in diagnostics product development itself takes much longer and the regulatory process lasts six to nine months from start of clinical trial to clearance by FDA. It’s just a much, much longer process, and it’s been quite an adjustment. I can’t fathom in high-tech taking seven years to get to first revenues, whereas in this business we’re in now we feel like we’ve done pretty well.
MDDI: So you really have to tip your hat to your former colleagues at Megahertz.
MDDI: Regarding your IP and changes in U.S. patent law, does that transition affect you at all?
RA: Not really. We have a number of patents filed for and a few even issued in Europe. The IP portfolio isn’t really a critical component of our value as a company. This is a space where there are 50 ways to skin the cat, everybody’s going to patent their way, but it’s pretty easy to get to market with an approach that doesn’t infringe. Ultimately, we’ll be about providing great products and great customer service and maintaining our stickiness in control of the market that way.
MDDI: You speak a lot about products, and your background suggests that product development and marketing is something you’re good at. Is that what appealed to you when you decided to make the change to diagnostics with Great Basin?
RA: It’s funny. Around the time that the largest investor and the chairman of the company asked me to come meet the CEO Bill Gates had recently given a speech where he said if you were young and doing start-ups now they’d probably be in life sciences.
I looked at this opportunity and what I saw was a marketplace that had to that point in time been driven by a very different mentality, and I think for a lot of good reasons. As molecular was developing as a technology, regulatory concerns and other issues were the primary concerns for the companies involved. But I could see this change coming where we going to get a place and time where the process was going to be much more product- and service-driven rather than driven by IP or regulatory in terms of how people approach the market.
I think that’s proven to be true. Cepheid’s had enormous success; they have very little IP; it’s about a great product.
MDDI: Great Basin has distributors in six regions overseas. Can you describe how that network was set up and any challenges you faced?
RA: Our vice president of sales, Andy Olson, actually set up the distributors and has done a very nice job managing them. Essentially, in Europe [it was clear there was] already the opportunity for a second company to come in and compete in this space with a very easy-to-use product similar to what Cepheid has. We essentially had our pick of the major distributors in every country that weren’t already distributing Cepheid. They’re all really excited to add this product to their line. We won’t be adding any more distributors for a period of time; we want to get the company up into revenues and get more comfortable with our ability to manage this next phase in the company’s life.
We’ve got the major countries in Europe covered. We’ve got distribution in New Zealand. The other problem we have is that if you go to places like Japan the regulatory environment is very different.
MDDI: Can you speak to that? Because the regulatory environment is something new to you, coming into this industry. What is about the Japanese regulatory environment that strikes you?
RA: I don’t know a lot about it, but very early on we had a brief discussion and everybody said, “Look, you don’t want to do Japanese regulatory until the company’s a little more mature.” So we haven’t dug into the problem. I just know that it requires a whole new trial, that there’s a lot of expense involved, and that their requirements are stringent. I don’t necessarily mean stringent as to the performance of the diagnostic itself, but rather just stringent—you can imagine, it’s Japan—as to the paperwork and so on involved.
In the case of in vitro diagnostic 510(k) clearance is available to us. In our first trial the process was a very smooth one, the trial ran about 75 days, it took us another three weeks to prepare the submission, FDA responded within the 90 days in which they’re obligated to respond, and we had clearance, I think, within 45 days of first response from them. It’s also a very experienced commercial team here. For the VP of operations it was the fourth or fifth 510(k) clearance in the last three years; obviously the others were at a previous company. A 510(k) is a great approach to a [product] like a diagnostic.
MDDI: Why is that?
RA: People talk about FDA being difficult to work with. That certainly was not our experience.
MDDI: I’m sure they’ll be glad to hear that.
RA: Won’t they.
MDDI: Finally, the Supreme Court is about to rule on the legal challenges to the Affordable Care Act. Does the ACA or the uncertainty surrounding its implementation affect Great Basin in any way?
RA: In the case of our products, no. They’re not reimbursed. Typically, if you come into the hospital for a hip replacement and you get a c. diff infection, the hospital isn’t going to be reimbursed for testing you for c. diff. If anything, diagnostics save money for a hospital because they get a result quicker so you can get a patient on correct treatment sooner. And they’re getting a better result from a culture. If it has any impact, it’ll just help our business. If they can reduce the amount of money being spent to treat infections that happened when a patient was in the hospital, it’s going to be good for all of us.