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ANALYSIS AND COMMENTARY ON CRITICAL BUSINESS AND LEGAL ISSUES

INSTANT RESULTS, IMMEDIATE IMPACT

Not too long ago, women who suspected they were pregnant had to go to the doctor, take a test and wait 10 days or more for the results. Today, a $6 test can do the job at home in three minutes, as a dark pink line gives an answer mere days after conception.

The early pregnancy test approved by the FDA in 1977 marked a turning point not only in prenatal care but also in the diagnostics industry. Medical testing began to shift away from centralized laboratories to the “point of care”—the doctor’s office, the hospital bedside, the drugstore and the home. Companies now sell fast, accurate, user-friendly, cost-effective tests to monitor glucose, check cholesterol, predict ovulation, detect HIV, determine drug abuse and more. Research and product development is accelerating, fueled by advances in technology,
the growing number of people with chronic conditions, the drive to reduce health care costs, and the global push to fight AIDS and other deadly epidemics in countries with barebones medical infrastructure.

The worldwide market in point of care testing (POCT) was $3.98 billion in 2005, a 66 percent increase over 2000, according to TriMark Publications, a health care market research firm. U.S. hospitals alone ran 600 million POC tests. Performed on fluid and tissue samples, POCT represents the fastest-growing segment of the $28 billion in vitro diagnostic market, and for good reason. The tests deliver results on the spot, often within minutes. A pediatrician can swab a child’s throat, check for strep A and start antibiotics in a single visit. A diabetic can monitor her blood sugar and call the doctor at the first sign of trouble. In a single day, a health care worker in a remote Ugandan village can do finger pricks, find out who is infected with AIDS, counsel patients on preventing transmission and distribute life-saving drugs. As testing technology becomes more powerful, it is moving beyond patient diagnosis. Blood-bank screening, foodsafety checks and veterinary diagnostics— all eventually willrely on decentralized approaches that provide results almost instantly.

Investors are increasingly attracted to POCT, as evidenced by strong merger and acquisition activity in the past year. Yet the market is challenging and highly competitive: Home pregnancy alone has 100 products available. Developing rapid tests for conditions that don’t have them requires technical expertise and capital. To launch new products, companies must maneuver through regulatory systems in the U.S. and abroad. The experience of our company, Chembio Diagnostic Systems, highlights the issues facing investors in the POCT space and suggests strategies for success.

Before 2002 we specialized in home pregnancy kits but refocused our efforts on HIV. We targeted the overseas market because philanthropic funding was available and the need was severe: In some developing countries, 90 percent of those infected don’t know it. We developed three rapid AIDS tests, and through collaborations with leading health agencies and NGOs, including the
Brazilian Ministry of Health, the Clinton Foundation HIV/AIDS Initiative, the World Health Organization and the U.S. Centers for Disease Control and Prevention, we gained approvals, procurement certifications and distribution channels for our products. We set up offices in Africa, signed a 13-year deal with Brazil and doubled sales of HIV test kits from 2004 to 2005. (We obtained funding for most of our international HIV work through the U.S. President’s Emergency Plan for AIDS Relief.)

In May 2006, on the strength of our track record abroad and clinical trials at home, we received FDA approval to market two HIV tests in the U.S. The timing was fortuitous. Four months later, the CDC issued revised recommendations, urging all Americans ages 13 to 64 to undergo routine AIDS testing—heightening the demand.

Our success in HIV taught us lessons about regulated manufacturing, the need to collaborate with government and philanthropic organizations, and the importance of strategic partnerships in raising cash and extending our marketing reach. The knowledge we gained spurred us to develop new products and invest in R&D. We are selling a test for Chagas disease, an insect-borne infection endemic in Latin America. And in March, we won a patent for a new testing technology known as the Dual Path Immunoassay. This novel platform will enable the development of diagnostic tests that can increase sensitivity, extend the spectrum of useful sample types and improve results when testing for multiple conditions, among other benefits. The system may have applications for diseases, such as tuberculosis, for which no rapid test exists.

The integration of POCT with digital and wireless technologies will continue to make tests faster and easier to use. We’re working with companies that are devising handheld readers and embedded chips to remove subjectivity from the interpretation of test results. Anyone who has used a home pregnancy test well remembers staring at the strip and wondering: Is that the dark pink line? The next generation of tests—in pregnancy and well beyond—will answer unmistakably: yes or no. CT
 

LAWRENCE A. SIEBERT is president and CEO of Chembio Diagnostic Systems, Inc., a Medford, New York-based company that develops, manufactures and markets rapid medical tests.

THE ROAD TO WIRELESS 2.0
By Roy Berger - NEXTWAVE WIRELESS, INC.

It’s a sunny Friday afternoon, and you and a few colleagues are playing a round of golf. By the second hole, you realize your swing is off—but you’re not sure why. Then you get an idea: Why not let your favorite golf instructor analyze your swing? So you dial his number and, through the power of real-time mobile video, the instructor instantly sees the problem. You’re lifting your head. Again.

Later, in the clubhouse, you take a moment to watch a live keynote address at an industry conference in Tokyo about a new regulation you’ve been following. Then, before dinner at the clubhouse restaurant, you make a quick two-way video call to say goodnight to your kids and then steal a moment to watch a high-definition broadcast of the last inning of that night’s baseball game. During the game, a commercial pops up with a personalized promotion for a new putter—the mobile network has detected you’re in a clubhouse. You decide a new putter can’t hurt, so you order it along with some new golf balls.

After dinner, you check the traffic for the drive home by plugging directly into a webcam on the freeway. In the car you decide to download that new album you’ve wanted and relax to music on the way home. And all of this is done on a mobile device not much larger than a cell phone.

Welcome to the world of Wireless 2.0. A world where wireless has evolved far beyond voice and limited data and becomes a powerful global broadband ecosystem that can provide you with access to virtually any type of multimedia content, anywhere, anytime.

AN EXPANDING UNIVERSE OF CHOICES

Wireless 2.0 will transform the way users and providers generate and consume content. We’re all familiar with timeshifting, defined as the ability to record a broadcast, such as a TV program, for later
viewing. Global broadband connectivity will facilitate placeshifting and screenshifting . The former allows you to watch a program where you want, while the latter allows you to watch a program on the
device you want, such as a mobile handheld device. These technologies will engender an explosion of new choices and formats, as both individuals and organizations seek new ways of capturing users’ attention. And the ability to target personalized, site-specific advertising to a handset viewer—such as an ad for golf clubs at a golf course—could transform the world of advertising.

Wireless 2.0 will also help make us safer. Recently, the City of New York awarded a $500 million contract for citywide emergency services and mobile broadband network to Northrop Grumman, which uses wireless broadband technology developed by NextWave. With this new system, first responders will have high-speed data access to anti-crime and anti-terrorism databases, fingerprints, mug shots, and city maps. And rescue workers will be able to transmit realtime video to a command center from the scene of an incident.

A HOST OF CHALLENGES

Creating Wireless 2.0, however, requires addressing several challenges. For example, today’s cellular networks were not designed to handle the widespread use of bandwidth-intensive applications like
streaming video. New global standards such as WiMAX and TD-CDMA are emerging to provide cost-effective means of moving vast quantities of information between devices and the network.

The development of WiMAX and other standards requires close collaboration by technology experts across the wireless industry. Members of our senior team have participated in the development of WiMAX from the very beginning. They have taken leadership positions in the committees formed by the Institute of Electrical and Electronics Engineers responsible for evolving the standard.

Wireless technologies are developing faster than ever before. So it’s critical that the wireless industry work closely with regulatory bodies to ensure harmony between these new technologies and the regulations that govern the wireless business. At NextWave we regularly meet with legislators, the Federal Communications Commission and similar bodies around the world to update them on new technologies and to discuss how the right regulatory environment and spectrum rules can facilitate the introduction of new and innovative services for consumers.

Finally, Wireless 2.0 will require a complete ecosystem of new products and technologies. New classes of handsets, new multimedia content management systems, new semiconductor technologies, even new digital rights management software will all be required. But in the end, Wireless 2.0 is not about technology or regulations; it’s about transforming people’s lives. And, of course, about helping us all improve our golf swing. CT

ROY BERGER is executive vice president, Corporate Marketing and Communications, for NextWave Wireless, a worldwide supplier of wireless broadband products, technologies, and network solutions, headquartered in San Diego.

TAKE THE PRIVATE CAR
By Marla L. Lien - DENVER REGIONAL TRANSPORTATION DISTRICT

When it comes to infrastructure projects, my agency and others like it often face tight budgets, short timeframes and a skeptical public. Federal transportation dollars remain at a premium, so new and creative strategies are needed to fund, procure and operate projects of all scopes and sizes. One of these is the public-private partnership.

In a typical public-private partnership, a public agency hires a private company or companies to design and build—and sometimes to finance, operate and maintain—one or more aspects of a public infrastructure project. And while they have been relatively slow to catch on in the transportation sector, public-private partnerships are gaining in popularity around the country, particularly in highway building and urban infrastructure projects. That’s because, while there are risks involved in any project, these partnerships offer a range of potential benefits to public and private parties alike.

PAST PARTNERSHIP SUCCESSES

At RTD, we have experienced these benefits firsthand. Private companies operate nearly 50 percent of RTD’s bus service, providing significant cost savings to riders and taxpayers. Another successful partnership was the T-REX Transportation Expansion Project, a $1.67 billion venture that included 17 miles of highway improvements, 13 new light-rail stations and 40 miles of commuter rail track.

In the traditional contracting model, the public agency must manage several contractors. When a problem arises, contractors will sometimes blame each other. The agency is forced to wade into the conflict, which requires time and money. But when a single organization takes responsibility for all aspects of both design and construction, the line of responsibility is clear.

T-REX employed the design-build partnership model, which means it utilized a single contractor to oversee both design and construction of the project. Project guidelines held contractors accountable for minimizing traffic disruptions. As a result, the program kept all existing lanes open during peak traveling periods and even created additional capacity during portions of the construction schedule. Nevertheless, the project was completed on budget, 22 months ahead of schedule.

PRIVATE FINANCING FOR COST SAVINGS

A second advantage to public-private partnerships is the potential for cost savings. In the traditional model, the public agency must finance a large upfront payment to contractors and then shoulder operating expenses. When the private partner agrees to finance the project (as well as design and build), construction and operating costs can be effectively amortized over 30 years or more, improving cash flow.

RTD has launched FasTracks, a $6.2 billion, 12-year program to expand rail and bus service throughout its eight-county service area. Two of the commuter-rail corridor projects that are part of the FasTracks program have been selected by the U.S. Department of Transportation for participation in a pilot program, known as Penta-P, to evaluate the benefits of public-private partnerships for federally funded transit projects.

For the Penta-P portion of the project we have hired Goldman Sachs and JP Morgan as advisers to take advantage of the financial experience found in the private sector. These advisers will assist us in finding a single concessionaire to handle design, construction, finance, operation and maintenance for both of these commuter-rail corridors. They will also investigate ways of obtaining financing through sources such as private equity or bank loans. Their compensation, in part, rests on their success in devising the most cost-effective bid package.

NAVIGATING THE HURDLES

Public-private partnerships present a host of new challenges to overcome if they are to fulfill their potential. By their nature, the number of stakeholders involved in these partnerships is large—not only federal, state and local funders, but also the public, advocacy groups and now private partners including contractors, lenders and investors. Therefore, public and private partners must strive for transparency and efficiency. Public participation is important, and a vigorous education plan can help all parties feel they have a stake in the project’s final outcome. It’s also useful for each side to recognize that the other is powered by different motives and faces different constraints. For example, public agencies may have to cope with funding limits, labor rules or procurement rules unknown in the private sector. Private parties must demonstrate a substantial ROI. Hence, communication is important for each side to understand the other’s mind-set and ultimately for the successful planning and execution of the project.  CT

MARLA L. LIEN is general counsel for theDenver Regional Transportation District.

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