Adaptive Biotechnologies Reaches Fork in the Road. What to Charge?

Xconomy Seattle — 

Chad Robins has a problem that all entrepreneurs hope to face someday. It’s a sign that his company has passed some key tests in R&D. He needs to figure out how much he should charge for his company’s new diagnostic test for patients with leukemia and lymphoma.

Robins, the co-founder and CEO of Seattle-based Adaptive Biotechnologies, has a lot of factors to consider before this decision gets made in the next couple months. Set the price too high, and he risks alienating his most important customers—insurers, physicians and patients—right when he’s introducing the new test and wants to curry favor. Insurers, under intense pressure to corral runaway healthcare spending, could create some sticky red tape if they believe the price is egregiously high. Robins could also create an opportunity for a competitor, South San Francisco-based Sequenta, to gain more market share in this fledgling new diagnostic market.

Then again, if Robins sets the price too low, he could fail to capture the full and fair value of a test that provides a new form of genomic information that could save lives of thousands of cancer patients. Even though he doesn’t need to satisfy some return-obsessed venture capitalists on his board, he still has angel investors who would naturally like to see a good return on their investment. No matter what he does, he has to make the pricing decision based on incomplete information. It will take years, and many expensive clinical trials, to answer basic questions like whether catching tumors early with this technology adds up to something meaningful—like patients living longer, higher quality lives.

Chad Robins, co-founder and CEO, Adaptive Biotechnologies

“In general, it’s pretty muddy waters when you look at diagnostics reimbursement,” Robins says. “It’s definitely a difficult environment. But it’s something we’re preparing for.”

This is the kind of dilemma that folks at business schools could sink their teeth into with a case study. Lucky for us, Robins will be able to talk about his current thinking about this dilemma at the big Xconomy Seattle event coming next Tuesday, titled “Biotech in the Belt-Tightening Era.”

Robins, for those unfamiliar, leads a company with technology from the Fred Hutchinson Cancer Research Center that was developed by his brother, Harlan Robins, and Chris Carlson. The technology uses a combination of superfast/supercheap DNA sequencing from Illumina, and a proprietary algorithm that examines the diversity of genetic rearrangement in B and T cells of the immune system.

This “immune profiling” technology has immense potential in science, enabling researchers to ask all kinds of new and detailed questions about the immune system, such as whether a patient’s immune repertoire is in good shape after a round of cancer chemotherapy. It can also tell doctors whether a mutant B or T cell line is present, and in the very early stages of proliferating out of control and spreading as a malignant cancer. Adaptive’s technology can also tell whether all traces of cancer have been eradicated from the blood, which it did for the parents of a 6-year-old girl with leukemia who was featured last year in The New York Times.

Adaptive’s technology has already been shown, in papers published in Science Translational Medicine and the New England Journal of Medicine, that it can spot signs of “minimal residual disease” in cancer patients accurately, and much earlier, than the standard cell-counting technology used in the U.S. called flow cytometry. The flow technology can vary in price, but Robins says $500 per test is a rough benchmark to consider. The Adaptive technology will cost more, he says, but he’s not yet ready to say how much more, partly because he has to weigh some of the issues listed above.

I’m looking forward to interviewing Robins one-on-one at the big event on Tuesday about the specific challenges he faces in the era of healthcare cost control. Robins told me he’s personally looking forward to hearing from one of the other speakers, Genomic Health CEO Kim Popovits, which has successfully persuaded insurers to pay several thousand bucks for a genomic diagnostic test that predicts the likelihood of recurrence for breast, colon, and—coming soon—prostate cancer. We’ll also hear from former Dendreon CEO Mitch Gold on what he’s learned from the sipuleucel-T (Provenge) Medicare debacle, and from Seattle Genetics CEO Clay Siegall on how his company has introduced an expensive new lymphoma drug with minimal pushback from payers.

It’s hard to overstate the importance of these pricing issues in today’s biotech business. Today’s payers want to know about the value they’re getting for new innovations. I look forward to hearing how some of the West Coast’s top biotech entrepreneurs plan to answer that question. I hope you can join the conversation in Seattle on April 9.