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Genevolve: Looking for that sweet spot to get market traction

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This is the fourth article in a continuing monthly series chronicling the growth path of Genevolve Vision Diagnostics, a life sciences startup based in Albuquerque, NM that is commercializing cutting edge genetic research to develop new diagnostic tests and gene therapies for colour blindness.

FM startup banner head Genevolve 300x145 Looking for that sweet spot to get market tractionBy Francis Moran and Leo Valiquette

Sometimes, you need to take a step back to get two steps ahead.

In the almost two months since we last touched base with Matt Lemelin, CEO of Genevolve Vision Diagnostics, this has certainly proven to be the case.

Genevolve was planning to make a big splash at the annual meeting of the American Academy for Pediatric Ophthalmology and Strabismus this month. An impressive showing here could spark the endorsement and early adoption from the broader medical community Genevolve needs to kick start the process for qualifying its Eyedox Genetic Test for Color Vision for insurance reimbursement. However, Lemelin decided to pull out of the show and refocus on the largest industry show of the year – the annual meeting of the American Academy of Ophthalmology taking place in Chicago in November.

“The stars are not aligning as planned for our launch,” he said. “We have had delays on the science side. A major challenge lies in, for a lack of a better word ‘transferring’ the test collateral from the research side to a commercial entity so that it works flawlessly. This has turned out to be quite a challenge. It is imperative to release a perfect product to preserve our reputation.”

There is a substantial market demand

It is a reputation that is still in the early stages of being established in the marketplace. Genevolve was founded in 2009 to commercialize non-invasive molecular diagnostic assays and treatments for clinical applications in the colour vision industry. Eyedox is the company’s first commercial product – a genetic test that can diagnose colour blindness in a far more accurate and thorough manner than existing tests, such as the century-old Ishihara test.

A growing number of daily activities and professions rely on normal colour vision and on accurate diagnosis of the presence and severity of any colour vision deficiency. However, traditional tests often cannot provide a proper diagnosis in terms of the type and severity of a deficiency, and often result in misdiagnosis.

“Over the years, we have received emails, calls and letters from thousands of frustrated colour-blind people,” Lemelin said. “The outcry from patients, together with feedback from practicing clinicians who have indicated that a genetic test will change everything for them, motivated us to develop the test as a commercial product.”

With its genetic test, Genevolve is blazing a new trail to create a global colour vision standard for all occupations. But this is a risky proposition at a time when investors remain wary of life sciences investments into new areas of research and the complex U.S. system for health insurance reimbursement is facing an overhaul.

Last month, Lemelin pitched Genevolve at a Gathering of Angels event in Atlanta. Inevitably, the issue of insurance reimbursement came up. But like every savvy entrepreneur hustling for cash, he understands the need to be ready for hard-nosed questions from potential investors.

“I suggest that entrepreneurs seeking investment be prepared for anything and have canned answers at the ready, especially if issues are presented at inopportune times,” he said. “I came away with some good leads and learned lots to add to my arsenal of knowledge.”

Among those lessons learned, which we will explore in more detail in our next post: how to better present to angel investors, how to negotiate with investors over the valuation of your company, and trying to make progress at industry gatherings where the social aspects appear to overtake the business agenda.

But it all comes back to reimbursement …

In our last post, we talked about how Genevolve’s colour-vision test falls into the category of molecular diagnostics, which can qualify for reimbursement through a complex pricing and fee schedule that uses “stacked codes.” These codes are used to tally up the costs associated with each step that is required to carry out the test, as well as the technology involved. A new test must go through a long and complex process to have new codes created and qualify for long-term insurance reimbursement.

Genevolve believes its Eyedox test can also save doctors time, by a factor of 10. While anything that saves time is a plus, the challenge is how doctors are compensated for their time and how this is claimed for insurance reimbursement.

At present, doctors are only able to bill the U.S. insurance system for their time if they are able to diagnose the type of colour blindness. Due to the limitations of standard tests, they seldom can. As a result, many doctors shy away from carrying out colour vision tests or see it as a loss that they write off. Not only must Genevolve attempt to execute a culture change in how doctors regard colour vision testing, it must still determine if doctors who use its test are able to make an insurance claim using existing codes.

Casting a shadow over all of this is U.S. President Barrack Obama’s new health care plan, which threatens to tighten the rules governing what qualifies for insurance reimbursement, the uncertainty of an election year and a new tax on medical devices intended to help extend health insurance coverage to uninsured Americans.

“All of this has a ripple effect on innovation and trickles all the way down to creating considerable investor angst,” Lemelin said. “Nobody, even the big boys, can figure out the reimbursement changes, many variables and many unknowns. It is causing many to sit in the sidelines, stifling innovation.”

… and developing contingency plans

One of the challenges for Genevolve is to design its test in such a way that it becomes easier for physicians to derive revenue from carrying out colour-vision testing, either by being able to bill the insurer or the patient. With changes to the U.S. medicare system, Lemelin said physicians are looking for new lines of business. Genevolve hopes to tap into this by bundling its test with other related vision products and services that are not billable to the insurer, such as contact lens prescriptions. In other words, make the colour vision test part of a service that the patient is already accustomed to paying for and is already a source of revenue for the physician.

Genevolve also has a contingency plan up its sleeve if it doesn’t qualify for reimbursement.

“We would switch to a boutique model in which we would then compensate doctors,” Lemelin said. “But, realistically speaking, we would need to take a volume approach and bring our price way down to make this model successful. There is a fine line here as far as losing our shirt, but we feel we can make it work as a last resort.”

Another option that Lemelin is considering is a group purchasing organization, or GPO, involving early adopter physicians and possibly partnerships with other vendors of vision products. The incentive for physicians to sign up would be that they would have exclusive access to unique products.

“It’s just an idea,” Lemelin said. “It is critical to evaluate all options … they all have their pros and cons. You have just got to somehow find the sweet spot and unfortunately there are so many unknowns that some of it is wait and see and shifting on the fly.”

Next time, we’ll talk about the pros, cons and complexities of wooing angel investors.

Genevolve: Giving a fair shake to the eyes in the sky

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This is the second article in a continuing monthly series chronicling the growth path of Genevolve Vision Diagnostics, a life sciences startup based in Albuquerque, NM that is commercializing cutting edge genetic research to develop new diagnostic tests and gene therapies for colour blindness.

FM startup banner head Genevolve 300x145 Giving a fair shake to the eyes in the skyBy Francis Moran and Leo Valiquette

In July 2002, a FedEx Boeing 727 carrying cargo crashed on its approach for a night-time landing in Tallahassee, Fl. A U.S. National Transportation Safety Board investigation identified the first officer’s colour vision deficiency as a factor in the crash and recommended that all existing colour vision testing protocols employed by the U.S. Federal Aviation Administration (FAA) be reviewed. Four years later, this case, and the issues which it raised about colour blindness testing in the commercial aviation industry, was the subject of a panel at an international workshop hosted by Saudi Arabian Airlines.

For Matt Lemelin, CEO of Genevolve Vision Diagnostics, stories such as this validate his company’s mandate, and commercial potential, to redefine how colour blindness is tested, diagnosed and treated. As Genevolve moves closer to its commercial launch, he is eagerly looking at specific industries such as aviation, where there is an opportunity for the company to establish new testing standards that are more fair and equitable. Genevolve’s ultimate goal is to create a global colour vision standard for all occupations.

As we discussed a month ago when we introduced Genevolve, the company’s underlying intellectual property has been recognized by Time Magazine as a top 10 scientific discovery of the year. Lemelin and his team have been working for two years to bring to market the first commercial product for vision professionals – the Eyedox Genetic Test for Color Vision. It’s been a challenging road thanks to meagre funding and a decision mid-course to switch to a different gene-sequencing platform – which delayed the product launch, but promised to reduce costs and improve efficiency and accuracy.

The quest for cash

When we caught up with Lemelin recently, he was busy trying to secure the company’s Series A round – a rather modest sum of US$100,000 – to add to the seed funding the company has already received to date. The fresh capital will be used to refine the business model, fund marketing and to engage in some legal housekeeping to add further protection to Genevolve’s underlying intellectual property.

In recent months, Lemelin has worked his network to reach out to a number of angel investors in the life sciences space. He has racked up significant travel costs and even brought potential investors together for a pitch session. But it has proven difficult to find investors with cash in hand willing to bank on molecular diagnostics. Many investors remain spooked by the current market volatility, while other opportunities lie offshore – securing an investment would incur additional legal costs and complexities.

“The challenge for us has been that there are few proven business models for commercializing molecular diagnostics technology,” Lemelin said. “As exciting as a genetic testing business sounds, many potential investors don’t understand the business, so it scares them off a little.”

But then he found his way to a U.S. finder who was willing to put up the $100,000 in return for a five percent commission and a one percent equity warrant.

“Securing private equity investment remains the best option for the company and from the surface it looks like a splendid investment opportunity,” Lemelin said.

But with any formal investment, the devil is often in the details. To complete the transaction, Lemelin attempted to recycle the future forward agreement template from one of his other investment discussions to save himself some legal costs, but after running it past his attorney, he discovered that even modest investment sums can’t escape the bureaucratic dictates of the U.S. Securities and Exchange Commission. Closing the deal will still incur steep fees and complex regulatory hurdles.

Getting ready to pounce

With or without that cash infusion, is the company on track to meet its yearend product launch deadline?

“I had a conference call with the inventor last week and maybe I will get a Christmas present this year,” Lemelin said. “ Eyedox should be completed by Christmas … which likely means end of January. Nonetheless, real progress is being made.”

But January would still put Genevolve on track to launch at a key trade show event in March – the annual meeting of the American Academy for Pediatric Ophthalmology and Strabismus.

“The future is hard to predict yet I am extremely optimistic – our most promising path of least resistance will be pediatric ophthalmologists,” Lemelin said. “Current tests typically can’t be carried out effectively until a child is five to seven years old. But we can test an infant with amazing accuracy.”

Taking to the skies

But as we said at the outset, Genevolve is also pursuing opportunities in other markets, such as aviation. In military aviation, individuals with colour blindness cannot become pilots. In civilian aviation, individuals with colour blindness can fly, but they face a number of different restrictions which limit their ability to pursue a commercial career, such as a prohibition against flying when they must depend solely on their instrumentation.

The issue, however, are the shortcomings of the tests which are used to diagnose colour vision.

“The FAA is clearly aware that its current methods pass some people who pose a safety hazard and fail others who are likely capable to fly,” Lemelin said. “One particular area to be keen of is air traffic controllers – their screens, along with cockpits, are getting increasingly colour complex, but the testing methods are badly outdated. Even inspectors are unfairly discriminated against because there is an obvious lack of understanding from regulators about testing colour blind employees.”

He is keeping a close eye on changes in the European Union that will see the European Aviation Safety Agency take over aviation regulation from the Joint Aviation Authority. This hand off will also include changes in existing regulations, including those regarding colour vision.

“The issue here is discrimination against pilots,” Lemelin said. “It is not clear how much colour vision a pilot actually needs to safely fly. If we could help mould new European regulations regarding colour vision, it would be a major step towards our goal of establishing a global colour vision standard.”

He believes that all it will take is one national regulator or military adopting Genevolve’s technology to create a domino effect for the company.

Community engagement

To help raise Genevolve’s profile within the aviation industry, Lemelin recently connected with Pedro A. de Ponte, the founder of CVD Pilots, an online community for pilots with colour vision deficiencies.

“Pedro has a number of contacts in the field, including the aviation medical examiners who have successfully overhauled the Australian colour vision rules to the applause of colour blinds everywhere,” Lemelin said.

Genevolve has also attracted the support of Zurich’s Daniel Flück, who runs a prominent blog about colour blindness called Colblindor.

“The recent buzz I am gaining with the aviation community is most exciting, but also in the general colour blind community and tapping into Mr. Flück’s following, this all helps to gaining a foothold,” Lemelin said. “Ultimately we need to become entrenched within the eye doctor community. These guys are a hesitant bunch, but with trade shows and gaining momentum with eye docs, physician adoption will likely grow and I look forward to the day it reaches the tipping point.”

In our next instalment, we’ll explore more in depth the challenges of being a life science startup attempting to secure financing and create a viable business model, the rapidly changing landscape for insurance reimbursement in the U.S., and the risk of your ongoing intellectual property development residing in the grey matter of one individual.