By Francis Moran

According to Matt Lemelin, CEO of Genevolve Vision Diagnostics, there are more than 100 occupations which rely on workers having normal colour vision. As we explored in our last post, . Job performance and passenger safety depends on pilots, air traffic controllers and many other technical and support personnel having full colour vision.

It’s easy to understand, then, why Lemelin is filled with such enthusiasm for Genevolve’s prospects when he hears the United States Air Force state that “no colour vision test currently on the market delivers what the Air Force requires.”

“We are very excited about the possibilities of working with the Air Force and other governmental departments,” he said. “We have a fairly complete understanding of their needs in regards to colour vision and we feel we have a turnkey solution to resolve their longstanding issues.”

The challenge, of course, is to bring to market a compelling product that is protected by a rigorous intellectual property (IP) strategy and has garnered the regulatory approvals and industry praise to attract the interest of such a flagship customer. In this post, we will take a look at Genevolve’s product development, IP strategy, business plan and how venture capital does, or does not, fit into the picture.

Finding the right partner … and the right terms

While the ground-breaking genetic research that underpins Genevolve’s value proposition is ultimately intended to treat colour blindness on a commercial scale, the company is first bringing to market the Eyedox Genetic Test for Color Vision – a first step toward creating a global colour-vision standard for all occupations.

“We have identified significant market pain,” Lemelin said. “Everyone who has a colour-vision deficiency needs and deserves to have accurate information about the nature of their colour vision. Unfortunately, even highly trained optometrists and ophthalmologists are unable to objectively discuss colour vision deficiency with their patients because of a lack of a proper diagnosis.”

But solving this market pain takes laboratory work—a lot of costly laboratory work. In the typical life science scenario, a startup such as Genevolve would secure a VC round and yield some control and ownership to the investor for the cash it needs to set up its own lab. Lemelin, however, has opted instead to establish a partnership with a third-party certified facility, rather than surrender control of Genevolve’s destiny.

To the best of his knowledge, this partnership is as rare as it is innovative.

“We have established a rather equitable multi-year agreement with one of the most recognized laboratories in the world,” he said. “We were not interested in a joint venture or a formal partnership, thus we worked out a royalty-based agreement taking lab costs into consideration.”

As usual, the devil is in the details.

“When partnering with others, both parties must benefit and any deals made should be mutually beneficial or the partnership will not work. You also want to avoid anything being too lopsided favouring one party over the other.”

To that end, Lemelin negotiated who would handle what share of the logistical and marketing costs to ensure both parties had a vested interest in a successful outcome. While the lab is responsible for the bulk of the logistics around clinical development and Genevolve’s market development, both parties share obligations related to the marketing effort.

Covering your assets

But the most important details of the partnership relate to ownership of IP. As we explored in the first post, Genevolve has an exclusive world-wide licence to commercialize the genetic research of husband and wife team Jay and Maureen Neitz and their colleagues at the Eye Institute of the University of Washington in Seattle.

“IP protection is a major issue in partnering with others,” Lemelin said. “In our case, the key patent which encompasses our genetic discoveries is broad and exclusive but it needs to be clear who is bringing in the IP. And who owns any new IP if any is developed. We are constantly working to build the company’s IP portfolio through additional patents, trademarks and copyrights.” However, at this stage, he is reluctant to reveal too much about the strategies Genevolve has instituted to protect its IP.

One of the greatest risks with trying to commercialize a patent related to a body of research that continues to evolve is the fate of the inventor. In Genevolve’s case, that risk is mitigated by the fact that its IP was developed by a duo supported by a research team that has amassed a large amount of clinical data—at this point, the loss of one individual will not derail the entire venture.

Too often, however, this is not the case. For those startups that are dependent on the grey matter of one person, Lemelin offers this advice:

“Get to market FAST!” he said. “Have a contingency plan for every possible event. Do not make major changes and keep it as simple as possible. Learn every detail possible about the IP in case you are forced to pick up unforeseen slack. Do appropriate technology assessment and have multiple potential paths to market … and insurance coverage can be a possible solution to provide further financial protection for the company and investors.”

The business of health

Genevolve is itself pursuing two primary paths to market:

  1. Physicians: Physicians are enrolled through a variety of hooks, including exclusive agreements, patient pipelines, free test kits and the promise of getting a competitive edge by offering improved patient care.
  2. Occupational departments: This comes back to those 100 or more occupations which rely on normal colour vision, requiring employers to accurately test their employees. Genevolve is developing specific tests to meet specific occupational requirements.

“We continue to develop distribution partners, not only through our existing global broker network from our laboratory partnership, but with major players like McKesson (one of the largest pharmaceutical distributors in North America), and with companies that develop colour-vision aids with the goal of adding value to our product,” Lemelin said.

An important aspect is qualifying the test for health insurance reimbursement.

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.

“The process of getting a new code can take years,” Lemelin said. “To begin the process, you must prove a need by demonstrating national acceptance of the test. This process is best described as establishing reasonable use or, more generally, clinical utility. It then would be critical to establish a value-based service that can be economically and medically justified.”

For Genevolve, this means validating the test by securing analytical articles in peer-reviewed publications and demonstrating that its test has become an accepted standard of care through physician testimonials and rates of adoption. However, molecular diagnostics is such a new field, said Lemelin, that there is not yet a standard in place that provides Genevolve with a target adoption rate to aim for.

As we mentioned in our last article, Genevolve is planning to make a big splash at  in March. An impressive showing here could spark the endorsement and early adoption from the broader medical community Genevolve needs to kick start the process of qualifying for insurance reimbursement.

Lemelin has already received positive feedback from practicing clinicians which has him optimistic that Genevolve will secure adequate physician adoption rates. The company also has a practicing optometrist as an investor, which lends further credibility with other physicians.

To VC … or not

Another risk factor facing the business is , which threatens to tighten the rules governing what qualifies for insurance reimbursement. While Lemelin remains confident that he will be able to meet reasonable usage requirements and show sufficient physician adoption rates to qualify for reimbursement regardless, the Obama plan does create a measure of uncertainty in the market that has many investors wary.

And while Lemelin has always been reluctant to yield control to a venture capitalist, the fact of the matter is, the costs of getting the test to market requires an investment too small to attract the interest of many VCs. In addition, most are not interested in what they deem to be a “service” business. The next step for Genevolve – bringing to market a genetic treatment for colour-vision deficiency – would likely have greater appeal to a VC, but this would still mean surrendering control of the business to secure an investment.

Instead, Lemelin prefers to stick with a more measured approach and seek out the support of private investors. A private placement is another possibility. Once revenue is flowing in from the test, it will provide the capital Genevolve needs to forge ahead with bringing its genetic treatment to market.

“I prefer to commercialize the test, gain the credibility from this major achievement and approach our developing physician network and continue to pitch private investors along the way,” he said.

If all goes according to plan, it will begin with that medical conference in late March. In our next instalment, we will take a look at how the stars are aligning for that launch, the insurance reimbursement system in the U.S., and Genevolve’s contingency plan in case of reimbursement denials.

This is the third article in a continuing monthly series chronicling the growth path of , 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.