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Published: Friday, October 24, 2003
BY RHONDA ASCIERTO
Armed with a new strategy and leadership team, the company last week received approval for its products to be used in Kenya. This comes just months after its products were approved in Uganda and China.
The 15-year-old company makes the only two FDA-approved HIV tests that rely on urine samples (an initial test and a follow-up test). Typically, tests for the Human Immunodeficiency Virus (HIV), which causes AIDS, rely on blood samples. Since Calypte's products were approved by the U.S. Food and Drug Administration in 1996 and 1998, respectively, the company's revenue has been driven by sales to life-insurance companies and blood banks in the United States. However, earlier this year, the company ran out of money and stopped manufacturing products.
But that's all changed. Alameda-based Calypte resumed production in June. It is now forging ahead with a global strategy and readying to commercialize a new, rapid-version of its urine-based tests, which is expected to become its lead product within a year.
"They used to have a story that was typical for many biotechs: Good drug, bad management. But Calypte has done a 180 [degree turnaround]," says David Miller, co-chair of the Cornell-Columbia AIDS Clinical Trial Group's Community Advisory Board, which is sponsored by the National Institute of Allergy and Infectious Diseases. Miller is an independent consultant and owns no Calypte stock.
He says urine-based tests make widespread HIV testing viable for the first time. Unlike blood-based tests, urine-based tests can be easily disposed of, without risk of contamination. They also can be administered by anyone and are more affordable than other products, he says.
"Compared to a blood-based test, the differentiation in pricing isn't even comparable," says Miller, who says an average blood-based test costs $150 compared with Calypte's $2 urine test.
For Calypte, the overseas market likely will be its mainstay. Actual HIV infection rates are unknown, since most of the world's population has not been tested. And since HIV takes many years, sometimes decades, to become full-blown AIDS, health officials struggle to accurately depict the extent of the HIV epidemic.
In 2001, an estimated 40 million people were living with HIV and AIDS, not including an estimated 200,000 Americans who don't know they are infected. In severely inflicted countries, such as South Africa, children beg on roadsides for HIV "cocktail" drugs.
Calypte is now readying to serve these growing markets.
Facing mounting losses and unable to maintain its stock listing on the Nasdaq Stock Market, the company saw a management shake-up and a reverse stock split earlier in the year. Former president and CEO Nancy Katz left in June. Jay Oyakawa stepped in as president and COO, while former chairman Anthony Cataldo became CEO.
Since the changes, Calypte's stock (OTCBB: CYPT) has increased 1,100 percent from 12 cents in early July to $1.46 at press time.
Oyakawa aims to shift the company into revenue mode by expanding its distribution channels outside the United States and quickly commercializing a rapid version of its existing products. A rapid urine test, which provides immediate results, has many advantages over existing urine tests, which must be sent to a laboratory for analysis and typically take three days to a week for results.
Since Oyakawa came on board, the company has raised $12.5 million from London-based investment firm Marr Group, which it has used to gain regulatory approval to sell into Botswana, Uganda and China.
Oyakawa declined to disclose revenues from these new markets. But he expects overseas sales will drive the company's revenue within the next two quarters and beyond.
The company also is applying for approval with regulators in Russia, India and other African regions. Since medical device approvals in many foreign countries often takes as few as three months -- compared to years in the United States -- Calypte's global strategy may be executed relatively quickly, Oyakawa says.
But the company's greatest earnings potential may lie with its experimental rapid HIV urine test, which works much like a home-pregnancy test and immediately indicates whether a person is carrying HIV antibodies.
The product is slated to be submitted to the FDA for approval in mid-2004. It would be a breakthrough for Third World countries and rural areas, since the results are instant and require no additional infrastructure, such as diagnostic equipment that costs $400,000 to $500,000, Miller says.
The rapid urine test likely would not be sold over the counter, at least not initially in the United States, because those infected must have immediate access to counseling and support services, Oyakawa says. However, in parts of Africa, there has been interest in it as a consumer product, for privacy reasons and ease-of-use in the home, adds Oyakawa.
Calypte expects to begin a clinical trial by early next year and submit it to the FDA for approval within six months.
Just how long the FDA-approval process will take is anyone's guess, but the company will tackle approval in overseas markets simultaneously. This includes countries that already use its existing tests, as well as India and Russia.
"We already understand what needs to be done for approval for the countries that we're approaching," Oyakawa says.
Overseas markets will drive the bulk of future revenues, particularly in countries that are deeply affected by the HIV epidemic, he adds. "We believe there's pent-up demand in international markets."
Another rapid HIV test is already on the market, however it is not urine-based. Bethlehem, Pa.-based OraSure Technologies Inc. had its rapid blood-based HIV test approved in late 2002, which can diagnose a drop of blood within 20 minutes and can be used outside a laboratory.
Still, Calypte is planning to eke out a $5 million profit by the end of 2004 and generate $23 million to $25 million in revenue for the calendar year. For its most recent quarter, ended June 30, the company reported an $8 million loss, or 72 cents per share, on $749,000 in revenue.
"They haven't begun the stage of trials they need for the FDA, but they already know through lab tests that the rapid product works," Miller explains. "It's such a quick, easy win for the company ... and provides the only way to get a real understanding of what's going on in the world with HIV."
Rhonda Ascierto is a Biz Ink reporter.
You can reach her at email@example.com.