A Life-Critical Hedge Bet
VAP Diagnostics’ cholesterol test solves the 60 percent inaccuracy of standard tests. New investors bet this critical technology will flourish, after an earlier fumble by private equity.
It was about a year ago that Kenneth French got the news that he and the other employees of Atherotech were abruptly out of a job, a day French vividly remembers.
“We had three days’ notice and we were on the street. No insurance, no severance, no pay. It was rough. And it was fast, real fast,” French says.
Atherotech, a blood-testing company, fell victim to a perfect storm of private equity funding problems coinciding with a Justice Department investigation of the blood-testing industry. That led to lower reimbursements for cholesterol tests, which lowered margins, which in turn provoked sales force turnover, which, finally, led Atherotech to close.
“It was sources and external forces that we could not control,” says French, now the director of clinical operations for VAP Diagnostics, located in an office park in Southwest Birmingham. VAP is short for Vertical Auto Profile + Lipid Panel, a popular and comprehensive cholesterol test.
“The good news,” French says, “was that a very large international firm recognized the opportunity to purchase the Atherotech assets, which mainly was the VAP cholesterol test. That’s the premier test. There is no other test like this test. This is the best test currently available commercially in the world for what it does. And I say that with a very good understanding of all the competitors and various types of labs that look similar to what we do, but they don’t come close to what one VAP test performs, not for efficiency of cost and the information you get clinically.”
French believes that in just a few years, the company might not only be providing laboratory services to doctors and clinicians nationwide but could also be an equipment provider.
“This group said ‘we want this lab to be sustainable,’” French says.
Atherotech had about 400 employees when it shut the doors, and VAP Diagnostics now has about 40.
“We want to go back out there and slowly let people know we are back, but we want to keep our costs down,” French says. “Plus we are now owned by a private company. We are in charge of our own destiny.”
“We opened the doors back in March of 2017 and made ourselves available and the demand is good. I mean, we have our own issues that we have to work through, but basically we are starting over,” he says.
VAP Diagnostics is also coping with the after effect of the Atherotech shut down. “There was no notice to a lot of those customers that the company had closed, so they thought it was business as usual. When they realized they were not getting their tests back and we had closed, that left a bad taste in their mouths. And some of the customers said ‘What is to say this is not going to happen again?’” French says. “So we have to take our time, explain the story and say, look, we have an investor that is here to make it stay. They are here to make it grow, reach profitability and when it reaches a certain size, maybe spin it off to another part of the country.”
VAP Diagnostics is small compared with some of the other medical testing labs in the country, but French says he thinks the company’s proprietary VAP test will be attractive to a lot of doctors and clinicians.
“You have to realize in 1973 the original equation or formula for the test that is being used currently all across the United States, the original cholesterol test that your doctor used, is probably one of the top three most written tests that Medicare or third party insurance companies reimburse for. That original cholesterol test is that popular,” he says.
The original cholesterol test, French says, estimates low-density lipoprotein cholesterol “that everybody is so afraid of and what so many doctors want to see so they can lower that level to try to lower the risk of heart disease.”
Too much LDL over many years can result in atherosclerosis (the narrowing and hardening of arteries) and lead to heart disease or a heart attack.
French says that while most medical tests and equipment have improved over the years, the basic cholesterol test hasn’t.
According to French, the VAP test produces a number of findings that show who is at higher than average risk. The regular test, according to French, reports four pieces of estimated information whereas the VAP test reports 12 unique pieces of information. “But that is not the issue,” he says. “That LDL cholesterol test you are getting today, up to 60 percent of the time, is not reporting an accurate LDL in that person’s body. There is not a test I can think of that is not accurate 60 percent of the time.
“There was a clinician here in the Birmingham area who experienced zero heart attacks in his patients when he was using the VAP test. In the time when the VAP test was away from the market, about a two-year period, he experienced eight heart attacks in a three-month period.
“With the VAP test he was able to manage risk. When you take the management away you are back to looking at total cholesterol and thinking, now what do I do? The amount of cholesterol doesn’t necessarily prove your risk.”
French says there are three areas where risk can be reduced.
“One is making people aware, like the breast cancer awareness. As soon as a woman finds a very small suspicious lump, go get it checked, get a mammogram, and get checked. That is awareness. Guess what happens. You find it early enough. Only one in 30 women succumb to breast cancer now because of our awareness of breast cancer. One in three women succumb to heart disease.
“The next category is medicine. Do we have the right and best medicines to treat and combat and prevent heart disease? Well, the answer to that is, sure, we do right now.
“Since 1987, physicians have had statins, Niacin and other medications. But we now have six to treat familial hypertension. So medication is well taken care of.
“What is missing is identification. The problem is doctors are being told by the routine cholesterol test that the cholesterol is normal so the patient will go home when in fact there is a huge risk hidden within those normal values that the doctor is not seeing. That primary target of therapy, LDL cholesterol, right now, 99 percent of the time, is being estimated. It is a calculation from that formula created in 1973.
“But because of a very, very large change we have had in our human demographics, the foods we eat, the weight gain we have had, the inactivity we see in our children, because of cell phones and because of the dramatic change in our food and our health, that causes a level of triglycerides to go up which causes this formula to begin to report out inaccurate non-reflective LDL levels.
“So the doctor is looking at the LDL and saying hey, it is 95, which is just great. But in fact if you were to go in and actually measure it, it could be 110, 120. A doctor will treat 110, 120 immediately, but at 95 he will say you’re fine, go home. That person just went home with risk because the estimate fooled them.”
French says the number one health nemesis is heart disease. “Every family in America has been impacted by it. The VAP test is the only way you can find out if you are going to have an event or suffer from your second event,” he says.
Bill Gerdes and Cary Norton are freelance contributors to Business Alabama. Gerdes is based in Hoover and Norton in Birmingham.