Conducting clinical trials is an increasingly costly, complex process for drug companies. Seattle-based LabConnect LLC offers a way to make that process more efficient and less expensive for drug companies and medical device makers. As a result, LabConnect has grown rapidly.
President and CEO Eric Hayashi is in the enviable position of heading a business that has consistently ranked among the fastest-growing privately held companies in Washington state and across the country.
“It’s the beauty of compounding,” says Hayashi, referring to the impact over time of steady double-digit growth compared to larger, more sporadic gains. Founded in 2002, LabConnect is on Inc. magazine’s Honor Roll for its sure-footed performance, having grown 166 percent between 2011 and 2014.
LabConnect’s steady expansion stems from a canny assessment of an opportunity to improve how pharmaceutical companies and medical device manufacturers conduct their clinical trials. The company recognized a need for better management of the clinical trial process, from identifying research laboratories that excel in certain areas to handling specimens and managing data.
LabConnect does not own the labs, so it avoids the costs of building, equipping and maintaining research facilities.
“Managing a clinical trial is a completely different business than managing a lab,” Hayashi notes, “so we said, ‘Let’s focus on running the clinical trial and leave the laboratory tests to the labs.’”
LabConnect has established relationships with more than two dozen laboratories around the world and has supervised more than 500 contract studies. Its services include providing specimen-collection kits, cold storage for bio-specimens, project and data management, software for interpreting data, sample tracking and shipping, and providing support staff. LabConnect also has a list of more than 4,000 validated tests on its menu that clients can use, ranging from safety testing to biomarker analysis.
Here’s how it works: A client hires LabConnect to manage its clinical trials, scaling up testing through research laboratories in other countries, as drug companies often do to lower costs. With LabConnect overseeing the process, these labs are able to collect the data close to where the trials are conducted, which makes managing the specimens more efficient. The information from all the participating laboratories is then combined into a data set and sent to a data analytics company for analysis or directly to the client.
Since its founding, LabConnect has grown to 150 employees, including 135 full-time staffers. Its client roster includes Johnson & Johnson, Roche, Novartis and Bristol-Myers Squibb, among others.
Connie crowley works in clinical operations for a private company that hired LabConnect on Crowley’s recommendation. The company provided LabConnect with visit-specific kits for biomarkers and pharmacokinetic sampling for its study. The samples will be shipped to LabConnect for storage until the company asks that they be sent to a lab for analysis. In this case, LabConnect is simply managing the samples; in the past, Crowley has used LabConnect for both sample management and analyses at safety labs.
Crowley cites LabConnect’s flexibility in meeting her firm’s needs and its ability to provide appropriate kits and sample management within a reasonable budget. “The only con would be needing to educate LabConnect on some of the more esoteric samples being collected,” she notes, “but that isn’t really a con, since any lab would have needed this education.”
Hayashi’s first experience with clinical trials came as part of an internship in the 1990s when he was obtaining his M.B.A. from the University of Pennsylvania’s Wharton School. “The whole system was antiquated,” Hayashi recalls. “There were a lot of paper-based processes and inconsistencies in the delivery of the work.”
After he graduated, Hayashi got an even closer look at clinical trial procedures as VP of corporate development at Radiant Research, a Bellevue startup that identified and managed acquisitions of clinical research centers. The job also gave Hayashi valuable experience helping manage a fast-growing company. Hayashi played a key role in Radiant’s rapid expansion to 1,000 employees and $75 million in revenue in less than six years.
Hayashi’s experience on the customer side proved helpful when he joined LabConnect in 2003.
“There are tons of little things we do that you have to be a user to appreciate,” he observes. For example, the company’s test kits come pre-labeled so lab personnel don’t have to bother with filling out the mailing address.
Like most firms, LabConnect saw its business slow during the recession. But, says Hayashi, “We were lucky because our business model did not saddle us with some high fixed costs like our competitors.”
The recession did put some competitors out of business, leaving LabConnect in a stronger position, Hayashi notes. Looking ahead, he sees opportunities for growth. The mapping of the human genome opens the door for biotechs to identify and develop new drugs for very specialized purposes, Hayashi says, potentially creating huge demand for lab services and drug trials.
Where previously clinical trials mainly required high-volume, low-complexity tests to determine whether potential drugs were safe and effective for the general population, genetic testing allows development of drugs targeting individuals’ specific genetic profiles. That shift will lead to more low-volume, high-complexity tests, which are a specialty for the company, Hayashi predicts.
It likely will be expensive for big laboratories that have prospered on doing high-volume simple testing to add more complex testing capabilities. The shift plays into LabConnect’s hands, because managing clinical trials efficiently will be even more important.
“We’re ahead of the game,” Hayashi says, “because the whole structure of the company is purpose-built.”