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Biomarker Diagnostics: Place Your Bets Wisely

Biomarker diagnostics are the linchpin of personalized medicine. But building a successful business around such tests is anything but straightforward, given the complexities associated with both their development and commercialization. Today's molecular diagnostic companies need to think carefully before they choose a "go it alone" strategy when developing a particular test. It may make more sense to forge a partnership with another diagnostic company or a drug developer with the goal of sharing costs and relative risks.

In recent years, start-ups trumpeted the prospects of novel biomarker diagnostics with great fanfare. High-flying venture firms such as Kleiner Perkins Caufield & Byers, TPG Biotech, and Mohr Davidow invested millions of dollars to fund these fledgling businesses. Much of this attention was—and still is—deserved. In theory, these molecular tests allow physicians to more precisely tailor patients’ medicines, thereby improving their outcomes. Unfortunately, most of today’s marketed and near-term diagnostics have failed to live up to their theoretical commercial potential.

To succeed as viable businesses, molecular diagnostic companies face multiple hurdles. First, start-ups must determine if the biomarkers measure a...

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