San Diego Firm Hopes for Profits From Unique AIDS Test

When Dr. Kenneth Widder began doing research and development as a second-year medical student at Northwestern University 10 years ago, he worked in a donated university laboratory and supported his work with fellowships from the American Cancer Society.

Widder is still doing research and development, but now he supports himself as the founder, chairman and chief executive of Molecular Biosystems, a company based here that, when it went public in 1983, turned him into a millionaire.

And, according to biotechnology industry analysts, Molecular Biosystems has the potential to turn its shareholders into even wealthier people.

That prediction is based on a three-pronged push to develop a series of diagnostics tests for infectious diseases, a unique AIDS test and a substance that could improve the contrast of “pictures” generated by magnetic resonance imaging.

On Profit Track

Although Molecular Biosystems probably will lose $500,000 during the fiscal year ending March 31, Widder believes that the company is on track toward profitability.

“We’re getting to the point as a publicly traded company where we need to shoot for breaking even,” Widder said. “And it looks like that’s within the realm of possibility by next fiscal year.”

Further, Widder said Molecular Biosystems doesn’t “need to go back to the financial community for more dollars. We have sufficient capital on hand to cover our operations.”

Widder’s enthusiasm is generated in large part by an arrangement with Du Pont, which last year invested $2.5 million in the company in return for an 8.5% equity position. That partnership will begin to bear fruit at the end of this month when Molecular Biosystems and Du Pont introduce a string of eight diagnostic tests that use strands of DNA to determine the presence of infectious diseases.

The eight tests, along with others under development, are expected to be less costly than existing tests because they will produce results in as little as three hours. The tests now used require as long as six hours.

Chasing a Market

Molecular Biosystems is chasing a market that should grow to more than $100 million by 1990, said Widder, who expects to produce a second-generation test that will allow “hands-off, automated testing” by late 1987.

Widder expects that the tests will give DuPont and Molecular Biosystems a significant lead in the diagnostics market. “We have a really strong technological lead over our competitors and that’s evidenced by the fact that we have the state-of-the-art technology,” Widder said.

Although DuPont will market Molecular Biosystems’ proprietary devices, each test will carry Molecular Biosystems’ name, giving the company what Widder called “immediate name recognition and the chance to build our reputation for quality and dependability.”

Because DuPont will market the tests, Molecular Biosystems won’t be forced to absorb what Widder identified as the “large internal overhead structure needed to develop our own network.”

Although the DNA tests represent Molecular Biosystems’ best chance to become profitability, the company also has attracted attention for work on a blood screening test that could pinpoint AIDS.

Unlike other tests, which detect antibodies of the virus that is believed to cause AIDS, the test being studied by Molecular Biosystems detects elevated adenosine deaminase (ADA) levels in AIDS victims. If Molecular Biosystems can prove that elevated ADA levels are an accurate indicator, the test could “supplant” standard tests and “be important for measuring the progress of treatment in AIDS patients,” Widder said.

Others in Field

“Molecular Biosystems doesn’t for one minute think its (test) is the solution to the whole (AIDS testing) field and there are other companies which are further along with other kinds of tests,” said Misha Petkevich, a technology analyst with Hambrecht & Quist in New York. “But Molecular Biosystems might (have) a product that will prove to be competitive and superior to existing products.”

“Molecular Biosystems is a company with a difference,” said Scott King, a technology analyst with Montgomery Securities. “They’ve got a technology which no one else is playing with and the market for AIDS testing is expected to grow to between $100 million and $140 million worldwide.”

“We’ve begun talking to people about marketing the ADA test,” Widder said. “There are a lot of avenues we could go down with the test.”

Surprisingly, Molecular Biosystems began its AIDS test research because of “a shot in the dark” observation by Widder that doctors might be able to use elevated ADA levels--which generally only turn up in children with rare diseases--to diagnose AIDS.