Kenneth J. Bloom, MD, FCAP Chief Medical Officer, Clarient, Inc.

1. Establishing a Real-Time Consultative Network: The CLARiENT Experience Kenneth J. Bloom, MD, FCAP Chief Medical Officer, Clarient, Inc. Clinical Professor of Pathology, USC

2. My Experience with Telepathology/Virtual Pathology • Performing virtual pathology since 1985 • Commercialized first virtual pathology system in a reference laboratory setting • Currently supporting over 700 pathology practices using utilizing various aspects of virtual services. • I review approximately 90% of my cases virtually • I have a consultative network of virtual pathologists to help me in my practice. • I have implemented about 40 virtual microscopy systems

3. The Evolution of Virtual Pathology in a Reference Setting - Basic Business Strategy • Strategies based on disruptive innovations have the highest chance of creating growth. • Introduce benefits such as • Simplicity • Convenience • Ease of use • Lower price Clayton M. Christensen, The Innovator’s Dilemma

4. The Disruptive Playbook • Scratch an unscratched itch • Make it easier to get an important job done • Make an ugly business attractive • Find a way to prosper at the low end of established markets by providing a good enough solution at low prices • Democratize a limited market • Expand the market by removing barriers such as lack of skills or access

5. Implementing a playbook • Make it easier to get an important job done • Quantitative assessment • Find rare events • Obtain measurements easily • Simplify and improve access to second opinions • Make an ugly business attractive • Reduce Fed’Ex costs • Democratize a limited market • Allow access to complex/difficult immunostains • Eliminate the need for clients to obtain space, people and equipment

6. Manpower/Resource implications • Shortage of qualified histotechnologists • Shortage of subspecialty Expertise • Need for high priced equipment without adequate volume • Lack of space • Competing resources • More residents being trained in advanced technology but those technologies not available to them in the job market

7. What problem am I trying to solve? • Reduce logistical costs • Improve turn-around time • Reduce workforce requirements • Allow clients 24/7 operations • Empower local pathologists • Access to expertise • Access to new technologies • Access to more complete menu • Access to Information Technology

8. Take pictures • Sign Out Report IHC Biomarker Ordered Block Pulled & Slides Sectioned IHC Stain Performed Slides Collated & Delivered To Pathologist Pathologist Review & Interpretation Traditional Clinical IHC Workflow

9. Off-Site Review • Consultation ReviewTumor Board & PresentationsQA/QC ReviewEducational/Research Virtual Microscopy • Incorporate Images Into Reports • Pathologist Review & Interpretation • Image Analysis Virtual Microscopy Workflow

10. Virtual Microscopy • Image acquisition • Image storage • Image retrieval • Real-time browsing • Real-time consultation • Image analysis Imaging of entire slide Each image ~ 0.4 Gb

11. Virtual Microscopy

12. ACIS

13. Zeiss/Trestle with Slide Loader

14. Selecting the Hardware • Hardware is a commodity. • It will be out of date as soon as you purchase it. • It was out of date as soon as the vendor starting building it. • Hardware will always become better, faster and cheaper. • Will the vendor be in business in 5 years • Is the vendor solving my problem or a different problem • What is the total cost of ownership • Cost, training, maintenance, repeats No different than buying IHC, Flow, FISH, Molecular Equipment

15. Problem being solved • Pathologist needs access to tests and/or expertise that is not available locally • Traditionally, the pathologist is at the mercy of the reference lab or university pathologist • Ability to seek another opinion instantly • Achieve near real-time results (order stain, results back at the speed of instruments and scanners NOT fed-ex overnight) • We want the local pathologist to retain as much control as possible. • Access to test result and/or slides as soon as they are ready • Ability to review slides with experts • Ability to provide up to date results at tumor board even if case is not yet completed

16. Expert Expert University University Clarient Consultative Network Stains performed and scanned Stains performed and scanned Sent to Clarient via local courier + airlines Report returned Local Pathologist releases results to clinician Local Pathologist reviews complex tumor. Needs to order special studies Local Pathologist reviews case on PathSite. Orders consultation Monday Morning Monday Evening Tuesday Morning Tuesday Evening

17. The Consultative Team • Hector Battifora • Larry Weiss • Shriram Jakate • Neal Goldstein • Keith Kaplan • Ossama Tawfik • Scott Binder • Noel Weidner • Jeff Myers

18. The Consultative Team • City of Hope • University of California, Los Angeles • University of California, San Diego • Rush University • University of Michigan • University of Kansas • Mayo Clinic • Yale University • Beth Israel, Boston

19. The Process • Call, e-mail, page consultant or daily login • Go to Clarient Home Page • Login • Worklist loads automatically • Click on case • Review Slides - Take images • Order tests if necessary • Prepare report • Call submitting pathologist

20. Clarient Home Page

21. Login to System

22. Review Worklist - Select Case

23. Review Slides

24. Review Slides

25. Virtual Slide

26. Virtual Slide

27. Order Additional Tests

28. Review Images

29. Prepare Report

30. Virtual Multi-headed Scope Conference with Experts

31. Change is inevitable, except from vending machines Woody Allen

32. Thank you!

33. Production genius or marketing genius • Henry Ford • Did he conceive the concept of an assembly line after discovering that could not sell cars for more than $500 or did he invent the assembly line because he had already determined that he could not be successful selling cars for more that $500. Harvard Business Review, October 2006