Tucson should establish a medical diagnostics institute and take other major steps to expand its already robust diagnostics sector and boost economic development, according to a report unveiled Wednesday.

And Tucson shouldn't just set its sights on catching up with other diagnostics centers - it should seek to "leapfrog" the competition to lead the industry, says a report commissioned by Tucson Regional Economic Opportunities Inc.

The report, issued and discussed at a conference at Ventana Medical Systems/Roche in Oro Valley, says that with the strength of diagnostics specialist Ventana, fast-growing HTG Molecular Diagnostics and others, together with the research strengths of the University of Arizona, the Tucson region is well-positioned to take advantage of a move to new patient-specific, gene-based diagnostic testing.

The report marked the launch of a new TREO economic-development strategy to create a medical-diagnostics niche for Tucson.

Arizona and Tucson have made boosting the biotechnology sector an economic-development priority, through efforts like the decade-old Arizona's Bioscience Roadmap, TREO Chairman Steve Eggen said.

But the biotech area is so broad, focus is needed to succeed, said Eggen, retired chief financial officer of Raytheon Missile Systems.

"Our strategy must be laser-focused on the region's strengths, like diagnostics," he said.

The medical diagnostics industry is poised for rapid growth, as genetic-based discoveries lead to more so-called companion tests that match drugs to patients based on their genetic makeup, a national biotech industry leader said at Wednesday's conference.

"What TREO is doing here is catching the front of the wave," said James Greenwood, president and CEO of the national Biotechnology Industry Organization.

Greenwood, a former Pennsylvania congressman, said more accurate testing will be critical in cutting the billions of dollars in waste from ineffective drugs and could help stem Medicare costs as baby boomers continue to age.

Currently, he said, only 1 percent of marketed drugs have a companion diagnostic, and genetic testing is recommended for optimal treatment for only 10 percent of marketed drugs.

In the future, say over the next decade, Greenwood said, genetic-based diagnostics will be routine for 50 percent or more of drugs in early clinical or preclinical development.

And while current genetic tests apply to about 2 percent of the population, more than 60 percent might benefit from their use in the future, he said.

Along with that expected adoption comes huge market potential, Greenwood noted.

In 2010, $4.7 billion was spent on diagnostics in the U.S. - a figure conservatively projected to double by 2017 and rise to $15 billion by 2021.

Authored by former University of Arizona medical dean and Critical Path Institute founding president Dr. Raymond Woosley, the report recommends:

• In the near term, the Tucson region should establish a "National Diagnostics Institute" as a public-private partnership. First priorities for the institute should include developing a "diagnostics toolkit" to help startups find critical resources, and to set up shared laboratory space to help incubate companies.

• Further along, Tucson should establish a "community accelerator" to boost the most promising startup companies and increase cross-border biotechnology manufacturing.

• Longer term, the community should complete a "seed-to-success" strategy, nurturing diagnostics startups from the idea stage through incubation to later, accelerator stages including prototype development and proof-of-concept studies.

Also over the longer haul, the UA and its partners must increase the amount of local, clinical translational research, such as translating genetic findings into new therapies.

Woosley said the timing of such steps depends on what kind of support the initiative can garner.

Ventana President Mara Aspinall said during a panel discussion that diagnostics has long been the "orphan" of the medical community, but that is now changing.

Ventana, a UA technology spinoff in the mid-1980s that was acquired by Roche after successfully commercializing automated slide-staining instruments for tissue analysis, is moving to become a major player in companion testing.

Ventana, which initially began marketing a companion test for the breast-cancer drug Herceptin, currently has 188 programs involving 38 drug companies to develop companion diagnostics, Aspinall said.

The Tucson area already has an emerging diagnostics industry cluster, which besides Ventana/Roche and HTG Molecular includes Accelerate Diagnostics, which recently moved to Tucson from Denver, and startup MSDx.

And the region has strong clinical and institutional collaborators, including the UA's colleges of science, medicine, pharmacy and public health; the UA Tech Park; the largely unbuilt UA BioPark; the University of Arizona Health Network's South Campus; and Oro Valley's Innovation Park, home to Ventana/Roche and a major research center of drugmaker Sanofi.

But there are major obstacles to the goal of creating a diagnostics industry center, the report noted.

Gaps in resources to support diagnostics firms include limited access to laboratories, clinical collaborators and capital investment; a lack of clinical research infrastructure; and sometimes-limited access to university technology.

Though some of those key weaknesses are being addressed, more needs to be done, the report said.

It cited efforts by the UA's Bio5 Institute to expand clinical collaborations, lab and office space planned at the UA Bioscience Park; efforts to make seed funding available to high-tech startups; and the UA's Tech Launch Arizona, a new cabinet-level agency aimed at streamlining and boosting technology transfer.

The effort got an ally Wednesday in the town of Oro Valley, which is committed to hosting a diagnostics business accelerator, Mayor Satish Hiremath said at the conference.

Contact Assistant Business Editor David Wichner at dwichner@azstarnet.com or 573-4181.