AdvisoryDx | Diagnostic Investor Diligence

10 Commercial Questions Every Diagnostic Investor Should Ask

Clinical promise is necessary. It is not sufficient. This scorecard gives investors a structured lens for evaluating the commercial architecture behind the science. It is the layer where most diagnostic platforms quietly fail.

Commercial Architecture Diligence Framework

CLINICAL UTILITY

Does this diagnostic change a clinical decision?

Determine whether the test generates actionable information that directly alters patient management, treatment selection, or monitoring decisions, not just data.

GREEN FLAGS

Published clinical utility studies demonstrating outcome changes
Clear mapping to a specific clinical decision node (e.g., treat/no-treat, escalate/de-escalate)
Defined patient population with unmet diagnostic need
Endorsement or recognition from clinical guidelines or KOLs

RED FLAGS

Test provides information but no defined clinical action follows
No published evidence linking result to a change in care pathway
Clinical value is described only in terms of 'awareness' or 'monitoring'
Physicians cannot articulate what they would do differently with the result

MARKET VIABILITY

Is the target market clearly defined and commercially viable?

Assess whether the company has identified a specific, reachable segment of the market with quantifiable demand, not a vague TAM slide.

GREEN FLAGS

Defined beachhead market with specific buyer personas
Bottom-up market sizing grounded in patient volume and test frequency
Evidence of pull from early-access or pilot programs
Identified channel partners or distribution pathways

RED FLAGS

Market size derived only from top-down TAM estimates
No segmentation beyond 'all patients with condition X'
Unclear who the economic buyer is (lab, physician, payer, patient)
No pilot data or letters of intent from target accounts

ECONOMIC VIABILITY

Is there a credible path to reimbursement or sustainable payment?

Evaluate the economic architecture: whether the test can be paid for at scale through established or emerging payment mechanisms.

GREEN FLAGS

CPT code established or analogous code pathway identified
Payer engagement or coverage discussions initiated
Health economic model demonstrating cost-offset or value
Existing Medicare LCD/NCD precedent for similar tests

RED FLAGS

No reimbursement strategy beyond 'we will get a CPT code'
Pricing model relies entirely on patient self-pay
No health economic data or cost-effectiveness analysis
Payer landscape analysis has not been conducted

FDA clearance can validate performance. It does not validate payment.

REGULATORY RISK

Is the regulatory pathway defined and de-risked?

Confirm the company understands its regulatory classification, submission pathway, and timeline, and has planned for post-market requirements.

GREEN FLAGS

Pre-submission meeting completed with FDA (or equivalent authority)
Clear 510(k), De Novo, or PMA pathway with precedent predicates
Regulatory counsel engaged with IVD-specific experience
Post-market surveillance plan outlined

RED FLAGS

Regulatory pathway described as 'straightforward' without specifics
No pre-submission interaction with regulatory agency
Confusion between LDT, EUA, and cleared/approved pathways
No timeline or budget allocated for regulatory submission

EVIDENCE STRATEGY

Does the clinical evidence plan support both adoption and coverage?

Determine whether the evidence generation strategy is designed to satisfy the dual requirements of clinical adoption by physicians and coverage decisions by payers.

GREEN FLAGS

Prospective clinical validation studies planned or underway
Evidence plan addresses both analytical and clinical validity
Study design reviewed by biostatistician with IVD experience
Publication strategy targeting peer-reviewed journals

RED FLAGS

Evidence limited to analytical validation only
No prospective study planned. Reliance on retrospective data
Study design insufficient for payer evidence review committees
No KOL involvement in evidence generation strategy

DEFENSIBILITY

Is the technology defensible and differentiated?

Assess the depth of the technical moat: whether through IP protection, proprietary methods, data assets, or platform architecture that creates durable competitive advantage.

GREEN FLAGS

Granted patents on core method, biomarkers, or algorithm
Proprietary dataset or training data not replicable by competitors
Platform architecture enabling multi-test expansion
Published head-to-head performance data vs. existing solutions

RED FLAGS

Technology relies on publicly available methods or open-source tools
No IP filed or only provisional patents with narrow claims
Differentiation is described in terms of 'better' without quantification
Competitive landscape analysis is absent or dismissive

CHANNEL ARCHITECTURE

Is there a clear distribution and go-to-market channel?

Evaluate whether the company has mapped the physical and commercial pathway from test to result, including laboratory operations, logistics, and sales infrastructure.

GREEN FLAGS

CLIA-certified lab operational or partnership agreement in place
Defined specimen collection and logistics workflow
Sales team hired or outsourced with IVD commercial experience
EMR/LIS integration plan for ordering and resulting

RED FLAGS

No laboratory operational plan beyond 'partner with a reference lab'
Sales strategy is 'direct to physician' without field infrastructure
No consideration of pre-analytical variables or specimen logistics
Go-to-market plan lacks geographic or account-level prioritization

Distribution is not a go-to-market strategy. It is a delivery mechanism.

ADOPTION MECHANICS

What drives physician and laboratory adoption?

Understand the behavioral and operational triggers that will cause clinicians to order the test and laboratories to offer it, beyond clinical data alone.

GREEN FLAGS

Pilot programs with measurable adoption metrics (order rates, turnaround)
Workflow integration that reduces friction vs. current testing
Champion physicians identified and engaged as advocates
Defined training and onboarding program for ordering clinicians

RED FLAGS

Adoption plan relies on 'building awareness' without activation strategy
No workflow analysis of current testing vs. proposed test
No pilot data on real-world ordering behavior
Physician engagement limited to advisory board attendance

EXECUTION CAPABILITY

Does the team have diagnostic commercialization experience?

Assess whether the leadership team includes individuals who have taken a diagnostic product through regulatory clearance, market launch, and commercial scale, not just R&D.

GREEN FLAGS

C-suite or VP-level hire with prior IVD launch experience
Track record of successful diagnostic product commercialization
Advisory board includes reimbursement, regulatory, and commercial experts
Board composition includes diagnostics industry operators

RED FLAGS

Leadership team is entirely academic or research-focused
No commercial hire planned until post-funding
Prior experience is in pharma or devices but not diagnostics
Advisory board is composed only of scientific advisors

INVESTOR NARRATIVE

Is the commercial story structurally sound for diligence?

Determine whether the company can present a coherent, defensible commercial narrative that connects clinical value to economic sustainability: the story that survives scrutiny.

GREEN FLAGS

Integrated commercial plan linking clinical, regulatory, and market strategy
Financial model reflects realistic adoption curves and reimbursement timelines
Clear milestones tied to value inflection points
Data room organized with evidence, regulatory, and commercial documentation

RED FLAGS

Commercial plan is a collection of disconnected slides
Revenue projections assume immediate post-launch adoption
No sensitivity analysis on reimbursement rate or adoption timing
Unable to articulate the commercial thesis in under 60 seconds