July 1, 2010 (Vol. 30, No. 13)

Initial Successes Aside, the Path to Market Is Still Rife with Hurdles

Genomics transformed biology, and now we are seeing its initial impact on drug development and personalized diagnostic services, particularly in cancer. While progress is indeed being made in biomarker discovery, there are various issues to consider just in terms of developing a sound business model.

Development of targeted medicines would be furthered by the co-development of diagnostics. About 10 panel discussions at the “BIO International Convention” also with the business of biomarkers—from discovery to validation to eventual development into a diagnostic.

Kalorama Information forecasts the market for cancer diagnostics in combination with therapy growing annually at 25–30% over the next 5–10 years, reaching $90 million in the pharmacodiagnostics category by 2014. By 2025, 10–20% of all new drugs will be labeled with a companion test.

Last year the U.S. market was $30 million; the worldwide market for all types of cancer diagnostics including tests for histopathology, immunoassays, flow cytometry, FISH, and others was $4.27 billion. Kalorama also notes the growing use of protein biomarkers in clinical trials for cancer drugs, which is expected to be more than $1 billion in 2010.

Our understanding of cancer has been advanced by biomarker research. Initial success can be seen with targeted drugs like Erbitux (cetuximab), Gleevec (imatinib), Herceptin (trastuzumab), Iressa (gefitinib), and Tarceva (erlotinib) already on the market. Patients would further benefit from the use of biomarker tests that can identify those most likely to respond. For example, in the treatment of node-negative breast cancer, research has shown that only 30% of patients benefit from chemotherapy treatment.

Several biomarkers involving EGFR and associated gene mutations are already validated for cancer treatments. FDA has approved test/treatment regimens for all the aforementioned drugs.

Rod Raynovich


Although the concept of companion diagnostics is compelling, progress to the market has been slow as they require extensive collaboration between diagnostic and drug companies. There are a myriad of political, scientific, and regulatory issues stymieing progress, including whether drug firms can expend the time and money to develop biomarkers in parallel with drugs; developing a robust, reliable assay; dealing with the fact that many proposed markers are run in CLIA labs and are not approved diagnostic kits; and onerous regulatory pathways.

Another major challenge for biomarker discovery and evolution to a diagnostic kit is proving clinical utility and the major investment in clinical trials. Stephen Little, Ph.D., vp of personalized healthcare at Qiagen, estimated that a Phase III drug trial can cost $100 million and a companion diagnostic for the same indication could cost as much as $20 million more. The available market for an FDA-approved companion diagnostic is likely to be between $20 and $50 million a year.

John Schultz, senior vp of licensing and strategic development at Clinical Data, pointed out during “BIO” that IP ownership can also crop up as problem. Yet another point of consideration is which assay platform should be used, which affects pricing, said Schultz. Most biomarker platforms utilize nucleic acid testing such as PCR and immunoassays. Mass spectrometry for SNP genotyping also shows promise for prenatal diagnostics; this forms the basis of Sequenom’s diagnostics.

DNA microarrays are also gaining ground, and Illumina recently reported 510(k) market clearance for its BeadXpress System for in vitro diagnostic use only with the VeraCode Genotyping Test for Factor V and Factor II. 

DNA sequencing for genomic research is growing quickly as the cost of personal human genome sequencing makes its way down toward the $1,000 mark.

Finally, Schultz noted that it is important to determine how the diagnostic can be marketed. Biomarkers have the potential to be transformative, but the business model has not yet been proven. According to Dr. Little, three possible business models include: a biomarker gets accepted as part of the drug development process; payors drive the evolution of a product when it becomes clear that a subpopulation can be targeted for improved drug efficacy and cost effectiveness; and patients pursue tests where they can obtain test data for their own treatment.


Linda Pullen, Ph.D., a consultant, commented that, although many companion diagnostic deals have been announced, the financial terms are not always disclosed. “It could be that the value proposition is speculative because the predictive power of the biomarker in drug/diagnostic studies is unknown and the range of outcomes is very large.” Dr. Pullen also feels that it is more likely that diagnostics will be developed only after the drug is on the market.

Hans Bostrom, Ph.D., director, scientific liaison licensing and external research Europe at Merck, reiterated that big pharma is not interested in more targets, but instead, validation of existing targets through translational medicine.

Although product sales for companion diagnostics and biomarkers were less than $40 million in 2009, deal making has been active. Genomics and personalized medicine is a long-term theme supported by explosive scientific developments and a compelling need. Deal flow in genomics should continue at a brisk pace. However, unlike the late 90s it will not create a new biotech bubble as capital flow into the life sciences has drastically slowed, and the big money is still tied up in bonds, derivatives, and algorithmic macro trades like currency and interest rates.

Rod Raynovich ([email protected]) is a principal at Raygent Associates.

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