October 1, 2008 (Vol. 28, No. 17)

List of Companies Emerging from This Bio-Arena Continues to Expand

Amidst the doom and gloom of the credit meltdown, biotech stocks are shining brightly. Medical diagnostics are even hotter, though, with the medical genetics subgroup in the number one position, according to September 2008 Investor’s Business Daily data.

Back in the dark ages of biotechnology and molecular biology, several drug companies pursued the combination of diagnosis and therapy. The implied synergies faded in importance as the biopharma boom took hold in the 1980s with ample financing for pure plays such as Amgen and Genentech.

In the late 1990s, the field of genomics exploded with the mapping of the human genome. That megatheme produced the biotech stock market bubble of 1999. Genomics tools have now evolved to the clinical stage, and the previous investment in genomics will be leveraged over the longer term.

New platform technologies and scientific breakthroughs applying vast amounts of genomic data have brought diagnostics to the forefront. It is predicted that better diagnostics based on genetic information will bring more targeted and cost-effective therapies. The market is significant and predicted to grow rapidly. Kalorama Information predicted that the molecular diagnostics market would exceed $3.2 billion worldwide in 2007 and reach $5.4 billion by 2012.

Affymetrix and Illumina have both created array-based products that enable high-speed analysis of DNA, RNA, and proteins as tools for disease research, drug development, and molecular tests. These gene-sequencing tools are being applied at an earlier stage.

Companion Diagnostics

Genetic tests can optimize drug therapy, and companion diagnostics are being touted as a method to better define a patient’s need or predict clinical outcome from a specific drug. The FDA recently approved a HER-2 test from Invitrogen called Spot-Light that can be used to identify breast cancer patients who are candidates for treatment with Herceptin. In addition, data was recently presented showing the importance of testing for the K-ras gene to assess the clinical benefit of Erbitux for metastatic colorectal cancer.

Of all the larger integrated healthcare companies, Roche has best executed the synergies of molecular diagnostics and biopharmaceuticals and is well positioned for the future with products in oncology and infectious disease. Its genetic tests include CYP450 for drug metabolism studies and HER-2 for use with tamoxifen therapy.

Emerging Companies

There are many emerging growth companies with new genomic testing models. Myriad Genetics is one of the larger genetic testing companies with revenues exceeding $200 million. The company’s BRACAnalysis® test assesses a woman’s risk of developing breast or ovarian cancer based on detection of mutations in the BRCA1 and BRCA2 genes.

Genomic Health is another growing company in the genomic-based clinical testing arena. Its Oncotype DX® breast cancer assay is used to predict the likelihood of disease recurrence and of chemotherapy benefit for early-stage breast cancer patients.

Genoptix is a laboratory service company focused on delivering personalized and comprehensive diagnostic services to community-based oncologists and hematologists.

Luminex’ core xMAP® technology is a microsphere-based multiplexing system that, the firm reports, offers a fast, reliable, and economical way to perform complex bioassays, yielding up to 100 reproducible results from a single drop of sample.

The company offers a cystic fibrosis screening assay and a newborn screening panel is expected by Q4 2008. Earlier this year, Luminex announced that Abbott Labs will distribute its xTAG Respiratory Viral Panel that can detect 12 viruses and subtypes.

Sequenom is one of the hottest genetic testing stocks of 2008 going from $5 in March to $22 in August. The company translates genomic information into potential clinical utility with its MassARRAY® DNA analysis platform beginning with its SEQureDx, technology for prenatal noninvasive, SNP-based genetic analysis.

The test isolates and analyzes circulating fetal nucleic acid from a maternal blood sample and can be performed early in pregnancy. Clinical testing is under way. The company’s current revenue stream is primarily from the MassARRAY iPlex Gold platform for SNP genotyping or sub-whole genome study applications.

Among the other SNP-based tests in the firm’s pipeline are those for chromosomal disorders, Rh disease, autism, and thalassemias. Most of the current sales are for DNA analysis tools and revenue estimates are in the $50 million range for 2008 with losses at $0.70 per share.

Aureon is a private firm focused on “enabling personalized patient care through predictive pathology.” The company launched Prostate Px+ earlier this year. It is said to be the first commercial test to predict prostate cancer progression and disease recurrence at the time of diagnosis.

Autogenomics’ BioFilmChipTM microarray-based multiplexing molecular diagnostic platform can be used to assess disease signatures with genomic and proteomic markers. Recently, the company obtained FDA clearance for its Infiniti Assays for Warfarin, to optimize the use of the drug and reduce bleeding complications, and factor II and V genotyping to identify patients with suspected thrombophilia. The company has a broad pipeline of applications that are in various stages of development.

Nanosphere’s Verigene® System can detect DNA/RNA or utilize multiplexing of multiple protein targets to provide a 2–3 order magnitude higher sensitivity than immunoassays due to its amplification methods, the company claims. The company has developed nucleic acid tests for the most common genetic disorders including thrombophilia, folate metabolism, and cystic fibrosis. An in vitro diagnostic test is also available for detection of the alleles of the CYP2C9 gene as an aid to patients at risk for increased Warfarin sensitivity.

Navigenics offers Health Compass, a scan of an individual’s genome and interpretation of the results by genetic counselors.

Osmetech received FDA clearance for its eSensor XT-8 Warfarin sensitivity test in July. The test is based upon electrochemical detection technology for detection of nucleic acids on a microarray. The eSensor XT-8 is a random-access system with a genetic test menu that will be expanded with other genotyping tests.

Perlegen Sciences, an Affymetrix spin-out, is focused on clinical situations in which genetic information has the potential to improve patient care by improving therapeutic decisions. Its diagnostic programs are in breast cancer, coronary disease, smoking cessation, type 2 diabetes, and hepatitis C.

Perlegen utilizes a high throughput DNA analysis engine that, according to the company, can read SNP genotypes 100 times faster than capillary-gel electrophoresis used by the Human Genome Project. It is also using high throughput, massively parallel gene sequencing technology to catalog all genetic variations associated with disease.

A new wave of molecular diagnostics platform companies are entering the commercial stage with technologies that translate genetic information to actionable clinical outcomes, not only for cancer and infectious disease but also for cardiovascular disease and diabetes.

It is clear that the application of genomic-based diagnostics will have a major impact on therapies and we can probably expect a shift in R&D investment from drugs to diagnostics.

Rod Raynovich ([email protected]) is a principal at Raygent Associates.
Web: www.raygent.com. Phone: (310) 871-1231.

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