Whitefish, MT / May 29, 2014 / Most of the science behind disease is only truly understandable by scientists, researchers, and physicians rather than the general population. What everyone does understand is that, in virtually every scenario, early detection is a key to treatment or even survivorship. The life sciences IPO boom that started in 2013 has created some additional wind under the sails of few diagnostics companies, including Veracyte Inc. (VCYT) and Foundation Medicine Inc. (FMI), and it should have investors taking a closer look at upstart Panacea Global, Inc. (PANG) and its new cancer-detecting technology.
These three companies have some fundamental differences, but share a goal of delivering a comprehensive solution to detect cancer at an earlier stage and with higher reliability than currently available diagnostics, effectively reducing healthcare costs and improving the quality of life of patients by giving doctors actionable information.
San Francisco-based Veracyte went public in October 2013, raising $65 million by selling 5 million shares at $13 each. Although it has different products in the pipeline, Veracyte has commercialized its thyroid nodule assessment called Afirma® Thyroid FNA Analsysis. In short, the test tells doctors whether a thyroid lump is cancerous or not.
The Afirma diagnostic, which features Veracyte’s novel Gene Expression Classifier (GEC), is meeting an area of unmet need where physicians are often left essentially guessing about interpretation of a FNA (fine needle aspiration) procedure. Research shows that FNA procedures produce an indeterminate result up to 30 percent of the time, requiring a diagnostic surgery to be performed. Up to 80 percent of those surgeries prove the lump to be benign.
In the Veracyte model, a thyroid nodule FNA sample undergoes an assessment at Veracyte partner Thyroid Cytopathology Partners, which classifies the nodule as benign or malignant 83% - 86% of the time. In the cases that the assessment is indeterminate, the GEC is performed, ultimately resulting in about a 90% reduction in diagnostic surgeries. With a listed price tag around $4,300, the Afirma product pays for itself by avoiding the more costly procedure, explaining why it is gaining positive coverage from insurance companies.
Shares of VCYT printed new all-time highs in March following the first earnings report as a public company. Veracyte received 14,373 FNA samples in the quarter ended March 31, 2014, compared to just 10,757 for the same quarter last year. Revenue for first quarter 2014 rose by over 70% from first quarter 2013 to $7.47 million. Net loss for the first quarter of 2014 totaled $6.67 million versus $6.90 million in first quarter 2013. With a market cap of $270 million, investors are clearly betting that the company will tighten the net loss going forward, especially with Cigna (NYSE:CI) and EmblemHealth recently joining other insurers with coverage.
Cambridge, Massachusetts-based Foundation Medicine went public in September 2013 (some big holders included Third Rock Ventures, Google Ventures and Bill Gates’ Gates Ventures), raising $106 million by selling 5.89 million shares at $18 a piece. Shares reached as high as $30.25 this month on just under 300K average volume (3m).
Foundation’s first clinical product was FoundationOne™, a genomic profile product that works in conjunction with traditional tools for making decisions about cancer treatments to better delineate a course of action. Different than most others in the diagnostics business, FoundationOne doesn’t try to pinpoint one genetic abnormality. It takes a tumor biopsy and runs it through its extensive database for abnormalities that are known to support growth and spreading of that particular tumor type. The system further matches the results with targeted therapies, including clinical trials specific to the indication, providing the oncologist with a list of recommendations for what may provide the greatest therapeutic benefit to the particular patient. For Foundation, it’s all about personalized medicine, a popular topic in today’s biotech space.
The company makes most of its money in deals with big pharmaceutical companies because no insurance plans to date have offered reimbursement (the company approximates average revenue per test to be $3,400 for three months ended March 31, 204). Novartis (NVS) contributed about 10 percent of Foundation’s total revenue at the time of the IPO and the company also works with majors like Celgene (NASDAQ:CELG), AstraZeneca (NYSE:AZN) and Johnson & Johnson (NYSE:JNJ) to help define patient populations that may benefit from their drug candidates.
Testing frequency and revenues are increasing, though. In first quarter 2014, more than 4,700 FoundationOne clinical tests were reported, up from 3,750 in forth quarter 2013. First quarter revenue more than doubled to $11.46 million, versus $5.2 million for the same quarter a year earlier. First quarter 2014 net loss rose to $12.17 million, or 44 cents per share, compared to $7.25 million, or $2.56 per share, in first quarter 2013.
The company launched a second clinical product, FoundationOne Hemes, a genomic profile for hematologic cancer, in December. With that, over $110 million in cash, improving revenues, and a $590 market cap, investor seem to be banking on Foundation meeting or exceeding the projected 22,000 and 25,000 clinical tests in 2014.
Panacea Global, Inc. is focused on developing and commercializing products for the early detection, diagnosis and monitoring the recurrence of several types of cancer using the novel cancer biomarker Human Aspartyl (Asparaginyl) B-Hydroxylase (HAAH), an over-expressed enzyme in cancer cells. Panacea has licensed the worldwide exclusive rights from developer Panacea Pharmaceuticals to commercialize its blood-based cancer diagnostic tests based on HAAH.
The significance of HAAH in cancer research is well documented, including Time Magazine dubbing Panacea Pharmaceuticals’ ELISA assay LC Detect (an acronym for “Lung Cancer” Detect) one of the Ten Biggest Medical Breakthroughs of 2007. The clinical studies underscoring this next generation technology were conducted in collaboration with Brown University and Rhode Island Hospital and have been featured in newspapers and 18 peer-reviewed publications. The tests were also the focus of an interview with Terry Bradshaw in a 2012 episode of the television show “Today in America.”
Panacea Global now has the rights to market LC Detect, as well as BC Detect (breast cancer), CC Detect (colon cancer) and PC Detect (prostate cancer). A brief phone conversation with the company revealed that these will remain the top areas of focus initially, as these indications encompass about 80 percent of all cancer diagnoses. Other research is being conducted to expand the product line to include TKSense, a test for chronic and acute myelogenous leukemia.
Panacea likely has an edge over existing diagnostic products for a multitude of reasons as it enters the commercialization stage. For starters, each test has extremely high sensitivity and specificity, meaning the test may utilized as a standalone or companion diagnosis tool to rule in or out cancer in the stages of early diagnosis, recurrence, and remission.
Further, the turnaround time for Detect test results is very quick, with results delivered within 48 hours. The company’s ELISA machine is a customized, fully-automated solution that manages all aspects of test protocol with little operator intervention, thus eliminating any chance of human error.
A clear differentiator in the Detect series as compared to marketed products today is not only accuracy and turnaround time, but also the price tag for the one-time blood tests. Panacea is set to launch its product line through public and private regional partners in Canada and Belarus at only $200 per test. Gamma-Dynacare Medical Laboratories, which covers more than 1,000 labs in Canada, will be offering the Detect series in that country. In Belarus, the tests will initially be available at the state-owned N.N. Alexandrov National Cancer Centre in Minsk. This will put an inexpensive and highly effective tool in doctor’s tool chests to take a proactive approach and potentially save time and the 10’s of thousands of dollars that can be spent through conventional diagnostic approaches to prove that a person doesn’t have cancer. In the case of positive results, the physician can move forward with a biopsy and other standards of care and ultimately check again to see if those procedures were effective through another Panacea Detect test.
Until someone can develop a drug that reverses or halts tumor damage at every stage, regardless of origin, 100% of the time, the cancer industry will remain in a constant state of emergency to develop new technologies to treat the disease. New, effective drugs are great, but only one part of the equation. A quicker path to diagnosis is essential also and will result in better outcomes by getting patients the treatment that they need before tumors spread or metastasize. The innovative approaches of Veracyte, Foundation Medicine and Panacea Global are delivering solutions that meet this need, which should result in therapeutic benefits for cancer patients and profits for shareholders as the reach the mainstream global oncology community.
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