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Third Wave to Launch Automated MDx System Next Year, Delays FDA Submission for HPV Test

This story originally appeared in Biocommerce Week, a newsletter that has been discontinued.
 
Third Wave Technologies officials said last week that the firm intends to launch a fully automated molecular diagnostic instrument next year geared toward large national and regional labs.
 
They also said that the firm’s application for clearance of its human papillomavirus molecular diagnostic test would not be filed with the US Food and Drug Administration by the end of the year, as previously planned, but will be delayed one to three months. However, Third Wave CEO Kevin Conroy said the firm expects to receive the CE Mark for its HPV high-risk test in December.
 
Meanwhile, Third Wave’s third-quarter revenues rose 24 percent, but its net loss climbed 25 percent as litigation costs hit the bottom line.
 
“Our [long-term] goal is to achieve HPV market leadership across all customer segments,” Conroy said during the firm’s third-quarter conference call last week. “We will achieve this goal by providing superior, differentiated FDA-approved products on an automated, walk-away instrument.”
 
Third Wave unveiled a prototype of the fully automated HPV instrument at its investor day in New York in September. “We expect to have this instrument available on an OEM basis in 2008 and anticipate making a supplemental FDA submission after our HPV product’s approval,” said Conroy last week.
 
It is “a high-throughput instrument developed with the large national reference and regional labs in mind,” he said. “It is capable of automated throughputs that would meet or exceed Rapid Capture with significantly less hands-on time.”
 
Rapid Capture is the name of the platform on which Digene’s HPV molecular diagnostic test is based. Digene, which was acquired in August by Qiagen for $1.6 billion, currently sells the only molecular diagnostic product cleared for marketing in the US and Europe for HPV, the primary cause of cervical cancer (see BioCommerce Week 8/8/2007).
 
Conroy said hospital labs want instruments to be fully automated, have flexible batch sizes up to 48 tests per run, fast turnaround time, and a small physical footprint — all attributes that the Third Wave system will have.
 
He said the firm had placed “75 percent” of its focus over the past few years on developing the HPV test, which he said provides the market with a non-PCR-based alternative to the Digene test. The test is more specific than competitors and “gives us an asset that we believe we can leverage into the hospital testing market,” he said.
 
The major driver of growth for the HPV test will be the publication of clinical data, said Conroy, adding that the firm expects the data to show better specificity than Qiagen’s HPV test.
 
However, he noted that there will be a one- to three-month delay in Third Wave’s plans to submit the HPV test for FDA clearance by the end of this year. The firm met its goal of enrolling 3,600 patients in the HPV test clinical study and is beginning to evaluate results.
 
Conroy added that Third Wave will provide more information on distribution partnerships in Europe once the firm receives the CE mark for the HPV test.
 
In addition to its goals for the HPV test market, Conroy said Third Wave aims to be “the leader in the hospital lab segment, which is expected to grow at twice the rate of the overall market. We will do this by leveraging a relevant must-have menu that includes HPV, chlamydia/gonorrhea, and hospital-acquired infections on a single, easy-to-use instrument.”
 

“Our [long-term] goal is to achieve HPV market leadership across all customer segments.”

Conroy said he believes the firm can achieve these goals due to its Invader chemistry, and its ability to deliver a broad menu on a single platform.
 
“There is an increasing public awareness of hospital and community infections, [and] growing numbers of government agencies and healthcare systems are mandating HAI testing,” he said.
 
He said the firm would make additions to the product menu by focusing on infectious disease, genetics, and pharmacogenetics.
 
One specific test that has taken a back seat in Third Wave’s development plans is an FDA-cleared test for warfarin sensitivity. Earlier this year, the firm launched ASRs that enable clinical laboratories to build molecular assays for warfarin sensitivity.
 
Though Third Wave officials had previously expressed an intention to submit a warfarin-sensitivity test for clearance by the FDA, Conroy said last week that the return on investment for the warfarin testing market is “not significant enough to invest in getting FDA approval” at this point. “But we’ll see how things develop in the next six months,” he added.
 
Q3 Revenue Gains Offset by Litigation Costs
 
Third Wave’s revenues for the three months ended Sept. 30 increased 24 percent to $8.2 million from $6.6 million year over year. Revenue from clinical molecular diagnostic products rose 25 percent to $6.7 million, while receipts from research products increased 19 percent to $1.4 million.
 
Third Wave’s net loss for the period swelled to $6.4 million, or $.15 per share, from $5.2 million, or $.12 per share, year over year, due in part to $1.8 million in litigation charges during the quarter.
 
Digene and Third Wave have been locked in a legal dispute since the beginning of the year over patents covering HPV testing. A US District Court recently ruled in favor of Third Wave in the claims-construction phase of the litigation (see BioCommerce Week 10/10/2007).
 
Conroy said during the conference call that he expects Qiagen to appeal the Markman ruling.
 
“We do not believe there is a significant amount of risk on appeal,” said Conroy. “We also believe that that process will take a couple of years. In the meantime we are very focused on ensuring that we do a similarly strong job of executing in our preparation for our anti-trust trial against Digene.”
 
Qiagen also said at the time of the Markman ruling that it would press ahead with its patent suit against Third Wave.
 
Third Wave’s R&D expenses rose to $5.8 million in the third quarter from $3.5 million the previous year, while its selling, marketing, general, and administrative costs increased to $7.7 million from $6.24 million.
 
The firm finished the quarter with around $43.6 million in cash, cash equivalents, and short-term investments.
 
Third Wave also reaffirmed its previously announced guidance of 2007 clinical molecular diagnostics revenue of $26 million to $28 million and total revenue of $31 million to $33 million.

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