NEW YORK (GenomeWeb) – While most investors' eyes are on the adoption of NanoString Technologies' ProSigna Breast Cancer Gene Signature Assay, the firm's business with researchers continues to thrive.
Instrument and consumables sales drove the Seattle-based company's second quarter revenues up 51 percent, with 80 percent of the company's new nCounter system placements related to oncology research and diagnostics, the firm reported last week.
Of the firm's $10.9 million in total revenues, $181,000 were generated by Prosigna kit sales, up from $61,000 in the first quarter. In spite of the growth, Leerink Partners analyst Dan Leonard last week lowered his price target on the company's shares to $21 from $23 citing concerns about NanoString's ability to secure reimbursement from payors, especially from Medicare. NanoString has since announced that UnitedHealthcare will reimburse Laboratory Corporation of America for services based on ProSigna.
While interest in ProSigna is high, sales to life science researchers continue to generate the bulk of the firm's business. CEO Brad Gray told BioArray News that the firm has benefitted in particular from the launch of its PanCancer Pathways Panel in April, calling it the "most successful new gene expression panel launch in our history."
It's also a competitive product to other multiplex, cancer-related offerings. Affymetrix, for instance, sells the OncoScan FFPE Assay Kit, which offers copy number detection in about 900 cancer genes. Illumina offers a Cancer SNP panel targeting around 400 cancer genes.
"Compared to other products on the market, the PanCancer panel provides a collection of more than 700 essential genes representing all major cancer pathways, and allows researchers to study functional genomics in a new and simple way," said Gray.
The availability of a catalog cancer research product also allows NanoString customers at "different sites from around the globe to collaborate with a common set of genes and a common theme," Gray said. He noted that customers can opt to customize the panel with up to 30 additional genes of their choice.
Though the company did not break out direct contributions from the panel to its Q2 sales, Gray said on an earnings call last week that PanCancer Pathway panel sales made a "meaningful contribution to consumable growth during the quarter."
While NanoString is keen to build its molecular diagnostics business, which now includes the use of its nCounter Elements general purpose reagents as components of laboratory-developed tests, its PanCancer Pathway panel is marketed for research use only, a point that Gray stressed on the earnings call.
"If we had an impression or facts that suggested that one of our research customers was redeploying it as a clinical asset, we would stop selling the asset to them," Gray said. "It's really designed to be a research tool that comprehensively probes the biology of cancer, helping to identify which pathways are important so that those pathways can then be explored more deeply."
The company has opposite sentiments about nCounter Elements, the general purpose reagents developed for translational research and clinical laboratories it launched earlier this year. Elements is based on NanoString's digital molecular barcoding chemistry and allows users to assemble their own customized assays using standard sets of barcodes provided by NanoString and probes that they can purchase independently from an oligonucleotide manufacturer.
They can also build laboratory-developed tests using Elements. In July, the Center for Personalized Medicine at Roswell Park Cancer Institute announced that the New York State Department of Health had approved its OmniSeq Target assay. OmniSeq analyzes 23 different cancer-associated genes, detecting specific gene mutations, translocations and copy number changes, looking for specific alterations and aberrations that indicate particular forms or targetable molecular characteristics of cancer.
Gray said the test is the first in the US to incorporate its Elements product, but that there are others on the way.
"We are seeing genuine interest in implementing assays with Elements from many of our new sites using our nCounter Dx systems, … which we believe will generate additional interest in the use of Elements to develop LDTs," he said.
Sales of Elements are already impacting NanoString's revenues and are a "key component of NanoString's translational portfolio," helping to drive sales of its dual-use Flex configured instruments, which allow users to run research or clinical assays, depending on the setting.
"As the installed base of Flex systems grows and our translational research customers adopt Elements for late-stage translational work, we expect to see Elements contribute more to revenue," said Gray. "Another factor will be recurring revenue streams based on LDTs offered using nCounter Elements," he said.
NanoString has also introduced an Elements product for detecting cancer gene fusions, positioning the offering as an alternative to fluorescence in situ hybridization assays, and targeting a market of approximately $200 million, he said. The company launched its universal junction probe design at the American Association for Clinical Chemistry annual meeting in Chicago in late July.
"Overall, we remain optimistic about the potential of our nCounter Elements chemistry, Prosigna Breast Cancer Assay, and Flex system to penetrate the clinical laboratory market," Gray said. "We expect all of these factors to create a strong foundation to drive significant Elements revenue in 2015 and beyond."