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NanoString Provides Updates on Biopharma Demand, Single-Cell Genomics, Dx Business

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NanoString Technologies last week reported a 39 percent increase in third quarter revenues while company executives offered an overview of the Seattle-based company's opportunities in the molecular diagnostics and life science research markets.

For the three months ended Sept. 30, the firm's revenues grew to $8.4 million from $6 million in the third quarter of 2012. Sales to life science researchers generated $8.1 million of that $8.4 million, while the remaining $300,000 derived from sales of the company's nCounter Dx Analysis Systems to early adopters of the firm's Prosigna Breast Cancer Test in Europe.

During a conference call recapping NanoString's earnings, CEO Brad Gray attributed the recent growth to the expansion of the company's commercial channels over the past several quarters. In particular, he noted that 18 percent of the company's Q3 revenues were generated by sales to customers in the Asia Pacific region.

In addition to the increase of sales to customers outside the US, Gray said that NanoString has experienced "two important trends" in recent quarters that have lifted its revenues.

The first is strengthened demand from customers at biopharmaceutical companies. During the quarter, he noted, one biopharma customer placed multiple consumable orders worth over $1 million to support "large-scale studies in the development of cancer drugs." Gray did not name the customer.

The second trend is the general adoption of NanoString's platform by customers who are studying and treating cancer. Gray estimated that 70 percent of the firm's instrument placements in Q3 were to clients who are focused on cancer research.

"We expect that cancer research will continue to be an important driver of future growth," he said.

Cancer researchers' adoption of NanoString's nCounter platform could also help the company expand its reach in the clinical market, Gray noted. During the quarter, NanoString launched an early access program for nCounter Elements, general purpose reagents developed for translational research and clinical laboratories. The offering is based on the company'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 (BAN 7/30/2013).

At the time of its launch, Gray called nCounter Elements the "single most important product launch of our life sciences business in the past two years" (BAN 8/13/2013). He reiterated that view last week, calling it a "core part of our strategy for entering clinical markets." More specifically, he said that the availability of nCounter Elements will allow NanoString to place more instruments in US CLIA-compliant laboratories, "a segment of the market that we never approached in the past."

So far, NanoString has enrolled 30 clients from three continents in its nCounter Elements early access program. The majority of the first adopters intend to run laboratory-developed tests based on the company's platform. Others aim to implement externally developed assays in their own labs. Gray noted that several early access nCounter Elements customers plan to offer ALK fusion testing for lung cancer patients based on techniques described in the Journal of Molecular Diagnostics earlier this year.

While NanoString does not expect nCounter Elements to generate significant revenues this year, Gray predicted that the product line "will become a more material contributor during 2014."

Single-cell genomics

In September, NanoString and BD Biosciences announced an agreement that would pair NanoString's single-cell gene expression assay with BD's FACSJazz Cell Sorting System (BAN 9/10/13).

NanoString first launched its single-cell assay, which supports the multiplex analysis of up to 800 genes per cell, in 2012. On the call, Gray described single-cell genomics as an "area of interest to many of our customers," but acknowledged it has been a "relatively small contributor to our overall revenue growth."

With the BD partnership, though, NanoString believes its single-cell offering can become a "more meaningful contributor" to its revenues next year. Gray cited market research from BD Biosciences that estimated a $75 million single-cell genomics market today that could grow into a $500 million market by 2018.

During Fluidigm's recent third quarter earnings call, CEO Gajus Worthington made his own market size estimate, predicting that it would grow to a $200 million market by the end of 2015. A self-declared leader in the single-cell genomics space, Fluidigm posted 43 percent year-over-year revenue growth in Q3, largely attributable to sales of its C1 Single-Cell AutoPrep System and accompanying BioMark HD instruments to customers engaged in single-cell research (BAN 11/5/2013).

NanoString and Fluidigm's mutual interest in the single-cell genomics market has landed them in the court room. Last year, Fluidigm sued NanoString, accusing the latter of false advertising and unfair competition after it allegedly rigged a head-to-head comparison study of its single-cell assay and Fluidigm's competing offering, and used the study's results in advertising and a white paper.

Earlier this month, though, NanoString announced that it had settled all outstanding lawsuits with Fluidigm related to a comparison study of single-cell gene expression capability, and as part of the settlement removed or destroyed all materials related to the study.

"This is important," Gray said, "as we can now return our full attention to managing our growing business and delivering innovative genomic products to our customers."

Diagnostics business

During the quarter, the US Food and Drug Administration cleared NanoString's Prosigna Breast Cancer Test and nCounter Dx Analysis System for clinical use. Prosigna relies on a 50-gene signature to subtype and classify different kinds of breast cancer. The company achieved a CE-IVD Mark in September 2012, and has been marketing the test in Europe and Israel since earlier this year.

In August, NanoString discussed the first placements of its nCounter Dx system with European customers, including an unnamed commercial lab in Europe that aims to serve customers in the Middle East, as well as to Spanish researchers at the Hospital of the University of Gregorio Marañon in Madrid and the Vall d'Hebron Institute of Oncology in Barcelona (BAN 8/13/2013).

On the call, Gray announced more European diagnostics deals, noting that in Q3 the company shipped four systems: two for use in a study in Germany and two for commercial testing in Italy and Turkey. All of these placements are part of a larger company strategy to develop the market for Prosigna outside of the US, Gray said, as well as to generate clinical data that can be used to educate physicians and payors ahead of an anticipated US launch early next year.

In addition to selling its system and diagnostic kits, NanoString will also make Prosigna testing services available during the first quarter of 2014 in order to support the roll out of the test, Gray noted.

He said that the company expects its Prosigna revenues to grow throughout next year, "building momentum as we established reimbursement and gaining inclusion and treatment guidelines."

According to Gray, NanoString is working toward obtaining reimbursement coding and coverage for its flagship test by laying the groundwork for Prosigna's inclusion in the US Centers for Medicare & Medicaid Services' MolDx program. MolDx is an effort to gauge the use of molecular diagnostics and set reimbursement rates based on the value these tests provide to patient care.

Inclusion in that program could provide a positive coverage decision by as early as the third quarter of 2014 for states covered by Palmetto and Meridian, "which include the largest molecular diagnostic testing sites for the largest US commercial labs," Gray said.

NanoString also is trying to get Prosigna included in key breast cancer treatment guidelines, such as those maintained by the National Comprehensive Cancer Network, he added.

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