NEW YORK (GenomeWeb) – NanoString Technologies continues to benefit from sales to clinical laboratories. The Seattle-based company saw its revenues grow 54 percent in the first quarter, driven by a 110 percent increase in instrument placements, 40 percent of which were of its nCounter Dx system for dual research and clinical diagnostic use.
The option to transition from research to clinical testing on the nCounter Dx has proven to be attractive to some of NanoString's customers, many of whom have embraced its nCounter Elements offering, according to CEO Brad Gray.
Launched earlier this year, nCounter Elements are general purpose reagents developed for translational research and clinical laboratories. The firm's offering 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.
Gray said on a quarterly earnings call last week that the response to Elements among clinical labs and translational researchers has been "enthusiastic, with substantial customer interest in developing assays to detect gene expression copy number variations and gene fusions."
According to Gray, long-standing nCounter customers who had previously published nCounter-based gene expression signatures have found an "excellent correlation" between assays based on the firm's standard chemistry and its newer Elements chemistry.
And though Elements plays in a market where rival technologies including microarrays, quantitative PCR, and next-generation sequencing abound, Gray portrayed technology trends as relatively stable.
"I would say the competitive dynamics have not changed substantially," Gray said. He said that NanoString usually competes with qPCR systems in the multiplex gene expression market, where product offerings have "not changed materially to date." Gray added that while sequencing is on the firm's radar, it has yet to see it impact its sales to translational researchers and clinical labs.
"Obviously, RNA sequencing represents an alternative to multiplex gene expression that we're watching closely," said Gray. "We have not seen a substantial improvement of RNA sequencing in our marketplace yet so that's something we'll keep our eye on."
Gray forecast in March that Elements sales would help drive instrument placements. He said at the time that cancer centers would be attracted to nCounter Dx because of its dual-use configuration, which would allow them to run Prosigna in diagnostics mode and develop new assays using Elements in life science research mode. As such, he predicted, the clinical laboratory market would "continue to emerge as a major catalyst" for growth at NanoString in 2014.
During last week's call, Gray noted that one clinical lab has used Elements to develop an assay to detect copy number variations in cancer, and has submitted that test to the New York State Department of Health for clearance. The company has also initiated an R&D program to aid customers who are developing assays for gene fusion detection.
Gray did not elaborate, and questions sent to NanoString about the adoption of Elements were not returned ahead of deadline.
According to Gray, NanoString's instrument sales represent the "highest quality growth" it can deliver, as expanding its installed base is a "leading indicator of higher consumables and Prosigna kit revenue in the future."
NanoString initiated sales of its US Food and Drug Administration-cleared Prosigna Breast Cancer Assay in Q1, and reported Prosigna kit revenue of about $61,000, a number the firm expects will improve in coming quarters as "more clinical lab providers come online, our sales team begins to educate physicians, and we begin to gain reimbursement."
According to Gray, there are now 19 labs worldwide that have ordered an nCounter Dx with the intention to begin offering Prosigna. So far, six of this initial 19 have launched the test, four of which are abroad. Within the US, Laboratory Corporation of America launched Prosigna in January and Arup Laboratories followed in March. Seven other US labs are now preparing to join them, including Quest Diagnostics and Genoptix Medical Lab.
To support the rollout of the test, NanoString has built a 20-person sales and marketing team that became active during the first week of April and is expected to impact sales in coming quarters.
NanoString remains on track to launch a benchtop version of the nCounter system later this year, and CFO Jim Johnson said during the call that R&D expenses rose 55 percent over the first quarter of 2013 largely due to related engineering costs.
The company has provided limited detail on the new instrument, which executives referred to as Gen3 on the call. The system would be the third introduced by NanoString since its establishment in 2003, joining the nCounter Analysis System and nCounter Dx, which became available last November.
Gray discussed Gen3 in January at the JP Morgan Healthcare conference in San Francisco, noting that it would consolidate the separate sample prep and digital analyzer instruments that make up the current version of the nCounter into one box and would cost between $75,000 and $125,000.
In March, Gray said that the firm was keeping details about the new instrument "close to the vest," but that the "technical improvements that are required to introduce the benchtop system are largely behind us," and the company is now dealing with engineering issues prior to the system's launch.