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Phalanx Rolls Out Expression Arrays in Asia; Seeks US, EU Marketing Partners

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Better late than never, Phalanx Biotech is rolling out its OneArray platform for human and mouse gene expression studies — nearly three years after it first promised to launch the platform at what was then a discount price of $100 per array.
 
Three years wiser, the firm is now targeting partners near its base in Taiwan and is actively seeking marketing partners to carry its business to North America, Europe, and Japan.
 
Despite its late entry to the market — at a time when other array vendors are experiencing flat gene expression sales — the company is counting on a still-nascent expression market in Asia to keep it in the game.
 
According to Luke Chen, vice president of sales and marketing at Phalanx, the firm began offering its mouse and human chips six months ago as a service through its labs in Hsinchu as well as a catalog product. The company is now looking to expand to key global markets via partnerships to sell both the service and the catalog chips, and is also considering adding a rat chip to round out its portfolio.
 
"We had the human and mouse arrays since the end of last year," Chen told BioArray News last week. "We made them available in Asia, mostly in Taiwan and Korea. We had a slow roll out and wanted to get more feedback and see how people were using it," he said.
 
The roll-out caps three years of flirting with a launch date. The firm first openly discussed bringing its arrays online in June 2004, but the release was eventually pushed through 2005 and into 2006 due to manufacturing and quality control issues.
 
Chen said that Phalanx regrets its late entry to the market, but the firm is betting that a competitive price, reliable performance, and flexibility might enable it to win a chunk of the marketplace.
 
"It's definitely unfortunate because we didn’t want the delay," he said. "We believe that we did miss some good opportunities. If we came out in 2004 things might have been different."
 
Chen said that manufacturing and quality control issues forced Phalanx to go "back to our drawing board and make sure that we did it right."
 
Doing it right meant launching a Human OneArray with around 32,000 total features culled from RefSeq, UniGene, the Cancer Genome Anatomy Project, BioCarta, and the Kyoto Encyclopedia of Genes and Genomes. Phalanx also tested out its platform by following the protocol established by the Microarray Quality Control consortium, a US Food and Drug Administration-hosted project that published its first results in a special issue of Nature Biotechnology last September (see BAN 9/12/2006).
 
"We went and purchased all samples used in the MAQC studies and then we basically followed the same set-up and then we asked a participant, Expression Analysis, to analyze our data," Chen said.
 
"All in all the results came out pretty good. As far as we are concerned, we are right up there with Affy, Agilent, and Illumina."
 
Chen said that Phalanx plans to publish the data from its MAQC-informed experiments, but that the company would like to do a few more experiments before doing so.
 
For its Mouse OneArray, Phalanx prepared a chip with nearly 32,000 features based on the Mouse Exonic Evidence Based Oligonucleotide database created by researchers at the University of California, San Francisco.
 
To compete in a gene expression market where nearly all players, from Illumina to Applied Biosystems, offer human, mouse, and rat, Phalanx plans to add a OneArray with rat content. However, Chen said that the firm is looking for a partner to co-develop the rat chip because the "rat genome is not as complete as human or mouse."
 
Currently, Phalanx serves most of its customers through its lab service, where Chen said all experiments are run in triplicate in order to ensure the statistical power of the results.
 
When Phalanx first announced its plans to enter the market in 2004, it created interest by promising a $100 chip when gene expression chips from other vendors were priced in the range of $500. Now, as some of those players have lowered their prices to the $150 neighborhood, Chen said that price is no longer the sole competitive aspect of the OneArray platform.
 
"Everybody is dropping prices today, but value is still value regardless," he said. He said that the OneArray is currently priced "significantly lower" than $100, but he declined to provide details. 
 
Chen also said that as the company grows comfortable with its service, it's ready to branch out into larger markets via distributors.
 
"We are basically looking for partners in the main areas like US, EU, and also Japan," Chen said. "For a small company like ours, it’s hard to expand to include a huge sales force. We recognize our size and our funding and decided to go with a partner instead," he added.
 
Room in Asia?
 
But if Phalanx is looking to turn heads in markets outside of Asia, it could be an uphill battle. Even the larger players in the sector describe the gene expression market as mature.
 
“In terms of gene expression, the total market is not growing very significantly,” said Illumina CEO and President Jay Flatley during the firm’s fourth-quarter earnings call in January. Erik Bjeldanes, marketing manager of gene expression at Agilent Technologies, said at the same time that gene-expression analysis is “not any longer the sexy, new application space, but more of a product line that is directed towards stability, cost per sample, throughput, and the more mature product line attributes.” (see BAN 2/13/2007).
 
However, some observers have indicated that there is still room for growth in the gene expression market in Asia. The continent is home to a number of smaller array shops like India's Ocimum Biosystems, as well as a number of new Japanese shops like Bio Matrix Research, Filgen, NGK Insulators, and Yamatake — all of whom licensed key array IP from Oxford Gene Technology last year in order to get their businesses off the ground.
 

"If we came out in 2004 things might have been different."

Michael Bennett, vice president of licensing in Asia at OGT, told BioArray News last August that the microarray market is "relatively small" in Japan compared to the country's GDP and population. He said that confusion about IP rights in the market had stunted its growth.
 
“I think they’ve been constrained, thinking about all the issues to do with IP and what they can actually do with microarrays themselves. So, I think [the deals will] help to open up that marketplace and get more people using microarray technology there,” Bennett said at the time (see BAN 8/15/2006).
 
According to Chen, Phalanx is best positioned in the Asian market, due to its location, the relatively low cost of doing business in Taiwan, and the fact that it has an established sales force in Asia.
 
"In Asia we do have a sales force," Chen said. "It is our main market at this point and we are growing in reputation," he added. He also said that Phalanx has been attracting mostly academic customers, but the firm is starting to get more interest from the biotech community.
 
Skeptical Users
 
When Phalanx first floated the impending availability of its discount chips three years ago, some microarray users reacted favorably to the idea of a Taiwanese firm with roots in the country’s semiconductor industry that would give more expensive California array companies a run for their money.
 
However, due to a variety of factors, including the emergence of Illumina as a lower-cost player in the gene expression market and the maturing of the market in general, some users are now skeptical about Phalanx’s ability to gain market share.
 
“My general sense is that there is a relative comfort level with selected platforms like Affy, Illumina, and Agilent,” Mark Geraci, director of the University of Colorodo’s gene expression facility in Denver, told BioArray News in an e-mail this week. 
 
“Also, the MAQC work supports those platforms as high quality,” he wrote. “I don’t see much of a market, even if the price-point is lower, as the competition has driven the prices down to a very affordable level for the quality of the products.”
 
Andy Brooks, director of the Bionomics Research and Technology Center at Rutgers University, told BioArray News in an e-mail this week that he believes there is room for a new player in the market, but that he doesn’t think that player is Phalanx.
 
“In my opinion there is room for a new player as long as they provide something that advances the technology significantly,” Brooks wrote. “In my opinion Phalanx doesn’t offer anything new, [it is] just another player so I don’t see them integrating well,” he wrote. 
 
“However, if there was a player with a technology that expanded the capabilities of gene expression, then yes, I think there would be room,” he added.

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