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Sticking to Schedule, Nanogen To Add Three Assays to NanoChip 400 Menu Before Year End

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Nanogen will submit two more array-based assays to the US Food and Drug Administration this year and will begin selling a Middle Eastern population-specific cystic fibrosis panel for use on its NanoChip 400 array system later this quarter, according to a company official.
 
David Ludvigson, Nanogen's president and chief operating officer, said during the firm's first-quarter earnings call last week that Nanogen will submit two more tests to the FDA before the year is out, including assays for warfarin resistance, and factor V and factor II clotting mutation detection.
 
Moreover, Ludvigson said that another assay based on the CF carrier detection assay it submitted to the FDA in the first quarter should debut in certain markets by mid-summer.
 
"We will launch an adaptation of our CF test in Q2 for use on the NC400 that will cover 14 adaptations unique to certain Middle Eastern populations," Ludvigson said during the call. "We have already started marketing this product in Israel."
 
Nanogen's drive into array-based testing signals a shift in strategy. While the company has invested heavily in developing the NC400 platform, its revenues to date have mostly been driven by RT-PCR legacy products from several acquisitions. Now the firm is looking to see its R&D expenditures pay off as it looks to internally developed products to generate sales.
 
"We expect to generate our growth in 2007 by internally generated growth instead of acquisitions," Ludvigson said during the call. "We believe that internally generated growth is the key to growth margins and improved EBITDA performance."
 
One of Nanogen's first steps in that direction was its submission last month of a cystic fibrosis carrier detection test for use on its NC400. The submission, which has yet to receive clearance from the FDA, capped years of R&D to transform its array platform from an academic standby to a clinical tool.
 
CEO Howard Birndorf said during the call that the submission was an "important milestone for our array technology that is growing out of research labs into the large higher-volume clinical market." He reiterated Ludvigson's pledge to "submit two additional tests for 510 (k) approval later in the year" and said that clearance could "provide a gold stamp of approval for our customers and will also broaden the addressable markets for our array products beyond high-complexity CLIA labs."
 
The company has also said in the past that it believes FDA approval will shorten the lead time for market adoption of the NC400. In November, Ludvigson said during the company’s third-quarter earnings call that FDA approval could "both expand our potential market and provide a stamp of acceptance for any new customers that are currently sitting on the fence about entering genetic testing themselves" (see BAN 11/7/2006).
 
New Tests
 
Nanogen considers the CF test to be the flagship assay for the NC400 because it targets a substantial market: CF is the most common genetic disease in the US.
 
The test Nanogen submitted to the FDA contains a panel of 23 mutations associated with cystic fibrosis as outlined by the American College of Obstetricians and Gynecologists in a 2004 recommendation.
 
Ludvigson said that the company’s Middle Eastern CF assay will include 14 mutations associated with carriers in that particular population. Nanogen spokeswoman Suzanne Clancy told BioArray News in an e-mail last week that Nanogen has decided to produce the new panel because "CF is very common in Israel in particular" and because Nanogen has a "distributor in Israel who is very well connected in the genetic testing and molecular diagnostics arena."
 
At the same time CF has been mostly ignored by other array diagnostics companies. Most of the firms that are using the Affymetrix platform for tests are focusing on cancer diagnostics and prognostics. Only Osmetech Molecular Diagnostics, run by former Nanogen president and COO Bruce Huebner, has an FDA-cleared array-based CF assay currently on the market (see BAN 1/24/2006).
 
While both Nanogen and Osmetech see promise in the CF testing market, Huebner told BioArray News this week in an e-mail that it will take some time to see widescale adoption for what is still regarded as a novel technology.
 

We expect to generate our growth in 2007 internally … instead of [by] acquisitions."

“The CF testing market is to date still a relatively small market,” Huebrner wrote. “The OB/GYN physician population is still in the process of adopting genetic testing into their patient care routine,” he wrote.  “We believe we will see continued growth in this market as more and more physicians better understand the use and application for a CF test in their practice,” he added. 
 
In addition to Osmetech, another rival will also include Tm Bioscience, whose Tag-It CF carrier detection test was cleared by the FDA in May 2005.
 
Other assays in Nanogen's pipeline include one for Factor V Leiden, the most common mutation associated with predisposition to excessive blood clotting, and Factor II prothrombin, an enzyme that is associated with hemophilia.
 
The company is also planning a test for resistance to the drug warfarin, a common anti-coagulant for the prevention of thromboembolism, or the blockage of a blood vessel by a clot. In November, Clancy said that Nanogen's strategy is to “look where molecular testing offers an advantage over current testing” (see BAN 11/7/2006).
 
Q1 Sales Up on Legacy Products
 
Even while Nanogen shifts its focus to array-based diagnostics, it's clear that the firm's purchases of Epoch Biosciences, SynX, and Amplimedical's diagnostics unit over the past three years are still paying off (see BAN 4/25/2006).
 
The company said last week that first-quarter revenues increased 120 percent as R&D spending ticked up 4 percent and its net loss decreased by just over one percent.
 
Total receipts for the three months ended March 31, 2007, increased to $9.7 million from $4.4 million year over year.
 
Nanogen said product-related revenue nearly tripled to $6.1 million from $2.1 million, and income from licensing and royalties dipped 33 percent to $1.2 million from $1.8 million. Revenue from contracts and grants rose nearly six-fold to $2.3 million from $416,000. Revenue was mostly driven by sales of Nanogen’s large portfolio of ASRs.
 
Meantime, R&D spending rose to $6.5 million from $6.3 million year over year and net loss declined to $11.8 million from $12 million in the year-ago period.
 
Nanogen had around $8.81 million in cash and equivalents and $12.4 million in short-term investments as of March 31.
 
The company said in a statement that it expects revenue to grow more than 50 percent for the full year 2007 compared with 2006, when it posted $26.9 million in revenue.

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