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NanoString Details 2018 Diversification Plans

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NEW YORK (GenomeWeb) – After a strong financial rebound in the fourth quarter of last year, following a disappointing Q3, NanoString this week laid out plans for how it hopes to broaden its business in 2018 without dropping the ball on sales of its core products.

"Over the last year, we’ve been focused on transforming from a … single platform company to a fully scaled company with multiple technology platforms," NanoString CEO Brad Gray said during a conference call this week discussing the company's 2017 earnings.

This type of conversion is challenging, he added, requiring attention to advancing the new while maintaining commercial opportunities for the firm's legacy products. In 2017, NanoString experienced some growing pains in this — seeing lower revenue during the third quarter, which Gray attributed to challenges in core instrument sales, as the company waited for "a number of personnel, organizational, and process changes to have an impact."

Based on its financial reports for the following quarter and the whole of 2017, though, it looks like NanoString was successful in stabilizing after that setback, and is now cementing plans for the rest of this year, including launching new research consumables for its nCounter platform, entering new clinical areas, and continuing to advance its newer technologies for sequencing and digital spatial profiling.

According to Gray, there will be two primary aims for NanoString in 2018 in terms of maintaining or increasing sales of its core nCounter technology. The first is to enhance its relationships with the oncology research community, where it has seen most adoption so far.

"Oncology has become a primary motivation for nCounter system purchases, accounting for approximately 85 percent of new instrument placements in 2017," Gray saidl.

Over the next year, the firm plans to continue to push its cancer panels, he added, and more importantly, to launch a new line of consumables called the 360 series.

NanoString released the first of these last fall — the IO 360 panel, which offers a holistic analysis of the interplay between the tumor, microenvironment, and immune response in cancer.

Moving forward, Gray said, NanoString will add to that 360 product line another two panels — a breast cancer assay anchored by the PAM50 gene expression signature that is the basis for the company's Prosigna clinical test, and a lymphoma panel built around a cell-of-origin signature initially developed by researchers from the Leukemia Lymphoma Molecular Profiling Project, which NanoString has been advancing in a companion diagnostics partnership with Celgene.

According to Gray, the new breast cancer 360 panel will be launched formally at the annual meeting of the American Association for Cancer Research in April, and the lymphoma panel will follow later in the year.

The second arm of NanoString's strategy for 2018 is a renewed push to expand beyond oncology, something the company believes will extend the market for its instruments further. Gray said that the two main clinical areas it hopes to develop products for will be immunology and neurology.

"In 2018, we’ll be introducing new panels that are more focused on disease mechanism, such as our Autoimmune Discovery Panel, covering approximately 10 diseases," Gray said.

For neurology, NanoString recently launched another panel, which offers a readout on the abundance of important cell types for research on Alzheimer’s disease, Parkinson’s, ALS, frontotemporal dementia, Huntington’s disease, and other neurological disorders.

More recently, the company launched a neuro-inflammation panel, which assesses the expression of 770 genes that play a role in immunity and inflammation, neurobiology and neuropathology, and metabolism and stress.

Aside from building content for the nCounter platform, NanoString is also hoping that 2018 will see milestones in its advancement of newer technology platforms, namely the firm's Hyb & Seq sequencing technology and its Digital Spatial Profiling technology, which it plans to launch under an early-access program by the end of the year.

According to Gray, NanoString has been engaging with potential DSP customers through a technology access program in which users pay the company to run their samples on prototype instruments.

"The oversubscribed program has included over 30 projects to date and resulted in a steady stream of presentations at major scientific meetings," Gray said. "It has also helped us cultivate demand for DSP instruments that we believe will support our launch," he added.

So far, studies using DSP have been performed with NanoString's own nCounter platform, but the company said earlier this year that it is opening up DSP analysis to next-gen sequencers as well, having tested it using both the Illumina MiSeq and its own Hyb & Seq chemistry with comparable results on the two platforms.

In response to questions from analysts, Gray added that there are signs that the value of DSP far exceeds that of the non-spatial information offered by NanoString's current nCounter platform.

There is reason to expect this could translate to revenue for the company, he said.  "Our technology access program customers are paying us $5,000 per sample to run their samples on our DSP prototypes, in contrast with about $250 a sample, which is what we sell our most popular panels for. So there is an increase of 20 times the value … between those two different modes of interacting with customers … [and] that gives us a lot of hope that the price point and the consumable pull-through for the DSP instrument will be substantially higher than we're experiencing on nCounter today," he added.

That said, Gray stressed that the company is not sure about what this will look like and isn't providing guidance based on it. "Our objective as we launch the instrument will not be to skim the market and maximize the price … [but more] to drive wide adoption of the spatial genomics concept and put as many of these systems in front of sequencers and nCounters as we possibly can, so that we can really own this spatial genomic revolution that we think is to come," he said.

The company's own sequencing technology, Hyb & Seq, is following closely behind — slated for commercial launch in 2020, Gray said. In support of that, NanoString is hoping to work this year on studies that demonstrate the ease of use and robustness of the platform ahead of a beta release in 2019.

At the Advances in Genome Biology and Technology meeting last month, several early-access users also presented DSP as well as Hyb & Seq data.

Asked if NanoString might look for a next-gen sequencing company to co-market the DSP instrument with, Gray said that it is "not out of the question."

"That being said, I don't think we need one," he added.

Clinical Diagnostics

A final area where 2018 could see changes for NanoString is in its clinical testing business. Gray highlighted the strong growth that the firm saw for  Prosigna during the last year, its sole clinical test.

"Prosigna enters 2018 in the strongest competitive position we’ve ever enjoyed and we’re optimistic about continued growth," he said, citing the fact that testing grew over 60 percent from 2016 to 2017.

According to Gray, NanoString continue to see two thirds or more of its Prosigna revenue coming from Europe. "We continue to face a strong incumbent competitor in the United States, and so market share gains will be slow and laborious, [so] I think we look at Europe as the primary source of growth in 2018," he said.

One element that is currently up in the air, which Gray did not discuss, is the final outcome of a reassessment by the UK's National Institute for Health and Care Excellence (NICE) of its recommendations regarding the use of molecular tests to guide chemotherapy decisions for breast cancer patients.

The organization is currently evaluating stakeholder comments to its draft revision of its diagnostics guidance 10, which exclusively recommended Genomic Health's Oncotype DX as an option for guiding adjuvant chemo in lymph node-negative women at intermediate clinical risk after the company negotiated a confidential price discount.

Since then, Genomic Health has held a monopoly in regard to NHS patients, which it could now lose based on the final outcome of NICE's guidance revision. The draft currently recommends against all evaluated tests, including Oncotype DX and NanoString's Prosigna, but that could be updated if companies can present a special price for their testing that would shift the health economic results into an acceptable range, as Genomic Health did in 2013.

Outside of breast cancer, Gray said, NanoString is also planning to file a PMA for the cell-of-origin lymphoma signature "in the next 18 months," pending results from ongoing studies.

He didn't mention if that would be as a specific companion diagnostic, as the company has been investigating with Celgene, or as a general-use test.

NanoString has had some stumbles in the CDx arena recently, with the decision by Merck last year to no longer support commercialization of an nCounter-based companion test to predict response to Keytruda (pembrolizumab).

"We continue to be in discussions with a large number of biopharmaceutical companies about potential CDx projects," Gray said.

"The best mechanism for driving those discussions forward is to do what we call pilot studies that provide our diagnostic assays to these companies for retrospective analysis of the samples they’ve collected in Phase I or Phase II trials," he said, adding that in 2017, the company  increased the number of cumulative pilot studies by 65 percent.

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