NEW YORK – Veracyte's planned acquisition of precision oncology firm Decipher Biosciences for $600 million in cash and stock, announced on Wednesday, should help the firm expand its global reach into the cancer diagnostic space using its nCounter platform.
On a conference call with analysts on Tuesday, Veracyte CEO and President Bonnie Anderson said that Decipher will remain a wholly owned subsidiary of Veracyte. As part of the transition, Tina Nova, president and CEO of Decipher, will serve as Veracyte's general manager of urologic cancers.
Decipher's prostate cancer diagnostic tests, Decipher Prostate RP and Decipher Prostate Biopsy, use whole-transcriptome analysis and machine learning tools to span the continuum of prostate cancer care, from early-stage detection to guiding patient-specific therapies. Specifically, the whole transcriptome tests identify coding and non-coding RNA biomarkers in a formalin-fixed paraffin embedded prostate tissue specimen with at least 0.5 millimeters of cancer length extracted from a patient's tumor. Decipher Prostate Biospy is intended for use after biopsy, while Prostate RP is intended to be administered after radical prostatectomy.
"Decipher has shown that if you overtreat a patient who should not have been treated with, for example, radiation therapy or hormones, the patient's survival can be worse than if you had not treated the patient at all," Nova said. "[Our] biopsy tests allow the doctor to decide whether to treat the patient initially or to monitor them over time, or to treat them right away to minimize the chance of recurrence."
Decipher also offers its Decipher Bladder test, which classifies patients into one of five molecular subtypes: basal, claudin-low, luminal-infiltrated, luminal, and neuroendocrine-like. The firm previously found that the bladder subtyping platform is able to predict which patients derive the most clinical benefit from neoadjuvant treatment with PD-1 inhibitor pembrolizumanb (Merck's Keytruda). While Decipher does not have clear plans to commercialize this potential application of the test, it hopes to explore the test's performance in larger retrospective analyses.
While Decipher currently has a draft local coverage determination for the bladder test, Nova said the firm expects to receive a final LCD for the assay in "mid-2021."
In addition to Decipher's prostate and bladder assays, Nova said the firm is currently developing a kidney diagnostic test.
Anderson emphasized that adding Decipher's tests in prostate, bladder, and eventually kidney cancer will expand Veracyte's test menu to address 7 of the 10 top cancers in the US, increasing the firm's "total near-term addressable market to over $2 billion."
Anderson also believes Decipher's tests in urological cancers will "establish a powerful testing menu" for driving nCounter platform sales, with a long-term global addressable market of almost $50 billion.
"We need to build out the [testing] menu, which is the value driver for driving the installed base of the nCounter [platform]," Anderson said. "Once you build that base … it will become more of a [razor/razor blade] approach, rather than a single lab in the US."
Veracyte currently offers three cancer diagnostic tests for users on its whole-transcriptome sequencing platform: the Afirma Genomic Sequencing Classifier, Percepta Genomic Sequencing Classifier, and its Envisia Genomic Classifier. In addition, the firm's Prosigna Breast Cancer Prognostic Gene Signature Assay and its LymphMark lymphoma subtyping test (currently in development) run on the nCounter platform.
Veracyte also plans to launch its Envisia test on the nCounter system by the end of 2021. Following the launch of Veracyte's nasal swab test for early lung cancer detection as a laboratory developed test, the firm expects to launch it on the nCounter system in 2022 for use in global markets.
Veracyte expects to maintain Decipher's CLIA-certified, CAP-accredited lab in San Diego, as Anderson noted the firm may benefit from the space as part of its plans to launch four new products in 2021. The company believes that combining the abilities of Decipher's and Veracyte's labs will allow increased flexibility for clinicians both in the US and across the globe, Anderson said.
Another element that attracted Veracyte to Decipher was its recent market growth in the urological cancer space. Decipher's full-year 2020 revenues soared about 139 percent to almost $40 million, compared to $16.5 million in the prior year. Despite the challenges with the COVID-19 pandemic, Nova said that major drivers of Decipher's growth included the expansion of its salesforce, acquiring multiple LCDs and managed care contracts in 2020, and receiving recommendations from the National Cancer Care Network.
"The Medicare rate for [Decipher Prostate Biopsy] is $3,873 … and the [current revenue mix] mix is 50 percent Medicare and Medicare Advantage, [and] 50 percent commercial," Nova said. "We are working very hard to add managed care contracts, and we have right now about north of 100 million covered lives on our commercial side."
Nova said that Decipher's prostate cancer tests differ from those of an unnamed competitor because they cover the entire localized cancer care continuum and are built to serve different clinical endpoints that clinicians can use for patients at different stages of risk.
"It's difficult with intermediate-[risk] patients [as to] what to do with them, [since] prostate cancer is such a heterogeneous disease," Nova said. "Having genomic information and the ability to provide the risk is something that doctors find extremely useful."
Beyond expanding Veracyte's oncology test menu, the acquisition will give it access to Decipher's Genomics Resource Information Database (GRID), which contains over 300 proprietary clinically validated prognostic and predictive signatures that are analyzed and stored as part of the firm's daily commercial operations. The biorepository holds matched banked samples from over 15,000 patient profiles that Nova noted provides "valuable information for our pharma partners."
While Anderson acknowledged that some of the information that Decipher has gleaned in its work with biopharma partnerships will overlap with Veracyte's own research, she believes the firm will still "advance a new area of what diagnostic results can do."
Nova added that because Veracyte and Decipher both perform transcriptome analysis of every patient sample they receive at their labs, the firms will be able to explore data "at a level that helps us stand out from other competitors."