This article, originally published Jan. 7, has been updated with additional information.
Following the acquisition of non-invasive prenatal testing company Verinata Health, Illumina plans to submit the firm's test to the Food and Drug Administration as an in vitro diagnostic product, according to an Illumina official.
Earlier this week, Illumina said that it plans to acquire Redwood City, Calif.-based Verinata for $350 million as well as up to $100 million in milestone payments by 2015 (GWDN 1/7/2013).
Verinata offers the Verifi non-invasive prenatal test, which uses Illumina's next-generation sequencing platform to test for fetal chromosomal aneuploidies and is currently available for high-risk pregnancies.
Verinata competes with several other firms offering similar prenatal tests that also use Illumina's sequencing technology, including Sequenom and Ariosa Diagnostics. Besides competing in the marketplace, these companies have battled each other over intellectual property related to their tests.
The acquisition bolsters Illumina's reproductive health portfolio, which also includes BlueGnome, an array-based cytogenetics testing firm that it acquired in September (CSN 9/19/12).
Non-invasive prenatal fetal testing has "a lot of potential and, we think, room for multiple players, so we plan to work collaboratively to develop this market," Greg Heath, Illumina's vice president and general manager of the diagnostics business unit, told Clinical Sequencing News.
Heath said that Illumina hopes to close the deal as soon as possible, noting that it has to pass regulatory review, which could take a couple of months.
He acknowledged that Verinata's market share in non-invasive prenatal fetal testing is currently small – Sequenom is the present market leader – but he said that overall market penetrance is still low. "Our view on this is that there is room for multiple participants in this market, and there will be dramatic growth over the next five years in this space."
According to Illumina, there are approximately 500,000 high-risk pregnancies in the US every year and about 3.5 million average- and low-risk pregnancies. Within the next five years, the company expects the domestic market to grow to 1.5 million to 2 million tests per year and expects to service "a significant portion of that market" with its partners. For 2013, Illumina estimated the addressable US market for high-risk pregnancies to be more than $600 million.
Sequenom said earlier this week that it received more than 60,000 samples for MaterniT21 testing in 2012.
Verinata will initially continue to offer the Verifi test through its CLIA-certified and CAP-accredited laboratory. As part of an agreement also announced this week, PerkinElmer will serve as Verinata's exclusive commercial partner for marketing and selling the test in the US, adding it to PerkinElmer's existing biochemical prenatal screening tests.
Ultimately, Illumina plans to submit Verinata's test to the FDA as an in vitro diagnostic, and Verinata will collect some of the clinical data needed for that in its laboratory.
"We think there is huge market potential outside the US," Heath said, noting that one way to penetrate these external markets is to create a standard. "Our intent would be to ultimately launch this as an IVD, so that it can be used more broadly," he added.
For high-risk pregnancies, major target populations for the test would be in the US and in Western Europe, he said, but "ultimately, we think that this test will apply to the average-risk population, and then there will be a very large market."
China, for example, has about 16 million pregnancies per year, Heath noted, including a "substantial" number of high-risk pregnancies.
The company has not set a timeline for submitting Verinata's test to the FDA yet. "A lot of that will depend on the discussions that we have with the FDA and what the regulatory path forward will be," Heath said. Illumina plans to start those "as soon as we can after we get through the regulatory review" of the acquisition.
Compared to Sequenom's test, Heath said, Verinata's is more comprehensive. The Verifi test currently covers Down syndrome or trisomy 21, Edwards syndrome or trisomy 18, and Patau syndrome or trisomy 13, and offers the option to include sex chromosome aneuploidies, such as Turner syndrome, triple X, Klinefelter syndrome, and Jacobs syndrome.
Sequenom's MaterniT21 Plus, on the other hand, covers trisomies 21, 18, and 13 and also detects the relative amount of Y chromosomal material. The company said this week that it plans to add fetal sex aneuploidies to its test by the end of the first quarter.
The company has also said that it plans to submit its test for premarket approval with the FDA.
Ron Lindsay, Sequenom's executive vice president of strategic planning, told CSN that his firm, which was first to market with its test, is currently the market leader "by a long way" and feels comfortable in that position. "We don't necessarily think this changes the game in the near term at all," he said. "At the end of the day, doctors choose the technology that makes the best clinical decision for them, and fortunately for us, that's been us throughout the year."
The same day that Illumina announced its plan to acquire Verinata, Sequenom reported that it expects its total full-year 2012 revenues to grow 59 percent year-over-year to $89 million, with diagnostic services revenues expected to grow more than five-fold to about $46 million.
Sequenom's preliminary full-year 2012 results indicate that more than 60,000 MaterniT21 Plus non-invasive fetal aneuploidy tests were accessioned in 2012. The annualized run rate for the tests exceeded 120,000 at the end of the year — up from a 90,000 annualized test volume run rate that Sequenom said the test had reached during its third-quarter earnings conference call in November.
Lindsay said that Sequenom's ongoing intellectual property disputes will likely be unaffected by Illumina's acquisition of Verinata.
Last year, Verinata, which uses technology developed by Stephen Quake's group at Stanford University, sued Sequenom over alleged infringement of two patents it licenses from Stanford (CSN 2/29/2012). In the suit, Verinata also sought a declaration that it does not infringe one of Sequenom's core patents.
Verinata also sued Ariosa and LabCorp last October, claiming that Ariosa's Harmony test infringes another one of its patents (GWDN 10/25/2012).
According to Illumina, Verinata has "the most comprehensive intellectual property portfolio in the noninvasive prenatal testing industry."
Heath, meantime, said that Illumina plans to honor all supply agreements it has in place with competitors providing similar tests to Verinata, including Sequenom. "It's our intention to grow the market," he said.
According to Lindsay, Sequenom's supply agreement with Illumina runs until 2016, so the firm is not concerned about its ability to obtain reagents in the short term.
Speaking later in the week at the JP Morgan Healthcare Conference in San Francisco, Lindsay said that in a worst-case scenario in which Illumina stops supplying Sequenom, "we'd have an alternative method in the same cost range, possibly cheaper."
"When we decided to do sequencing, we didn't stop looking at other approaches," he added.
Bill Welch, Sequenom's president, acknowledged that the acquisition "does add complexity," especially on Illumina's side because the company enables many other firms, including competitors, with its sequencing technology.
Sequenom CEO Harry Hixson was more outspoken in his comments, noting in a presentation at the JP Morgan conference that Sequenom is "puzzled" by Illumina's decision to acquire Verinata, especially given that Sequenom is "one of Illumina's best customers."
He added that Sequenom has competed "very effectively" against Verinata thus far. "They've been a distant third in the marketplace." The firms have had a number of "head-to-head competitions and we've won every one of them," he said.
Hixson also stressed the company's belief in the strength of its intellectual property. Among the patents related to shotgun sequencing, Dennis Lo of the Chinese University of Hong Kong, from whom Sequenom has licensed the IP surrounding its Maternit21 Plus test, "filed his patent 14 months ahead of Stephen Quake at Stanford, and those are the patents that Verinata depends on."
"We'll continue to pursue our IP and continue to push this product into the marketplace," he said.
Illumina's acquisition of Verinata adds to its existing assay portfolio in reproductive health.
Heath said the company recently submitted a cystic fibrosis carrier screening test that runs on the MiSeq platform to the FDA for 510(k) clearance (CSN 11/1/2012), which it anticipates to obtain in the second half of this year. That test, he said, is the first next-gen sequencing diagnostic product Illumina plans to launch.
Last year, Illumina acquired UK-based BlueGnome, which offers array-based pre-implantation screening for chromosomal aneuploidies. The company also has an in-house initiative to develop diagnostic tests for development delay, mental retardation, and autism using its own arrays.
"We've got everything from carrier screening to in vitro fertilization to pregnancy to early childhood development covered, so it's a nice portfolio," Heath said. Once the acquisition is cleared, he added, Illumina plans to "look at all possible synergies across Illumina, BlueGnome, and Verinata."
Market analysts agreed that the Verinata acquisition is in line with Illumina's clinical diagnostics strategy but noted that the purchase price is high, given Verinata's market share.
According to William Blair analysts, who called the acquisition price "a bit hefty," Illumina might find it challenging to gain traction with Verinata's test initially, given Sequenom's market position and its sales and reimbursement infrastructure.
Piper Jaffray analysts commented that the purchase price is "almost the enterprise value" of market leader Sequenom, stating that Illumina "paid too much" and that the investment firm is "hoping for additional, product-related releases shortly."
While they "understand the rationale for the deal," they said that "competing with one's own customers is not optimal," though this will "likely happen more frequently going forward" as Illumina is the largest provider of next-gen sequencing technology at the moment.
Citi Research analysts, meantime, called the purchase price "aggressive" and speculated that Verinata's competitors might move to sequencing platforms from Life Technologies in the long run.
- Monica Heger provided reporting from the JP Morgan Healthcare conference in San Francisco.