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Genomic Health Partners with OncoMed to Grow Companion Dx, NGS Reach

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Originally published May 8.

Genomic Health has begun a collaboration with OncoMed Pharmaceuticals that should not only expand its reach into the cancer companion diagnostics market, but will also help bolster its next-generation sequencing knowhow.

"[W]e're working with a partner where we see an opportunity for a companion diagnostic or a diagnostic product at the end of it," Genomic Health CEO Kim Popovits said last week during a call to discuss the company's first-quarter revenues. "This particular collaboration is of specific interest because we're very interested in the pathways and the opportunities to accelerate drug development by improving patient selection for the trial."

Under the terms of the deal, OncoMed will provide Genomic Health with samples from patients with different cancers, such as breast, prostate, colon, and lung tumors. Genomic Health will analyze these samples using its next-gen sequencing platform in order to discover biomarkers for predicting which patients will respond to cancer antibodies under development at OncoMed. Some of the samples will come from OncoMed's bank of xenograft models of freshly resected human cancers.

According to Genomic Health Chief Medical Officer Steve Shak, the company will identify predictive biomarkers for a number of OncoMed drugs that target pathways associated with cancer stem cells. OncoMed is working on anti-cancer stem cell therapeutics targeting the Notch, Wnt, and RSPO-LGR pathways. It is developing some of these on its own and has partnered with GlaxoSmithKline for two treatments targeting the Notch pathway and with Bayer for three Wnt-targeting drugs.

According to OncoMed, its joint effort with Genomic Health will further enhance its efforts to identify best-responder patient subsets for its drugs. "Our priority is not only to develop therapeutic antibodies but to target their clinical use in the subsets of patients most likely to benefit through focused clinical plans, which include patient selection strategies at early stages of testing," said OncoMed CEO Paul Hastings said in a statement.

The collaboration also allows Genomic Health an opportunity to show off the next-gen sequencing capabilities it has been working on for the past few years.

"In terms of our own R&D efforts, this is a case where we would be able to leverage our investment that we made in NGS over the last few years, making it possible now to gain insights with regard to critical resources that will allow us to do cost saving and pursue our own other programs," Shak said during the earnings call last week.

Shak told analysts last week that he doesn't expect the partnership to conflict with the firm's internal R&D efforts to advance diagnostics based on NGS data. "We will be very selective about such [external] alliances," he added.

Genomic Health and OncoMed did not disclose the financial terms of the collaboration.

Better-than-Expected Revenues

Genomic Health's announcement about the OncoMed collaboration coincided with its first-quarter financials report. For the three months ended March 31, Genomic Health's total revenues increased 17 percent to $58.5 million from $49.8 million in the year-ago period, beating consensus analyst estimates of $56.3 million.

Product revenues also rose 17 percent to approximately $57.9 million from $49.5 million last year, bolstered by strong adoption of the company's flagship Oncotype DX breast cancer recurrence test and the Oncotype DX colon cancer recurrence test score, for which the company is reporting immunohistochemistry-based mismatch repair status. Oncotype DX test results delivered in the first quarter increased 15 percent to 18,630 from 16,230 in the year-ago period.

Genomic Health received $1.2 million in Medicare payments for its colon cancer test in the quarter before coverage was established with the Centers for Medicare & Medicaid Services. CFO Dean Schorno said that the company doesn't expect this one-time Medicare reimbursement to recur in future quarters. Without this payment, product revenue for the quarter would have increased 15 percent year over year.

Although the company didn't break out the revenues derived from international sales of its tests, Genomic Health estimates that ex-US test sales grew by 25 percent in the first quarter.

There are currently 60 million lives covered for the Oncotype DX breast cancer test in markets outside of the US and Schorno expects international sales to grow at a greater than 25 percent tick throughout the year as the company inks more reimbursement deals.

"We would have reported a net loss of approximately $1 million without the better-than-expected revenue performance," Schorno reflected. Genomic Health posted a profit of $777,000 in the first quarter, compared to a net loss of $286,000 a year ago.

Genomic Health also grew its US sales force by 20 percent during the quarter. These additional reps will begin to have a positive impact on sales later this year, company officials said.

The company's R&D spending increased 18 percent year over year to $11.9 million from $10.1 million, while SG&A costs grew 17 percent to $36.3 million from $30.9 million. Genomic Health ended the quarter with $37 million in cash and cash equivalents.

Genomic Health is in the process of setting up a genetic testing services subsidiary called InVitae, which it initially disclosed in February (PGx Reporter 2/8/2012). The business aims to use genomic sequence data to help personalize care for patients with common and rare genetic conditions. The first diagnostic products out of InVitae are slated for launch in 2013

Genomic Health had an immaterial net loss related to InVitae in the first quarter and officials projected the full-year net loss for the business to be around $8 million.

During the quarter the company hired Rick Tompane as president of the subsidiary. Tompane was previously president and CEO of Gemfire and has also served as an independent consultant.

Pipeline Growth

"Currently our core cancer business represents a $3.5 billion market opportunity and our recent launch of InVitae presents an additional opportunity in new markets beyond cancer," Popovits said during the earnings call.

Beyond the breast and colon cancer indications for Oncotype DX, Genomic Health recently added a ductal carcinoma in situ test to the franchise and is focused on growing reimbursement for all of these tests. The Oncotype DX DCIS test gauges patients' 10-year risk of experiencing recurrence of a non-invasive form of breast cancer that occurs in the milk ducts and hasn't spread to the surrounding breast tissue.

"In breast cancer, we are encouraged by the initial demand for the DCIS Oncotype DX score," Brad Cole, Genomic Health chief operating officer, said during the earnings call. "We've heard from customers that having a reliable method to select DCIS patients for treatment with surgery alone is a significant advance."

During the quarter, Genomic Health garnered approval from the New York State Department of Health to report the Oncotype DCIS score to physicians in the state. Now, the company is marketing the test in all 50 US states. Genomic Health estimates that one out of five women newly diagnosed with breast cancer have DCIS, making it a 40,000-patient market opportunity in the US.

According to Genomic Health officials, there is growing interest in the Oncotype DX DCIS score because oncologists are already familiar with the benefits of the original Oncotype DX recurrence test for invasive breast cancer.

The number of surgeons ordering the DCIS score "is certainly higher than what it is for invasive cancer, suggesting they really see the need to have this information before selecting aggressive treatment for a disease that likely isn't aggressive," Popovits said.

Currently, the DCIS test doesn't have Medicare coverage. Genomic Health officials said the company is aiming to conduct another study this year for the DCIS test that will help drive reimbursement.

Prostate Cancer Test

For the past five years, Genomic Health has also been developing a test to gauge which patients have clinically significant prostate cancer at the time of diagnosis. The test, which is projected to be Genomic Health's next big product launch, is slated for market introduction next year.

"This is a very large market with a very large need, so we expect we'll see a number of players on the market," Popovits said.

Myriad has launched a gene expression test, called Prolaris, which assesses the aggressiveness of prostate cancer (PGx Reporter 2/8/2012).

Shak noted that Genomic Health's test platform will be able to analyze very small amounts of tissue, which will differentiate the Oncotype DX test from competitors.

Another point in favor of Genomic Health's prostate cancer recurrence test will be how it handles tumor heterogeneity. "At the time of radical prostatectomy one can see the same differences under the microscope in multifocal disease," Shak said. "Needle [biopsy] samples are needed to identify genes that reveal the biology that is underlying the heterogeneity in the way the tumor looks under the microscope. What's different about our test is that it includes genes from four different pathways … that were selected to reveal that underlying biology."

The first clinical validation study for the prostate cancer test is currently ongoing and Genomic Health is planning to announce top-line results later this year.

Genomic Health officials acknowledged that urology is a new market for the company and noted that the development program for the prostate cancer test has its own hurdles. "The challenge in prostate cancer is to do the right studies with the right endpoints," Shak said.

When developing the Oncotype DX breast cancer recurrence test, Genomic Health retrospectively analyzed patient samples from the National Surgical Adjuvant Breast and Bowel Project B-20 study. The development of the prostate cancer test will "not [be] like in breast [cancer] where a group like NSABP had done numerous trials with well-annotated data," Shak explained.

For the prostate cancer validation study, the company is collaborating with the University of California, San Francisco to use patient specimens that they have collected.

If successfully launched, Genomic Health will hire a separate sales force for the prostate cancer test.

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