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JP Morgan Healthcare Conference, Day Two: Life Technologies, Roche, Agilent, Thermo Fisher, Cepheid, GenMark

SAN FRANCISCO (GenomeWeb News) – The second day of this year's JP Morgan Healthcare Conference included presentations from a number of companies in the genomic technology and molecular diagnostic market.

Yesterday, GenomeWeb Daily News reported separately on a presentation from Illumina, in which officials discussed the company's acquisition of Moleculo and preliminary financial results for the fourth quarter. Below are capsules from some of Tuesday's other presenters.

Life Technologies

The presentation from Life Technologies CEO Greg Lucier focused on the firm's efforts over the past year, with a particular emphasis on its initiatives aimed at the clinical market. He noted the company's acquisitions in 2012, including those of Navigenics and Pinpoint Genomics, the hiring of Ronnie Andrews as president of medical sciences to help lead the clinical efforts, the establishment of a sales force focused on the CLIA lab market, and the launch of Life Tech's first lab-developed test, Prevenio, as a lung cancer test service.

Lucier said Life Tech has set up a channel to sell Prevenio in the US and intends to do the same in Europe. It also intends to develop additional products for lung cancer.

In addition, it has established a dedicated clinical trials channel, said Lucier.

Earlier in the day Life Tech announced a new venture with Boston Children's Hospital, called Claritas Genomics, which has been formed to develop diagnostics based on the Ion Torrent platform. Life Tech has a 20 percent stake in the venture, and company officials noted that others who become partners could also gain a stake. Lucier envisions Claritas partnering with other children's hospitals as it works on developing tests for pediatric applications and inherited diseases.

Lucier also said that one of the reasons Life Tech chose this type of partnership was to accelerate the use of the Ion Torrent technology in clinical practice. He noted that working with researchers specializing in this particular field would also make Life Tech a smarter company as it develops its diagnostics business. In addition, Lucier said the firm may enter into similar partnerships over the next year, as well as take minority stakes in technology companies.

Life Tech is on track to file for FDA clearance of the Ion Torrent PGM later this year. It also will seek the CE-IVD Mark for marketing in Europe and additional market approvals in Asia.

Roche

Following Roche Chairman Franz Humer's comments over the weekend that Roche would no longer pursue a deal to acquire Illumina, CFO Alan Hippe confirmed at the conference that a deal for the San Diego firm is "off the table."

Similar to past statements from Roche officials, Hippe added that Roche has other options in the next-generation sequencing and that the firm continues to be active in sequencing. While Roche continues to view sequencing as an important technology area, the company "can take our time and will take our time" to evaluate and purchase the right technology, he said.

His and Humer's statements put an end, at least temporarily, to speculation that Roche was once again in pursuit of Illumina following last year's failed bid to buy the company generally viewed as the market leader in sequencing. Roche originally offered $44.50 per share for Illumina a year ago, and later raised it to $51 per share.

Since the failed bid, rumors have sprung up intermittently of renewed interest by Roche in Illumina. Today, Hippe reiterated earlier statements by Roche that there are other attractive firms in the space, saying "We have multiple opportunities to get to the technology."

The focus, he said, will be on the technology itself and not the customer, and the criteria to any deal would be sequencing-based diagnostics.

Agilent Technologies

Much of the attention during Agilent's presentation and break-out session focused on Agilent's $2.2 billion buy of Dako completed in June, from which Agilent established a new business segment, the Diagnostic Genomics Group.

While Dako operates primarily in the immunohistochemistry space, it also develops companion diagnostics, and Dako will form the foundation of a business that Nick Roelofs, president of Agilent's Life Sciences Group, said is the fastest growing market in which Agilent participates. He estimated the diagnostics space to be around $7 billion with long-term growth of between 10 percent and 12 percent. In particular, Roelofs said that there are robust opportunities in Asia in diagnostics.

Even before the acquisition of Dako, Agilent had signaled its interest in becoming a larger diagnostics player when it registered its facility in Cedar Creek, Texas, with the US Food and Drug Administration as a medical device establishment and registered some of its liquid chromatography and mass spectrometry systems with FDA as Class I medical devices.

Yesterday, Roelofs added that Agilent will use its capabilities from the Life Sciences Group in proteomics and genomics research and "coalesce" it with Dako to develop molecular diagnostic products.

The Life Sciences Group includes Agilent's mass spectrometry and liquid chromatography instruments business.

LSG also includes Agilent's SureSelect Target Enrichment System, for which sales have grown as the market for gene partitioning products grow. Roelofs said, though, that as more competitors launch their own products, Agilent's share of that space might decline.

Thermo Fisher Scientific

Company President and CEO Marc Casper said that for 2012 the company achieved its goals, including revenue growth through the introduction of new products, holding costs down, and expanding margins.

For the coming year, Thermo Fisher will continue to launch new products with high impact, use free cash flow for M&A, share repurchasing, and quarterly dividend issuances, and build its presence in emerging markets.

It also will continue to carry out cost reduction initiatives begun in 2011 and expanded in 2012. In 2011, the company targeted $100 million in cost reductions and realized $85 million of that in 2011 and 2012, Casper said.

In 2012, Thermo Fisher initiated an additional $75 million cost-reduction effort. During the year, it realized $15 million in savings and expects to achieve the remaining $60 million this year and next, suggesting additional workforce reductions may be impending.

Through the first nine months of 2012, the company laid off more than 900 workers, according to documents it filed with the US Securities and Exchange Commission.

During his presentation, Casper said that revenues company-wide were spread more or less evenly among its three operating segments, Analytical Technologies, Specialty Diagnostics, and Laboratory Products and Services.

Moving ahead, though, because more M&A opportunities exist in Analytical Technologies and Specialty Diagnostics, those segments will likely comprise a higher portion of Thermo Fisher's revenues.

Thermo Fisher is the market leader in mass spectrometry, and Casper said that while the instruments have historically been research-use only tools, the day when they have clinical relevance may not be far off. While he doesn't foresee mass specs getting the needed regulatory clearances required for them to move to clinical settings in 2013, he said that it may happen not much further beyond this year.

Cepheid

Earlier on Tuesday, the company provided an update on problems surrounding the manufacturing of its Xpert diagnostic test cartridges as well as pre-announced its fourth quarter earnings results.

CFO Andrew Miller reiterated at the conference that the manufacturing issues have been resolved though some accounts are still in allocation. The backlog that resulted from the problems is anticipated to clear during the current quarter, however.

The company said in its announcement that revenues for the fourth quarter are expected to be about $92 million, short of an earlier guidance of $94 million. Cepheid said that while commercial clinical sales were better than had been anticipated, this was offset by product sales through its high-burden developing country program.

Miller noted, however, that during the fourth quarter, Cepheid had signed its third and final buy-down agreement for its MTB/RIF test in resource-poor areas of the world with multi-drug-resistant tuberculosis. The agreement is with Unitaid and follows agreements the company reached with the US Agency for International Development and the Bill and Melinda Gates Foundation.

Miller also said that in addition to clearing Cepheid's Xpert CT/NG test, FDA had recently cleared two other assays from the company, giving it a total of 14 FDA-cleared tests. One is for GBS LIM broth, the other for the Victorian strain of the flu, which will become available in about one month, Miller said.

GenMark Diagnostics

President and CEO Hany Massarany told investors that the company is on track for a late 2013 launch of its NexGen System, a sample-to-answer molecular diagnostics system that is intended to greatly expand the firm's laboratory customer base. The new system will integrate extraction and amplification and run both high and low multiplex assays. The initial menu will focus on infectious diseases, though Massarany didn't offer many details.

Massarany said that with its current eSensor XT-8 molecular system GenMark's addressable market is around $900 million but that will increase to $2.7 billion once the NexGen system is launched. He added that while the company can target around 500 full-service molecular labs now, it will be able to target 5,000 labs with the NexGen. The automation and ability to run multiplex highly complex tests will make the firm's assays attractive to labs that don't currently run molecular tests, said Massarany.

In order to capture more of that potential market, Massarany said the firm will need to expand its test menu and its sales force. The company currently has 22 reps in the field but will need around 50 to drive adoption of its tests as the menu increases.

Though GenMark does intend to sign up distributors in certain markets, "we'll have our own people managing our most important markets," said Massarany.

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