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Novartis MDx Focuses on Companion Dx as Key Strategic Direction

By Tony Fong

NEW YORK (GenomeWeb News) – Created three years ago, Novartis Molecular Diagnostics has set its focus on the companion diagnostics space, a market that remains relatively small, but one that the head of Novartis MDx called "a very significant piece of the strategic direction of the company."

Since being formed around three years ago, the MDx business, which is a unit within Novartis' pharmaceutical division, has grown to more than 500 employees, the majority of whom came from Genoptix, which Novartis acquired in January 2011.

Novartis officials declined to comment on the MDx unit's budget and other financial figures — companywide, Novartis reported $51.6 billion in revenues in 2010 — but said that it is not a significant part of the overall Novartis business.

However, "the significance of the entity is that we believe it represents the future of where medicine is going, so we do see it as a big platform investment and development for the future," Michael Nohaile, head of Novartis MDx, told GenomeWeb Daily News in a recent interview.

By launching its MDx unit and moving into the companion diagnostics space, Novartis has joined a growing list of firms that believe that market could become a major business opportunity, though it may take several years for it to happen. Like its Swiss competitor, Roche, Novartis has expansive pharmaceutical programs that lend themselves to companion diagnostic efforts.

In a blog post earlier this year, Prashant Dilwali, then a senior analyst at life sciences consulting firm Scientia Advisors, said that companion diagnostics appeal to pharma because they can provide potential revenue streams as well as "knowledge capital" to better match the most appropriate treatment with a patient.

"Better targeting can lead to more efficacious and safer therapies — potentially bringing back pipeline products previously thought to be ineffective," Dilwali said. "More important, diagnostics are viewed as viable businesses because they offer opportunities for portfolio diversification, thus lessening pharma's risk without radically changing their core businesses."

The companion diagnostic space also received a boost from the US Food and Drug Administration during the summer. In August FDA approved Roche's cobas 4800 V600 Mutation Test in conjunction with Zelboraf (vemurafenib), co-developed with Daiichi Sankyo, for treating patients with melanoma whose tumors express the BRAF V600E mutation.

Two weeks later the agency cleared Abbott's Vysis ALK Break Apart FISH Probe for use with Pfizer's Xalkor (crizotinib) ALK inhibitor.

When Novartis announced last month that it would be eliminating 2,000 jobs on top of the 2,000 layoffs that began last year, it spared its MDx unit, which Nohaile said "is not affected by that announcement."

As large as Novartis is, efforts in the molecular diagnostics space are sprinkled throughout the company and extend beyond Novartis MDx. Most notably, the Novartis Institutes for Biomedical Research (NIBR) recently announced a collaboration with SomaLogic to use that company's proteomics technology to accelerate Novartis' drug discovery and development efforts.

NIBR also had a collaboration for the evaluation of Accelr8's BACcel technology, but that evaluation partnership recently concluded without a deal being signed.

Through a Novartis spokesperson, NIBR declined to comment about either collaboration.

A Three-Pronged Strategy

Novartis MDx, however, is taking the lead in the company's efforts using 'omics technology in the clinical testing arena, and its business plan is three pronged.

The main goal is to develop diagnostic tests that fall in line with the US Food and Drug Administration's definition of a companion diagnostic — tests that are required for possible approval by the agency for a new drug.

The tests being developed are for use with drug compounds in Novartis' pipeline and address disease areas in which the Swiss-based pharma has traditionally concentrated, such as neurological diseases and oncology. Nohaile said the company expects to file the tests and their correlating drugs with FDA during the next two years.

Novartis MDx also is developing companion tests for certain drugs even in cases which FDA has not mandated such tests, but which Novartis believes "brings real patient value." Those tests, Nohaile said, are not necessarily for drugs that Novartis is developing "but they may be in areas where we believe we can leverage our knowledge and our reach to help get this out to patients."

Novartis also plans to bring these tests through the FDA approval process.

This complementary program, Nohaile added, potentially could generate more revenue than companion diagnostic tests for its own drugs. "There is some hope to make some revenue off the test, but mostly it's to support the medicine," he said.

"Where we are in a therapeutic area, we can leverage our clinical trial expertise [and] we can get archival sample material," Nohaile said. "The way we're doing these is definitely very clinically driven, so we're going to have clinical proof around them."

The third arm of Novartis MDx is the Genoptix business, acquired by Novartis for $470 million, giving the firm a CLIA laboratory and a testing service business. The biggest area of testing is leukemia and lymphoma, Nohaile said.

With molecular-based technologies incrementally finding use in clinical environments, Novartis believes that services such as those provided by Genoptix will become crucial for doctors, and it is building the business in anticipation of growing demand from physicians, Nohaile said. Earlier this year Genoptix launched a protein-based test aimed at cancer, and in the coming year it plans to launch DNA-based tests.

Novartis also is investing in the business to expand its technological capabilities and to build an infrastructure for its regulatory and reimbursements strategies.

Because Novartis uses a spectrum of different technologies for its new drug development research, the MDx unit accordingly is wide-ranging in its employment of technologies, which includes sequencing, immunohistochemistry, flow cytometry, DNA amplification, and RNA expression.

Nohaile said, though, that the focus is not to have specific technologies drive the development of its tests. Instead, "we're trying to build off a clinical base" of biomarker quality and data around those biomarkers. That approach is rooted in Novartis' belief that in moving into the realm of personalized medicine and trying to determine which patients respond best to a particular drug, a combination of multiple analytes will need to be investigated, calling for many different technologies.

Its tests will be used on instrument platforms developed by other firms such as Cepheid, with whom Novartis has a deal that was forged last year for the potential commercialization of a FDA-approved molecular diagnostic test for Philadelphia chromosome-positive chronic myelogenous leukemia. The test would be indicated as an aid in the monitoring of BCR-ABL1 mRNA transcript levels in patients diagnosed with CML.

For now, Novartis MDx is not interested in developing an instrument platform. While Novartis is not "completely closed to developing platforms," it also is not an engineering firm, Nohaile said.

Rather, his unit is leveraging NIBR's research and expertise in biomarkers and using its own ability to conduct clinical trials, "so we feel that we actually have something to add there because that's something that many diagnostic companies and platform companies don't have," he said.

In fact, much of Novartis MDx's mission and operation is driven by NIBR, which has thousands of researchers working in new drug development. NIBR has "a tremendous number of skills, and they have some truly outstanding scientists … and that gives us the privilege of leveraging the content and their discoveries on a scale that [Novartis MDx] simply could not contemplate," on its own, Nohaile said.

Since launching the MDx unit, Novartis continues to build the operation's skeleton. Though it is open to making acquisitions, Nohaile said that because companion diagnostics, and more generally personalized medicine, remains a young field "it's not as if there are big incumbent players that would be obvious" targets. So, the focus remains on internal growth.

When it comes to MDx ambitions, the company is taking a long view, he said.

"We think it's very aligned with medicine … and we really think that over the next decade or two that [molecular] diagnostics are going to have an extraordinary impact on patient care and really move the needle in terms of improving outcome in some pretty terrible diseases," he said. "Not just small improvements but really significant improvements by being able to molecularly type patients and be very precise down to the individual patient [and] what their particular disease is doing."