With a hungry eye on the cancer diagnostics market, ViroLogic has finally closed its $180 million acquisition of Aclara Biosciences, whose eTag technology may allow the combined company to create products complementing targeted-medicine hopefuls Erbitux and Iressa, among other cancer drugs.
Since some physicians are familiar with ViroLogic’s molecular diagnostics for HIV drug resistance, the company hopes its success in this market can act as a springboard into cancer testing and treatment, ViroLogic CEO Bill Young told Pharmacogenomics Reporter.
And if ViroLogic’s gamble pays off, it could elevate some of the leading-edge pharacogenomics-based drugs on the market to first-line therapies as opposed to last resorts.
“For the last several years, we’ve been very interested in taking this business model to other disease areas that are now more appropriate for individualized therapies,” said Young. “In my opinion, oncology is the next area where this is going to play out.”
In the near term, the combined company, which will endure an undisclosed number of lay-offs in Aclara and will retain the ViroLogic name, will focus on creating diagnostics for drugs targeting the epidermal growth factor receptor family. In particular, it will aim to develop products for the lung-cancer drugs Iressa and Tarceva, the colorectal-cancer therapy Erbitux, and the breast-cancer drug Herceptin, Young said.
In a June interview following the announcement of the acquisition, Young told Pharmacogenomics Reporter that the company was researching the VEGF and PGDF pathways, but he would not confirm that report recently. However, he said the company is working in areas related to “Avastin and angiogenesis products and other receptors,” in which eTag can work. “They’ll be the next stage after the EGF receptor family products,” he said.
Aclara’s eTag technology can detect drug-target proteins — “virtually any protein on the surface of the cell” — allowing investigators to determine the activity of certain cellular pathways, a function that can be useful for researching drug therapies directed against them, said Young. The technology also works well in paraffin-embedded tissue, the method most often used for tumor storage, he added.
Tests may cost between $500 and $1,000, and with “about one million” solid tumor patients a year, the cancer diagnostics market may be “many fold” larger than that of HIV, said Young. There are “about 40,000” AIDS cases in the US per year, he added.
The current market for Herceptin diagnostics, as an example, is “actually quite small,” amounting to less than $100 million a year, according to Sara Michelmore, a diagnostics analyst at SG Cowen. The immunohistochemistry diagnostics made by Tucson, Ariz.-based Ventana Medical Systems and Denmark-based Dako bring in between $20 million and $25 million a year, while Vysis, an Abbott Laboratories subsidiary, sells approximately $75 million worth of its Herceptin-related in situ hybridization diagnostic annually, she said.
Should a diagnostic actually prove useful in identifying EGFR-related drug responders, though, these drugs would likely no longer be relegated to last-resort status, said Michelmore. The proportion of responders to these drugs is currently too small to justify their use as first- or second-line treatments, she said.
“The problem with Iressa is that the response rates, even when they’re good, they’re not great,” said Michelmore. “If you can really select patients for Avastin and Iressa [and related drugs] — potentially it could be huge. You don’t want to be in a situation where you’re measuring refractory patients to go on these drugs. You really want to have it up front.”
A drug-diagnostic companion product might also be in ViroLogic’s cards. “I think that, very likely, we’ll have collaborations with drug companies that will pair an assay specific with a new drug,” said Young. Asked when a collaboration might show progress, Young said Aclara’s collaboration with GlaxoSmithKline is in the “evaluation stage,” with visible progress next year.
With $8.6 million in total revenues and just $7.4 million in cash, equivalents, and short-term investments as of Sept. 30, ViroLogic can breathe a little easier with Aclara’s $78.6 million in cash safely in the bank.
The new ViroLogic will also inherit R&D staff and the eTag protein-dimer-detection technology. The company plans to pair these assets with its CLIA-approved clinical reference laboratory, salespeople, and other infrastructure in order to produce, test, and distribute oncological diagnostics that could identify drug responders, said Young.
“We have experience in working with a science-oriented sales force that sells directly to physicians — how to educate them, how to get them to use the technology,” said Young.
The companies are in the process of testing patient samples with known outcomes to develop response-predicting algorithms, Young said. “I could imagine at least three separate products being developed in [the EGFR] family over the course of the next year or two,” he added, but he declined to specify which drugs would be the first to be paired with a diagnostic.
ViroLogic is one of the two companies producing HIV drug-resistance diagnostics, according to Mike Largen, an independent biotechnology consultant. The company has two methods of distribution: direct sales to physicians and agreements with big reference labs such as Qwest and LabCorp and regional labs.
Around 35 “mostly R&D” employees will join the new company from Aclara, moving from Mountainview, Calif., to ViroLogic’s headquarters in South San Francisco, said Young. The acquisition should be finished by the end of the first quarter of 2005, he added.
Several Aclara officials are also coming into the ViroLogic fold as part of the acquisition: ETag technology inventor and former Aclara Chief Technical Officer Sharat Singh will join as vice president and chief scientific officer of oncology; former Aclara Chief Business Officer Michael Dunn will assume the same role in ViroLogic; and Alfred Merriweather, Aclara’s chief financial officer, will become ViroLogic CFO. Former Aclara board members John Mendlein and Thomas Baruch will join ViroLogic’s board of directors.
In the works since at least May, when the two companies announced their intentions, the acquisition closed Dec. 10. The combined company has been trading on the Nasdaq exchange since Dec. 13 under the ticker symbol VLGC.