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Celera, Ditching Drug-Making, Discloses Three-Pronged Strategy for Molecular Dx


Celera Genomics hopes to reach profitability in fiscal 2008 and earn as much as $200 million per year in revenue from its diagnostic business by fiscal 2011 as it completes its transition from drug discovery to molecular diagnostic development, company officials said last week.

The company, which in January acquired Applied Biosystems' 50-percent stake in joint venture Celera Diagnostics, said it will focus on three areas in molecular diagnostics: existing genetic tests — which it calls "mature" — and their updates; a line of assays it calls "new genetics" tests that involve proteomics or gene-expression signatures; and licensing and collaboration deals.

In a meeting and webcast with investors last week, officials said Celera expects to generate between $160 million and $200 million annually from diagnostics sales, licensing deals, and alliances by 2011. By comparison, Celera Diagnostics generated $61 million in fiscal 2005 as part of its alliance with Abbott Labs, which drove the vast majority of its receipts.

The company is hoping to generate profits of 15 percent to 20 percent of revenue by that time, said Kathy Ordoñez, Celera Genomics president, during the meeting. "We are targeting to break into profitability at the end of 2008, with a substantial future upside," she added.

The company also expects that by the end of the 2006 fiscal year, which ends June 30, it will have $550 million to $570 million in cash. "I imagine this provides a basis for us to consider M&A activities," in molecular diagnostics — including proteomics — laboratory services, and "other relevant areas," said Ordoñez.

Celera's drug-development days are officially over. "We have successfully repositioned all of our small-molecule assets with partners, so we have no further capital commitments to any of those projects — they're now in the hands of others, and hopefully they'll take them forward to great success and our mutual benefit," Tony White, Applera CEO, told the investor audience.

The company has partnered out its small-molecule programs in HDAC, factor VIIA, and cathepsin S to traditional drug makers. "We also partnered an early-stage preclinical program with a venture capital [firm]" said Cathy Ordoñez. "We do not expect to make any sizable investments in that area going forward."

Biomarker Discovery

Celera has its own take on the term "targeted medicine," which it defines as predicting patient outcomes and the ability to "assess an individual patient's risk for disease, aid in the selection of therapy, and also monitor the effectiveness of treatment."

Regarding its biomarker discovery program — which involves both genomic and proteomic methods — the company has three strategies: For markers that may prove useful in diagnostics, Celera will first license the intellectual property to a partner who will offer the test as an analyte-specific reagent in the US. Later Celera will pursue clearance from the US Food and Drug Administration and launch an in vitro diagnostic product.

For biomarkers having pharmacogenomic possibilities, Celera plans to partner with pharmaceutical companies for development, and to later launch IVDs. With biomarkers that might make good drug targets, the firm will perform functional validation tests and partner with pharmaceutical companies who will carry out all drug development.

The company plans to focus first on infectious disease testing, followed by the assays' application to blood screening, then a concentration on cancer, Ordoñez said.

'New Genetics' Tests

Celera defines its so-called new genetics tests as those that rely on internal genomic and proteomic research. Most of the tests the company plans to introduce in the near term involve genetic information, while it plans to capitalize on proteomics findings by 2011.

Celera will license the intellectual property for nascent tests to "selected commercial laboratories" in the United States, Japan, and Europe, said Ordoñez. Future deals will follow the model of a recent deal with Specialty Laboratories, in which Celera licensed markers for cirrhosis risk in hepatitis C virus patients to the reference lab, which will validate a test. "Commercial terms of these licenses are expected to generate royalties to Celera on the order of 30 to 45 percent of net service revenue," Ordoñez said.

The company intends to later commercialize in vitro device kits for these genetic tests, Ordoñez said. As Celera develops products with companies other than Abbott, the firm plans to build its own sales force and sell its products as a partner to another experienced IVD company, she said.

Tests due in 2007 include Celera's and Specialty Labs' SNP-based cirrhosis risk score, as well as a test generating a risk score for coronary heart disease, a breast cancer prognosis test, and a test for determining the estrogen receptor status of breast cancer patients. Only the cirrhosis test will involve a partner other than Abbott.

It also plans to collaborate with undisclosed partners for two other diagnostics in 2008: a test for predicting patient benefit from statin drugs and a genetic risk-scoring test for thrombosis.

"We have successfully repositioned all of our small-molecule assets with partners, so we have no further capital commitments to any of those projects — they're now in the hands of others, and hopefully they'll take them forward to great success and our mutual benefit."

In deals outside its collaboration with Abbott, Celera intends to launch a genetic risk-scoring test for stroke in 2009, with two assays for undisclosed indications planned for 2010 and 2011.

The company expects to get IVD clearance from the FDA for each of its new genetics tests after it has offered them through clinical laboratories by licensing out IP. Celera's expects to generate a total of more than $100 million annually in test sales and royalties through its alliance with Abbott by its 2011 fiscal year. About 30 percent of those revenues should reach Celera through its Abbott partnership. Some of the tests "will have peak revenue potential for Celera [and Abbott] in excess of $150 million annually," Ordoñez said.

m2000-based and 'Mature' Molecular Diagnostics

The firm is pinning much of its future on the success of tests designed for the Tecan-built m2000 automated real-time PCR platform. By 2010, Celera hopes to launch eight tests to run on the m2000, four of which are slated for launch next year, along with the instrument itself.

"Toward the end of fiscal '07, moving into fiscal '08, we expect to complete commercialization of the m2000 platform," said Ordoñez. "Our goal for m2000 over the next five years is to achieve approximately 20 percent market share, which translates to end-user sales on the order of $200 million to $300 million by fiscal 2011," she added.

Alongside tests for the new platform, the company will continue to draw revenues from its more established genetic tests, such as cystic fibrosis testing, HIV genotyping, and hepatitis C viral-load tests. Celera is working to offer new versions for CF and HCV. Over the next five years, Celera expects "mature products" that are involved in its alliance with Abbott "will continue to generate end-user sales on the order of $50 million to $70 million annually," said Ordoñez.

In partnership with Abbott, Celera plans to launch three products as IVDs next year in the United States on the m2000 platform that are already sold in Europe as CE-marked tests for hepatitis C viral load, HIV viral load, and Chlamydia trachomatis and Neissera gonorrhoeae detection. The companies are also developing a hepatitis B detection IVD for the m2000 system, and they plan to launch it in Europe this year and the United States in 2007.

"The HCV assay will launch [in the United States] in the next quarter as an analyte-specific reagent assay, and also in the next quarter, we'll be doing the clinical trials in the [United States] to submit that as a PMA by the end of the year," said John Robinson, Abbott Diagnostics director of research and development, during the meeting. Celera submitted the HIV viral load test to the FDA for premarket approval in December, "and we anticipate approval by the end of this year," he said. Robinson led development of all m2000 assays at Abbott.

The company is "about 80 percent done" with the Chlamydia/gonorrhea test's clinical trials, and it plans on filing the assay for 510(k) approval "hopefully within this next quarter," said Robinson.

The HBV viral load assay should also launch within the next quarter as an ASR in the United States and as a CE-marked product in Europe, Robinson said.

In 2008, Celera's plans for new products include a hepatitis C virus genotyping test for the m2000 to replace its existing version of that test, as well as an m2000-based group B streptococcus detection test. A CE-marked HCV genotyping test "should launch by the end of the year, and we have a clinical trial planned [for a] 510(k) submission," said Robinson.

The company plans to launch two more assays on the m2000 for undisclosed indications in 2009 and 2010.

The European Community awarded a CE Mark to m2000 tests for Chlamydia/gonorrhea detection in January; for hepatitis C viral load in July last year; and for HIV-1 viral load in June last year.

All m2000 tests will be developed and commercialized as part of the company's collaboration with Abbott.

Abbott has placed more than 150 m2000 devices in Europe, "and on average these accounts are generating more than $100,000 per year in reagents and revenue, and the system is very ready to enter the American market," said Ordoñez.

In terms of mature diagnostics that are not based on the m2000, Celera has a next-generation cystic fibrosis test in development but company officers did not mention a possible launch date. The existing test is sold in Europe as a CE-marked in vitro device, and in the United States as an ASR awaiting FDA IVD clearance. The new CF test will replace its existing assay, although both new and old tests are sequencing based.

Ordoñez estimated that the market for CF testing comprises approximately 1.3 million tests at a total value of $40 million per year, with an annual growth rate of between 10 and 15 percent. She estimated the size of the market for HIV genotyping to be about $45 million annually, and the market for HCV molecular diagnostics to be about $250 million annually.

Although the markets for CF and HIV viral load will continue to grow, the firm believes both markets will experience price erosion, she added.

Citing "numerous market analysts," Ordoñez said the overall molecular diagnostics market could reach $5 billion by 2015.

Licensing and Collaborations

Celera's third main source of revenue will be licensing and collaboration. The firm plans to license Applera IP in genomics and proteomics for molecular diagnostic purposes in arrangements similar to last week's deal with Medarex, which hopes to create human monoclonal therapeutic antibodies using targets licensed from Celera. Celera has existing license agreements with Cepheid, Bayer, and Beckman Coulter.

The small molecule licenses Celera has signed will also produce "residual value," said Ordoñez. "Our goal, exclusive of the small molecule value, is to generate approximately $10 million annually from these collaborations," she said.

Projected Financials

In 2007, the company expects an increase in end-user sales of 35 percent to 40 percent over 2006. Celera estimates licensing and collaboration revenues for 2007 to amount to about $8 million to $12 million, and reported revenue to be in the range of $40 million to $45 million, said Ordoñez. Net loss for 2007 will be about $28 million to $35 million, she said.

Celera's R&D will decline as a proportion of end-user sales and as the company reduces its use of internally funded research programs, she said.

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