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Decode Launches Two DNA Tests in Q3; Genotyping Business Raises Revenues

Decode Genetics introduced two new diagnostic tests during the third quarter designed to assess patients’ risk for atrial fibrillation and myocardial infarction, and reported a subsequent 3 percent increase in selling, general, and administrative expenses related to the launch of the assays.
And although total revenues for the three months ended Sept. 30 increased 27 percent to $10.9 million from the year-ago period on the strength of the company’s genotyping-services business, CEO Kari Stefansson said that the company will not depend as much on that segment for revenues going forward.
During a conference call tied to the earnings release last week, Stefansson said the firm’s ability to launch the new cardiac tests, which were debuted in October, reflects the company’s ability “to move forward rapidly in [its] diagnostic effort.”
The first test, Decode AF, is a reference laboratory diagnostic for gauging patients’ risk of atrial fibrillation and subsequent stroke. It is based on the company’s discovery of a genetic variant in chromosome 4q25 that confers between a 40 percent and 160 percent increase in the risk of atrial fibrillation. Decode published findings from this discovery in the July issue of Nature.
The second test, called Decode MI, detects SNPs in the CDKN2A/2B gene region of chromosome 9. Based on studies in a few thousand patients, the company has found that patients positive for these variants have double the risk than controls of developing early-onset myocardial infarction. According to Decode, approximately 20 percent of the general population in the US and in Europe carry this genetic variant.
The tests for atrial fibrillation and myocardial infarction follow a diagnostic for diabetes prevention, launched in the second quarter. The test, Decode T2, detects SNPs in a gene called TCF7L2, linked to increased risk of T2D. While studies have shown that between 8 percent and 11 percent of the general population have two copies of the risk variant, type 2 diabetics are twice as likely to carry two copies of the SNPs.
“We are working with professional organizations and reimbursement groups to lay the groundwork for what we believe could become a significant foothold for this test in the growing diabetes prevention market,” Stefansson said during the call.
The company said it intends to follow the launch of these three tests by educating doctors and patients about them. “We are offering classes that clinicians and patients alike can understand, and it is a real and immediate clinical value for improving disease prevention and outcomes in patients,” Stefansson said.
“Our marketing team has been making this case very effectively and is indeed right now with a solid presence at the American Heart Association in Orlando,” he added.
Decode said it also plans to launch tests for other conditions, including one for glaucoma, in the near future.
Relegating Genotyping
Decode last week said total receipts for the three months ended Sept. 30 climbed to $10.9 million from $8.6 million year over year — an increase that the company attributed to its growing genotyping business.

“I would be surprised if … our revenue for the genotyping [service] next year would be much larger than it is this year. … I don’t see the genotyping business as being a big part of who we will be in the future.”

“Services across the business, including chemistry, biostructures, [the clinical research subsidiary] Encode, and particularly genotyping services are growing,” Lance Thibault, Decode’s chief financial officer, said during the earnings call last week. “The increases [in revenues] quarter to quarter are indeed because of the genotyping services.”  
However, Stefansson noted that the company would not be pinning its strategic growth plans on the genotyping business as he did not expect it “to grow leaps and bounds,” and since revenue from genotyping services tend to fluctuate quarter over quarter.
“I would be surprised if … our revenue for genotyping next year would be much larger than it is this year,” he said “I don’t see the genotyping business as being a big part of who we will be in the future.”
R&D expenses were $14.1 million for the third quarter of this year, slightly down from $14.2 million during the same period last year. “Our research and development expense this year reflects the advancement of our drug-development programs, the launch of our first three DNA-based tests for gauging individual risk of common diseases, and the acceleration of our gene and target discovery work in several major disease areas,” the company said in a statement.
According to the company, its product pipeline includes development programs for DNA-based risk predisposition tests in glaucoma and prostate and breast cancer.
During the third quarter, the company advanced the heart attack prevention drug DG051 to Phase IIa trials; began preparing arterial thrombosis prevention treatment DG041 for clinical pharmacology studies; and is continuing bioequivalence studies on its lead compound DG031 for inhibition of plaque.
Net loss for the quarter inched up to $24.2 million, compared to $23.6 million for the third quarter of 2006.

At the end of the third quarter, the company had $118.6 million in cash, cash equivalents, and investments, down from $152.0 million at Dec. 31, 2006.

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