Although the bulk of DeCode’s business depends on selling individual risk-based genetic tests to doctors, in the next decade, the company expects revenues from its personal genomics arm to rival its diagnostics business.
“In the next few years, we are going to see a dramatic rise in the sales of the individual tests,” DeCode CEO Kari Stefansson said last week during the company’s annual research and development presentation to investors. “But then, somewhere in the next five or 10 years, we will see the lines of increased sales of individual tests and the sales of DeCodeMe cross, and … pretty much every college-educated person in America is going to have genetic profiling of the sort that is marketed through DeCodeMe.”
For the quarter ending March 31, DeCode reported that total revenues increased to $15 million from $8.6 million year over year. Also as of March 31, the company had $16.2 million in deferred revenue that will be recognized over future reporting periods.
Although DeCode doesn’t break out its revenue based on its diagnostics, pharmaceutical, and personal genomics businesses, the company said in a statement that “the most significant factor in this increase in revenue is the continued growth in the company’s genomic services business.”
According to DeCode’s projections, the personal genomics market today comprises around 300 million potential customers. At around $1,000 per genome scan through the DeCodeMe service, 10 percent of that market would net the company $30 billion in revenues.
While the company is optimistic about the future potential of its personal genomics business, DeCode officials carefully outlined the firm’s DeCodeMe operation as an ethically and scientifically sound operation in light of recent regulatory actionfrom California state health officials against the company [see PGx Reporter 06-25-2008].
Cheap Risk Management
Through DeCodeMe, which launched last year, the company charges $985 to analyze an individual’s DNA sample for 1 million SNP markers, using the Illumina 1M beadchip, and provide genetic counseling.
“This is certainly a good opportunity to have a direct-to-consumer product, but this is also a good opportunity to work with physicians,” DeCode’s Chief Scientific Officer Jeffrey Gulcher said during the presentation. “We encourage [DeCodeMe customers] to work with their physicians.”
In an extensive marketing plan for its existing and forthcoming pipeline of products, DeCode emphasized that it is focusing on marketing to physicians and not depending on DTC promotions (see related story, in this issue).
Once a customer is genotyped through the DeCodeMe service, the company can update the customer’s profile with new risk information as new studies are completed and gene-risk associations are validated. “This is cost-effective risk management,” Gulcher said.
However, company officials were careful to present the personal genomics service as an operation that advances sound science and as a business that markets products ethically.
“This is a strategy to expedite the commercialization of our tests in each of those states in the case that we don’t receive state approval sooner.”
“We try to make DeCodeMe very user friendly. We don’t try to force on them the genetic information. We give them a background on each disease, and they can decide if they want to know or not,” Gulcher said. “We think people have a right to know but they also have a right not to know their risk for certain diseases, and they have a choice. They don’t have to look at all 30 different diseases.”
DTC marketing of genetic tests has recently become a freedom of information issue after the California Department of Public Health sent out cease-and-desist letters to several personal genomics companies demanding they stop directly marketing genetic tests to consumers in the state.
The state claims that 13 companies, among them DeCode, Navigenics, and 23andMe, are marketing their tests without a license. Under California state law, only a state-licensed physician can order genetic tests. Meantime, the bourgeoning personal genomics industry believes that state regulators are hindering consumers’ rights to their genetic information [see PGx Reporter 06-25-2008].
In addition, DeCode does not test consumers for risk alleles that have not been replicated in one or more populations, Stefansson assured.
According to the company’s presentation, one of the company’s tests, for myocardial infarction, is validated in more than 25 populations; another for prostate cancer is validated in more than 15 populations; its atrial fibrillation assay is validated in more than 10 populations; a type 2 diabetes test is validated in as many as 60 populations; and its glaucoma test is validated in more than 10 populations.
Company officials highlighted that one of the main advantages DeCode has is its genetic database of more than 300,000 human samples, which allows the company to validate the markers that it discovers.
“Our markers are better validated clinically than most markers that are FDA-approved because they have behind them tens and thousands of patients and controls,” Gulcher said. “Most tests don’t have that volume of information.”
Despite CDPH’s cease-and-desist letters, Navigenics and 23andMe continue marketing their tests directly to consumers in California. DeCode, on the other hand, has denied that it markets its products in the state and maintains that once it receives the appropriate licensing, it will only market its tests to doctors, as required by law.
According to DeCode officials, in addition to California, the company is not selling its tests directly to consumers in New York or in Maryland, where the company is awaiting state licenses.
Meanwhile, 23andMe and Navigenics have taken a different approach.
23andMe claims compliance with California’s laws, citing the fact that Illumina, the company that performs the genotyping for its service, is licensed in the state. Furthermore, the company says it employs a California-licensed physician to order the tests.
Navigenics has also maintained that it is in compliance because the genome scans that are part of its service are performed by Affymetrix, which is CLIA-certified in California, and the tests are ordered and reviewed by a California-licensed physician. Navigenics also said it encourages its customers to use its genetic counselors to better understand the test results.
Although the DeCodeMe service uses the Illumina 1M beadchip to analyze consumers’ DNA, the company has tried to set itself apart from competitors by the fact that it conducts its own genotyping.
“Regarding the California state license for diagnostics, it is important to point out that we do our own genotyping internally, and therefore have not assumed, as some others have, that subcontracting to a licensed laboratory for the genotyping automatically achieves compliance,” DeCode co-founder Jeff Gulcher told Pharmacogenomics Reporter previously [see PGx Reporter 06-25-2008].
“In many ways, 23andMe and Navigenics are only marketing organizations, somewhat akin to the dotcom companies, because they don’t do their own genotyping, they don’t control the quality of what they do,” Stefansson said during the R&D presentation. “At DeCode, and for DeCodeMe, we do all the genotyping ourselves. … We are responsible for the quality of the tests, which ultimately makes us responsible for our reputation as a diagnostics company.”
In response to these comments, 23anMe Founder Linda Avey told Pharmacogenomics Reporter this week that the company’s “genotyping platforms have been widely adopted by the research community because of their demonstrated quality and performance.
“We have high confidence in the quality of the data generated by the CLIA-certified laboratory we work with,” Avey said.
However, it seems that if the wait for a state license proves too long, DeCode might end up using a licensed US laboratory to market its tests.
In February, DeCode signed a contract with Lenetix, a US commercial laboratory licensed in California, Maryland, and New York. Clyde Shores, DeCode’s VP of diagnostic marketing and sales, said during the R&D presentation last week that Lenetix may sell DeCode’s tests in these regions through a sublicensing agreement.
“We have established a relationship with a commercial laboratory in New York that is working through the validation of our test. They do have licenses in New York, California, and in Maryland, and if we sublicense our testing to them, then they would be able to begin marketing our tests to each of those states,” Shores said. “This is a strategy to expedite the commercialization of our tests in each of those states in the case that we don’t receive state approval sooner.”
There is no reason to assume that even if DeCode provides its tests through Lenetix that will change its plan to only market to physicians in these states.
On its website, Lenetix describes itself as an “international laboratory resource providing rapid genetic screening and diagnostic testing for healthcare providers such as obstetricians, gynecologists, family practitioners, nurse midwives, laboratories,and diagnostic facilities worldwide including their patients.”