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Does Novartis Cancer Agreement Mean That Transgenomic Might Be Rounding a Corner?


Around this time last year, Transgenomic was putting the finishing touches on a cost-cutting strategy that would claim 80 jobs — or a quarter of its staff — including Gregory Duman, the CFO.

The move, which would cost the company between $3 million and $4 million in one-time restructuring charges, was designed to off-set lackluster sales of its Wave instruments — which was symptomatic of a deepening slump felt by other companies in pharmacogenomics.

For Transgenomic, the layoffs were a harbinger for tougher times: The following summer, ahead of its formal earnings report, the company posted a million-dollar year-over-year decline in second-quarter revenues as sales continued to slide. Four months later, in November, third-quarter receipts faired no better as revenue fell $1.5 million from the same period one year earlier.

But sometime in June, while Transgenomic was busy collecting second- quarter earnings data, the tide began to turn. First, the company extended a licensing deal with Geron, which called for Transgenomic to provide the stem-cell pioneer with an additional supply of modified nucleic acid building-block compounds.

In August, Transgenomic secured $4.5 million in a private placement with a number of investors; and one month later the firm launched its Surveyor line of consumables for SNP detection, which may replace existing enzymes in their class.

This week, Transgenomic announced a new collaboration, this one with Novartis. Though financial details of the deal were not disclosed, it is believed to be potentially one of the more lucrative collaborations the Omaha, Neb., company has penned in some time.

The deal, which is open-ended, was originally signed sometime ion 2002. The crux of the deal calls for Transgenomic to use its Wave platform to help Novartis identify mutations linked to patient response to several undisclosed cancer therapeutics.

(Novartis currently sells drugs for breast cancer, carcinoid tumors, and chronic myeloid leukemia; it was unclear whether Transgenomic may help the company identify mutations tied to patient response rates to these drugs or new candidates. Robert Pogulis, a spokesman for Transgenomic, said the collaboration “will potentially cover more than one” cancer.)

Novartis will not buy a Wave platform, though Pogulis said that service relationships usually result in the purchase of an instrument.

Transgenomic has already performed proof-of-principle work for Novartis, and both companies have penned, and subsequently extended, a master services agreement, Transgenomic said in a statement released this week. Additionally, “several specific project agreements have been signed, including a clinical assay/protocol development project,” and Transgenomic “has already begun to deliver data from these projects and the assay/protocol development project has been significantly expanded since its inception.”

Molecular Diagnostics

As Transgenomic was handing out pink slips last January, officials began talking about additional markets in which the Wave platform, which has been around since 1997, can be sold. “We are optimistic about emerging opportunities to leverage our Wave technology in several higher-value markets, including molecular diagnostics and oncology-related theranostics,” Colin D’Silva, CEO of Transgenomic, said one year ago.

In fact, one goal is to help make the Wave machine a staple in US-based molecular-diagnostic labs, and in the process take a swing at a sliver of a market that some say may reach $3.7 billion sometime in 2006.

In an earlier interview with GenomeWeb News, SNPtech Reporter’s sister publication, Pogulis said the firm is “really in the early-going here to just enhance targeting of institutions, entities, and individuals” involved in clinical-diagnostic testing. “So that’s the first step at this point,” he said. “We’re not necessarily fleshing out lots of details, but we certainly want to make a concerted effort to advance the Wave technology into the [US-based] clinical-diagnostics setting.”

Indeed, Pogulis told SNPtech Reporter this week that the Novartis collaboration may also target possible diagnostic markers as well as mutations that can be targets for therapeutics. “Both [diagnostic and therapeutic] approaches are potentially fair game, and depending on the nature of the study, and nature of the results obtained, I wouldn’t expect this to materialize in some immediate diagnostic application,” he added. “But clearly we’re … participating in an area where a lot of people have predicted that … diagnostics may play a role.

“That’s not an immediate, near-term objective,” he said, referring to the Novartis deal.

To be sure, moving the Wave platform from the bench to the clinic would not be a logistical stretch — labs in the UK and France already use it to help diagnose colon cancer and cystic fibrosis. The logistics get tricky, though, when US regulatory requirements come into play.

However, because the Wave instrument does not have 510K marketing clearance from the FDA, its use in the United States is limited to CLIA labs. And because molecular diagnostics are regularly performed in CLIA labs, Transgenomic can first “look for opportunities with those sorts of users,” Pogulis explained.

In an e-mail, he added that filing the Wave instrument for either a 510(k) or pre-market approval “is not in the immediate or near-term horizon,” and that the firm “remain[s] cognizant of the potential need to go down such a path in the future ... “

Last November, Pogulis said: “There’s really not a whole lot to develop other than optimizing the specific PCR amplicons for the genes of interest,” he said.

Currently, Pogulis said, the Wave platform is used in a handful of labs in the United States, but stressed that these are employed in CLIA-lab settings. “We are on track in moving” the Wave platform into the diagnostic arena, he said. “I think increasing involvement in clinical research, which is what the Novartis agreement is all about, is a very valuable stepping stone ... for the technology.”

Asked if the Novartis collaboration means Transgenomic may be rounding a corner, Pogulis said: “Yeah, yeah. ... We think it really is an example of where the value propostion of our technology plays very, very well. And [the Novartis deal] is a reflection of that.”

— KL


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