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Emboldened By Scrapie Campaigns, German Newcomer Puts Orchid Cellmark in Crosshairs

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In a small German port city on the North Sea coast, the 15 men and women who make up GAG Bioscience are gearing up to take on the industry leader in scrapie-susceptibility genotyping.

The tiny company, based in Bremen, hopes its mass spectrometry-based genotyping technology will catch up to Orchid Biosciences’ technology as the preeminent platform for eradicating scrapie from the world’s sheep population, and will help animal-health officials breed resistant sheep.

GAG, which has already begun genotyping sheep in a half dozen European and Middle Eastern countries, is also currently negotiating with the Canadian government to initiate a testing program for its flock, SNPtech Reporter has learned.

Scrapie testing is “a major issue in the [European Union],” said Georg Melmer, vice president of business development at the company. The hope is that GAG lands on the EU’s scrapie short list.

Though GAG is enjoying relatively strong success in the scrapie-eradication market, its focus on that space began to gel only after GAG put the brakes on an obscure genotyping business held over from a now-defunct predecessor. Closely held, GAG is the second incarnation of a biotech company founded in 1997 whose platform centered on the little-known genotyping application loosely called cattle identification. When the company dissolved three years later, its founders, including Jorn Mosner, absorbed the cattle business into what would become GAG. Mosner would go on to become CEO.

Today, the cattle business is one of GAG’s four business arms, each of which is based on the MALDI-TOF genotyping platform made by its Bremen neighbor Bruker Biosciences. (The other two, beside scrapie identification, include human pharmacogenetics and plant breeding.) The bovine unit aimed at helping government regulators, farmers, and even consumers trace cattle to know the farm in which it was raised and the abbatoir in which it was slaughtered. For example, GAG’s technology was used to ensure that beef labeled Argentine — for which consumers in Germany would pay a premium — is the real thing.

The application, which Mosner conceded hasn’t caught on outside of Germany’s farming community, might also be used to trace which meat was grown organically, or which originated in slaughter houses with a history of quality-control problems. Company officials maintain the strategy was sound when it was created, citing the notoriously stringent European Union food regulations.

“This is intended for the consumer to say, ‘Well, now I can look up which type of cattle it was, where it came from, what its origins are,’” said Melmer. “There’s a general feeling [in Germany] for the need to have good food. But nobody wants to pay for the technology” that might help enable this.

“Unfortunately,” he said, “that didn’t pan out commercially.” He said the cost of the genotyping technology would result in a one- to two-cent increase in the cost of beef per pound, but expressed doubts that consumers would recoil at the increase.

Interestingly, Orchid Biosciences intends to enter this market, according to CEO Paul Kelly. He told SNPtech Reporter that the company will jump into the space because an undisclosed number of current customers voiced their belief that the Cellmark platform can be applied there.

“It’s a new market for us; it’s a new initiative,” Kelly said.

Since shelving its bovine-fingerprinting business, GAG has strategically “shifted gears” away from the bovine initiative, said Melmer. Instead, the company has begun redirecting R&D resources to its scrapie and human pharmacogenetics programs.

According to CEO Jorn Mosner, GAG has tied up a “huge” scrapie genotyping agreement with the German government, and has penned similar deals with Austria, Greece, Italy, Israel, and Sweden. The company is currently vying to sell its services in Spain and France, “but it’s not easy,” Mosner said: These two countries hope to pen scrapie plans with home-grown companies. Mosner added that “in the near future” GAG will be approaching former Eastern-bloc nations Bulgaria, Romania, and Poland.

According to Kelly, Orchid has the “dominant market share” in the scrapie susceptibility-testing market in the UK, and is the sole provider for the service in Northern Ireland. The company runs more than 500,000 samples per year for scrapie susceptibility testing in these markets, he added.

He declined to say in what other countries Orchid is trying to sell the Cellmark brand for scrapie susceptibility testing, but said “we’re looking to aggressively grow the business outside of the UK and Northern Ireland.”

One advantage GAG’s platform might have over Orchid’s technology is cost. According to Mosner, governments using GAG’s technology to genotype sheep can expect to shell out €10 per animal, compared with €25 per animal for Orchid.

Asked to comment, Kelly said it might cost €25 to genotype a single sheep using the Cellmark platform. “But the price is volume sensitive … and clearly customers come to us based on the service, the brand, and the respect that we have,” he said. “That allows us to secure the kinds of prices that we have in the marketplace.”

The eradication of scrapie in sheep, which is believed to be similar to bovine spongiform encephalopathy in cattle, and by extension Creutzfeldt-Jakob disease in humans, is big business in Europe, particularly in Great Britain and France. There, the countries seek “the total testing of all sheep to eliminate the scrapie allele,” said Mosner. For example, under the National Scrapie Plan for Great Britain and Northern Ireland, sheep with scrapie-susceptible genes will, over time, be bred out of the UK national flock.

The disease is also getting noticed in Canada, especially after a scrapie outbreak hit Alberta and Saskatchewan sheep flocks this spring. Also, in late May, Canadian officials disclosed that a single cow in Alberta was infected with BSE. That single case has caused Canada to cull more than 2,700 cattle from its herds, and has cost the country’s cattle industry around $414 million in lost revenue in the first month after the discovery was announced.

Today, Canada “wants to build a scrapie genotyping service, and they asked [GAG] if we want to provide the technology,” Mosner told SNPtech Reporter last week. (He said Canadian officials approached GAG at a scrapie meeting in Oslo, Norway, before Canada’s BSE scare in May.)

Though it is difficult to say how much money the EU or Canadian government intends to spend to counter scrapie, Mosner said his company’s collaboration with the German government is worth €500,000, or $565,000, in annual revenue, and the deal in Canada, if it gets approved, would be worth between €500,000 and €1 million, or $1.1 million. He said the negotiations are in the early stages, but that he expects a deal to be signed in the fall.

GAG has also been applying its genotyping platform to molecular diagnostics, and the company last year signed a fee-for-service contract with Bayer to identify molecular diagnostics markers. It is GAG’s only human pharmacogenetics collaboration to date, said Mosner, who added that the company is negotiating with an undisclosed number of biotechnology and pharmaceutical firms for similar SNP-discovery and -analysis deals.

— KL

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