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Epigenomics, Seeking Balance after Roche Jilting, Adds Lung Cancer Dx to Pipeline; Q1 Revenue Slide

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Three months after Roche backed out of a deal to co-develop tissue-based tests, including a potential rival to Genomic Health's trailblazing Oncotype Dx, Epigenomics is looking for a new platform for diagnostics and is expanding its pipeline, the company said last week.

Specifically, Epigenomics has added a blood-based lung cancer screening test to its pipeline that it intends to develop alone for the time being, Oliver Schacht, Epigenomics CFO, told Pharmacogenomics Reporter in an interview.

The firm intends to find a partner for further development and commercialization, and "we're not excluding Roche," he said.

On the platform front, Epigenomics this year intends to complete concordance studies on a third-party device for use with its tissue-based diagnostics to replace Roche's LightCycler. "We're going to go into a collaboration with a diagnostics platform device company" by the end of summer, said Schacht. "It's probably going to be an array-based system."

In tissue-based tests, Epigenomics is pushing forward toward the clinic. The company is planning to file its prostate tissue cancer-profiling test for premarket approval with the US Food and Drug Administration before the end of 2007, and it is hoping to do the same with its breast cancer test soon after, Schacht said. "It could be that we end up with a de novo 510(k), but all that does is chop off 90 days from the approval process," he said.

Epigenomics continues to work with Roche on three blood-based cancer detection tests, a prostate cancer test, a colorectal cancer test, and a breast cancer test.

The company plans to establish at least one of these two tests as an in vitro diagnostic in a "major" US reference laboratory by 2007, according to its first-quarter financial statement. "The first one logically would be the colorectal cancer screening test," Schacht said.

Unaudited Earnings

The company reported first-quarter 2006 unaudited revenues of $599,000, a 75-percent drop from $2.4 million in the year-ago period.

Epigenomics' Clinical Solutions unit experienced a steep revenue drop to $165,000 in the first quarter of this year from $840,000 during the first quarter of 2005. "This is largely due to the fact that 2005 figures included significant revenue from the breast cancer treatment response test then conducted as part of the Roche partnership," the company said in its recent earnings report.

The Diagnostics unit generated revenue of $370,000 during the first quarter, down from $1.5 million in the similar quarter of 2005.

The impact of the end of Roche's collaboration "was exactly as we'd expected," said Schacht. "When we put out the guidance for this year, and put together our own budgets and expectations, that had already been factored in there."

The company reiterated its guidance for 2006, estimating year-end revenues between $9.6 million and $11.5 million.

Revenues for the full year of 2005 were $12.3 million.

Net losses for the three months ended March 31 ballooned 52 percent to $5 million, or $0.31 per share, compared to $3.3 million, or $0.20 per share, for the similar quarter in 2005.

Research and development expenditures grew from $2.7 million for the recent quarter from $2.5 million, year over year.

The company reported liquid assets on March 31 of $37.5 million.

— Chris Womack ([email protected])

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