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Gov t Hearing on Pathogen Detection Could Expand Market for Dx Shops

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A US House of Representatives subcommittee this week met to discuss the government's approach to anthrax detection, including the examination of different methods used by various laboratories. The result of this meeting, which found considerable miscommunications and poor coordination among the major government agencies charged with pathogen detection, may prove favorable to companies such as Cepheid and CombiMatrix

"Some time ago, we were told critical gaps remained in detection, sampling, and data-analysis protocols for biological contaminants like anthrax," Christopher Shays, chairman of the House Government Reform Subcommittee on National Security, Emerging Threats and International Relations said in a March 17 statement. "Every false positive brings multiple federal agencies stumbling to the scene with no real plan, and every false negative risks complacency in the face of a lethal threat."

The meeting presented the findings of a General Accounting Office report on anthrax detection, which recommend steps for inter-agency coordination and detection-method validation, the statement said.

"I think that was a follow-up to the false positive that came out of the Pentagon mail system about two weeks ago," said John Bishop, Cepheid CEO, referring to the March false discovery by Commonwealth Biotechnologies of anthrax in a Pentagon mail room. Cepheid was not part of that test.

According to a report from Pacific Growth Equities, which covers Cepheid, the meeting "highlighted the lack of coordination between the various government agencies" responsible for pathogen detection, such a the Department of Homeland Security, the Department of Defense, the Environmental Protection Agency, and others.

Pac Growth said it expects Cepheid to "take advantage of opportunities to educate and penetrate appropriate agencies going forward." It went on to say that "it's clear to us that 1) the government remains committed to [the] development of coordinated, rational and accurate testing methods and procedures and 2) [Cepheid's] technology would address needs of various agencies, yet apparent lack of knowledge about GeneXpert poses [a] hurdle to adoption."

The total market for molecular diagnostic pathogen detection systems is hard to define. Besides Cepheid and its partners Northrop Grumman and Smiths Detection, Nanogen has built a device, CombiMatrix is targeting its array at the market, and Agilent and Invitrogen have promised a major announcement related to bioterror pathogen detection related to their joint PATHAlert detection system.

The US Postal Service employs an automatic mailroom air-detection system based on Cepheid's GeneXpert cartridges, while the Department of Homeland Security's BioWatch program, specialty contracts from the armed services, the US Centers for Disease Control and Prevention's Laboratory Response Network, and large corporations provide a potential market for molecular diagnostics focused on potential biological terrorism agents.

All of these together make a reasonably sized market. "Based on our own assessments, we see the market as $300 million to $400 million, and see it growing to about $1 billion by 2010," said Bishop.

Determining the size and shape of the bioterror market is complicated because some agencies are reluctant to share information about their programs, according to several sources interviewed for this article.

Another complicating factor is cost and the difficulty of establishing common methods. "These are programs that are funded with DoD or Homeland Security money, so I'm not sure companies are making a commitment to developing a biothreat microarray above and beyond doing the research being funded for that array" because there is no proven market, said David Danley, director of Department of Defense and Homeland Security programs at CombiMatrix.

Additionally, the government won't commit to microarrays as a platform until they can be proven cost effective, he said. "So I would say that things are relatively tentative in terms of who's building competitive products, and how well the government is going to receive those products — all I can tell you is that there is still a great deal of interest in the government for these products," he added.

A Few Markets

The USPS has used Cepheid's GeneXpert system for "over 500,000 samples with no false positives," said Kaye Chegwidden, former director of Cepheid's Postal Service detection program, and its current director of customer service. The system built by Northrop Grumman and subcontractors Cepheid and Smith Detection runs mailroom air through a liquid, then performs PCR on the sample.

Grumman was awarded a $175 million production contract in December 2003, when system deployment "started small, then ramped up a great deal," said Chegwidden. In documents filed with the SEC, Cepheid credited a 186-percent year-over-year revenue increase in 2004 largely to sales to the United States Postal Service. "The USPS is looking at 2 million cartridges a year," said Chegwidden.

Cepheid is also looking to expand its presence. "We're working on an assay [including] Yersinia pestis, Francisella tularensis, and anthrax … [which] should be for sale by the end of the year," said Chegwidden.

The US Department of Homeland Security's BioWatch program, which samples the air of cities from clandestine locations, uses no molecular diagnostics, but employs microarrays made by Applied Biosystems. The program's air filters are tested at the Centers for Disease Control and Prevention's Laboratory Response Network, which also would receive samples from first responders and hospitals in the event of a biological attack, according to Rosemary Humes, director of Infectious Diseases and Preparedness at the Association of Public Health Laboratories. The network would also receive samples tested positive at the USPS, said Humes. About 20 labs in the network have an average of one to three ABI-7000 microarray platforms, Habert said.

But the members of the Laboratory Response Network have yet to fully adopt molecular technologies for pathogen detection, said Humes. "Microarrays are something we're looking at in the future — I'd say it was still in the research stage, but it's something we know is definitely coming in the future," she said.

Until then, more traditional methods will hold sway, said Vickie Baselski, technical director of microbiology at the Regional Medical Center at Memphis and Memphis Pathology Laboratory. "Most of this is still manual, believe it or not. Most of it is still culture-based. It's hard to beat culture for sensitivity, specificity, and cost effectiveness," she said.

Hospitals and clinical labs in general continue to use cell culture instead of molecular diagnostics, including PCR, microarrays, branched-chain DNA amplification, and ligase chain reaction, because "cost effectiveness has been the difficulty to this point," she added.

CombiMatrix, for one, is pinning its hopes for this market on the adoption of microarray technology, and it's developing a cheaper, fluorescent-based reader as early as this summer. "To displace existing technology, you really have to have a value proposition," said Danley.

— CW

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