New DNA-amplification technologies that bypass the PCR process may save reference labs and insurance companies tens of millions of dollars each year and increase the pace at which molecular diagnostics and new SNP technologies are adopted.
But despite these technologies’ potential, their inventors have two substantial hurdles ahead of them: First, it is widely believed that few of them know these new platforms exist. Then there’s Roche, the granddaddy of the polymerase chain reaction.
Today, molecular diagnostics accounts for $1.7 billion, or 5 percent, of the US clinical-laboratory market, according to Leomics Consulting. Within that space, which is said to be growing around 20 percent per year, SNP-based technologies are the backbone of nearly half a million predictive tests performed around the world each year at a cost of between $200 and $250 apiece.
That’s no small change. Considering that the volume at which these predictive tests are performed is expected to double every year for the next several years, reference labs and the health plans that reimburse them will soon be shelling out at least $500 million to perform them.
To be sure, the upstream costs of these tests are actually much smaller — somewhere between $20 and $30 apiece — but the brunt of the cost comes from PCR licensing fees. With an average fee of between $15 and $20 per test, PCR royalties quickly become significant: Assuming reference labs next year perform 1 million predictive tests, at least $15 million of their fees — roughly two-thirds of every dollar spent — will wind up at Roche. [Sample preparation and detection, which together cost between $5 and $10 per assay, comprise the remaining one third.]
“These costs will have to come down” before molecular diagnostics attains any real traction, said one former Quest Diagnostics executive. The first place to cut, therefore, will likely be the PCR process.
Aged King of the Hill
“PCR is a clunky technology,” said Steve Johnston, founder and CEO of Genetic Diagnostics, a Toronto-based startup that hopes to nudge PCR off its pedestal. “But it was revolutionary. It opened doors, and it had a good run. We have a much more elegant solution.”
At its core, GDI’s technology combines the patient sample, probe, and certain other chemicals into a single mixture. Avoiding the separation step, the technology places DNA in a kind of “quiet storage mode” quite different from the noisy, highly reactive environment that exists when DNA strands are traditionally split. This way, said Johnston, when a probe is introduced it can quickly find its match. In addition, because samples are not denatured, the technology allows researchers to perform multiple assays on the same sample.
“We can take a single-strand DNA oligo and have it attach to a double-stranded target in a highly specific manner and form a triplex on a Watson-Crick basis in five minutes at room temperature,” he explained. “When we saw that we knew we had something. At that point we shattered the dogma of what we thought was possible.”
Johnston said GDI’s technology can run assays 80 percent faster than PCR and save labs between $20 and $60 per assay, including labor and royalty costs.
GDI currently has four employees and expects to close a round of private-equity financing by the end of March. Johnston said the firm has not yet decided what corner of the molecular-diagnostics market it will likely occupy, or whether its collaborators will be big reference labs like Quest Diagnostics or LabCorp, or big pharma.
“We have several opportunities in front of us now, and we are in the process of putting our first couple of tests together,” he said, adding that GDI will define its market in the next two or three months.
Another company, Naxcor, has developed a technology that also bypasses the PCR step. That technology, called XLnt, replaces a nucleotide in the backbone of an oligo that the company manufactures and synthesizes with a coumarin molecule.
According to Geoffrey McKinley, vice president of R&D and business development, this molecule is highly specific for a particular nucleotide on the target that’s being tracked. Next, after being hybridized, the solution is irradiated with UV light to form a covalent bond between the target and oligo. Finally, after being washed, the solution “tremendously increases the signal-to-noise ratio,” said McKinley. The technology “doesn’t create any junk … and we don’t have a contamination issue at all,” he said.
Today, Naxcor, based in Menlo Park, Calif., is negotiating with a number of undisclosed reference labs it hopes will license the XLnt technology. Once it has gained some traction in these labs, McKinley said the firm will set its sights on second-tier hospital labs.
Meanwhile, Third Wave Technologies is already out on the market with a well-known PCR alternative. Currently, Third Wave sells several dozen tests to the large clinical-reference labs in the United States, including Quest Diagnostics. Customers that use the platform, called Invader, save money on reagents and PCR licenses and, to a lesser extent, labor.
The technology relies on linear amplification of the signal it generates rather than on exponential amplification of the target, according to CEO Lance Fors. Third Wave said this allows researchers easily to quantify target concentrations while reducing the effects of contamination that may result from exponential target amplification.
All told, the Invader is at least 10 percent less costly than PCR and might make it easier for small hospitals with little PCR experience to perform the diagnostics in-house, said Fors. Third Wave’s next market will be HMOs and integrated health networks, he said.
According to Jorge Leomics, a former vice president of functional genomics at Quest Diagnostics, each of these platforms can be a simple solution for hospitals intimidated by PCR and other amplification technologies. PCR “is still too complicated” for many hospital-based labs and near-patient diagnostic settings, said Leon. “It’s unbelievable. I tend to believe that PCR is very simple now, that everyone can digest this,” Leon said. “But when I go out to labs at hospitals, they still see PCR as a very complicated proposition” — a potentially significant finding considering these labs account for more than half of the entire molecular-diagnostics market.
“We need to provide them with something simpler and cheaper,” said Leon, who now runs Leomics Consulting. “That’s a valuable position.”
As it happens, Roche is not tone deaf to the opportunity. Though the Swiss drug giant will continue well into the next decade to hold patents for PCR technology and collect more than $100 million a year in licensing fees, company officials admit they are eagerly investigating ways to ensure that alternative platforms don’t grab too much of an extraordinarily lucrative market.
Ronnie Andrews, senior vice president of marketing at Roche Molecular Diagnostics, said his company has been placing its bets with real-time PCR and, as it happens, with some of the up-and-comers developing PCR alternatives.
“Certainly our strategy is to perpetuate the PCR technology and really to extend PCR into other diseases … like cancer and microbiology,” Andrews told SNPtech Reporter. He said Roche’s RT-PCR, like the TaqMan technology mark-eted by Applied Biosystems, will become a good option for labs that require faster turnaround. [ABI owns the TaqMan trademark in the research marketplace and owns a license from Roche to perform TaqMan chemistry.]
“We believe that being able to automate PCR and help decentralize the marketplace so we can provide this information to the community hospital level [carries a lot of] importance,” said Anfrews. “And we think we have a nice opportunity to do that.”
In fact, Roche is currently rolling out TaqMan 48 worldwide, which the company calls the first real-time PCR instrument for the clinical-diagnostics arena. It will enter the market initially with assays for HIV, hepatitis B and C, and cytomegalovirus. Andrews also stressed that Roche is not averse to using TaqMan to “cannibalize” its existing PCR technology for the sake of newer products.
“Having said that, this doesn’t preclude us from looking at other technologies,” he said. Though he was tight-lipped about what companies or technologies Roche may be courting, Andrews said the firm is interested in products that can “miniaturize and speed up” the ability to run tests on the molecular level.
“We’re not going to turn our backs on those technologies. We happen to be blessed [with] the financial capability to make acquisitions or make partnerships to make sure we have the leading technologies in molecular science,” he said.
“We’re not naïve enough to believe that PCR is the be-all, end-all long term,” Andrews said. “PCR by itself is not a sustainable competitive advantage. But the strategies by which we deploy [it] are. Somewhere out there someone will create something that’s better, faster, and more sensitive, and you’d better be on top of that.”