Third Wave this week reported a 25-percent increase in its third-quarter molecular diagnostic revenue, and said it will focus on penetrating the high-risk human papillomavirus diagnostics space and the broader hospital-testing market with a single test for HPV, chlamydia/gonorrhea, and hospital-acquired infections.
Third Wave’s decision to focus on its HPV testing franchise follows a recent US district court ruling that agreed with Third Wave’s claim constructions in an ongoing HPV infringement suit against Digene.
However, the company announced that its submission to the US Food and Drug Administration for its HPV test for high-risk strains 16 and 18 will be delayed by several months.
The analyte-specific reagent test, which Quest Diagnostics will offer, was originally slated to be submitted in the fourth quarter of this year, but the FDA has made additional requests, and the company’s 3,600-patient study may need to accrue additional patients. The company continues to expect the test to win CE marking in December.
Total revenue for the quarter ended Sept. 30 increased to $8.2 million from $6.6 million last year. Clinical molecular diagnostic revenues increased to $6.7 million from $5.3 million in the year-ago period, and receipts from research product sales inched up to $1.4 million from $1.2 million it posted in the third quarter last year.
"We believe Third Wave is well-positioned to create a sustainable competitive advantage through unique HPV products and an automated instrument offering, and through leadership in the rapidly growing hospital laboratory market,” Third Wave CEO Kevin Conroy said in a statement.
According to Third Wave, the HPV market is expected to reach $250 million this year. However, the US market is only 22 percent penetrated, and the European, Asian, and Latin American markets are penetrated only a fraction of that.
Worldwide, more than 100 million HPV tests could be performed each year, Conroy said during the conference call, but only 12 million women are currently being tested for the virus, which has been shown to be a precursor to cervical cancer. “Growing awareness of HPV will continue to drive the rapid growth [of HPV diagnostics] around the world,” he added.
Digene, recently acquired by Qiagen, markets the only FDA-cleared HPV diagnostic test. The company sued Third Wave in January, claiming that it infringes one or more claims of US Patent No. 5,643,715, entitled “Human Papillomavirus Type 52 DNA Sequences and Methods for Employing the Same.” The patent belongs to Georgetown University, and Digene holds exclusive licensing rights [see PGx Reporter 05-16-2007].
As Pharmacogenomics Reporter sister publication BioCommerce Week reported in March, Third Wave countersued Digene, accusing the company of “abus[ing] its monopoly power to thwart competition” in the HPV diagnostics market.
In September, the District court reaffirmed a Markman ruling that found in favor of Third Wave in the construction of claims. In an October filing with the court, Digene wrote it “will not be able to sustain the claim of infringement under the present claim construction.”
A jury trial of Third Wave’s countersuit will commence on Feb. 19 in Madison, Wisc.
“It appears now that Digene will not be arguing that Third Wave infringes its patent. Third Wave, on the other hand, will be presenting to a jury our antitrust suit against Digene,” Conroy said. “We will be asking the court to halt Digene’s longstanding anti-competitive business practices and to compensate Third Wave for its damages.”
He added, however, that he expects Digene to appeal the Markman ruling.
Damages are automatically treble in antitrust suits and antitrust violators are also liable for attorney’s fees and court costs, Conroy noted.
As reported in BCW this week, Qiagen CEO Peer Schatz declined to comment on the ongoing litigation. He said that Qiagen – through its acquisition of Digene – has the most extensive patent portfolio in the world covering HPV.
"This IP portfolio is only one of very many significant barriers to entry in the HPV testing market," Schatz said.
On the clinical front, Third Wave officials cited studies involving its high-risk HPV assay that suggest its test is superior to Digene’s product.
In nine analytical studies looking at 2,000 samples, there was 86 percent agreement between Third Wave’s test and Digene’s test. In the instances when test results did not match, sequencing found on average that 79 percent of the time Third Wave’s test yielded the right results.
This “demonstrates that at the appropriate sensitivity level, Third Wave’s test is likely more specific at detecting high-risk HPV types and at avoiding false positives than the FDA-approved test on the market,” Third Wave R&D vice president Jorge Garces said during the call.
The company is also conducting its own 3,600-patient study before it submits the test to the FDA for clearance. One of the primary endpoints of the trial is its ability to predict the absence of disease. According to Conroy, however, based on an initial limited dataset, the company has seen “slightly lower-than-expected disease prevalence” from the trial’s central pathology lab.
“The positive effect of lower disease prevalence has the potential for greater negative predictive value,” Conroy said. However, the downside “is the need to enroll additional … subjects to adequately power the study.”
“The positive effect of lower disease prevalence has the potential for greater negative predictive value.” However, the downside “is the need to enroll additional … subjects to adequately power the study.”
The company said this additional enrollment will push back the anticipated completion of the study to the first quarter in 2008. Meantime, Conroy noted that Third Wave customers have indicated that they are willing to switch from an FDA-approved test to a homebrew test if these results prove positive.
In its updated treatment guidelines this year, the American Society for Colposcopy and Cervical Pathology expanded HPV 16/18 testing for women who are HPV-positive but pap-negative.
Additionally, studies have shown that these strains are more likely to cause cervical cancer than other high-risk strains. A woman who is infected with HPV type 16 is 40 percent to 50 percent more likely to progress to cervical cancer. A woman with type 18 is 20 percent more likely to progress to cervical cancer, but within a decade that risk can increase to 50 percent.
“Third Wave is the only company with an HPV 16/18 genotyping product,” Conroy said. “HPV genotyping will allow physicians to identify and treat those women at greatest risk of cervical cancer. It also permits them to manage patients with other HPV types less aggressively.”
Comparatively, Digene’s product differentiates between high-risk HPV types (16, 18, 31, 33, 35, 39, 45, 51, 52, 56, 58, 59, 68) and low-risk HPV types (6, 11, 42, 43, 44).
"I see a lot of data around HPV testing, where analytical performances are being looked at," Qiagen’s Schatz said. "What is important is clinical performance, and this is where probably the most significant barrier kicks in. We have, however, a very clear [patent] position that we will defend . very actively going forward."
Menu of Must-Have Tests
The other part of Third Wave’s long-term goal is to grow its hospital-based testing business, which mainly includes diagnostics for HPV, chlamydia/gonorrhea, and hospital-acquired infections, which the firm plans to consolidate into a single instrument.
During the call, Third Wave officials also discussed plans for the company’s cystic fibrosis test and warfarin-sensitivity test. Market penetration for the company’s cystic fibrosis ASR grew to 15 percent in the third quarter from approximately 10 percent at the end of 2006.
Earlier this year, Third Wave launched ASRs designed to enable clinical laboratories to build molecular assays for warfarin sensitivity. In previous quarters, Third Wave officials had expressed an intent to submit the test for FDA clearance.
However, Conroy this week said the return on investment for the warfarin-testing market is “not significant enough to invest in getting FDA approval” at this point. “But we’ll see how things develop in the next six months,” he added.
Since September, when the agency approved a warfarin sensitivity test made by Nanosphere, making it the first FDA-approved test of its kind on the market, several companies that were previously selling reagents to laboratories have said they plan to clear a test kit through the agency to increase physician and patient confidence in the products [see PGx Reporter 10-10-2007].
According to Conroy, a significant educational push among patients and doctors is necessary before the warfarin-diagnostics space matures.
In this past quarter, Third Wave also entered into a five-year contract under the Federal Supplies Schedules program, which “makes it easier for federal health care facilities to order our products. It will also help us establish new customer relationships within the federal government, and allow us to serve our existing customers more effectively,” said Conroy. The agreement includes the company’s entire menu of clinical products.
In the third quarter, the firm’s R&D expenses rose to $5.8 million from $3.5 million the previous year.
The company’s net loss for the period grew to $6.4 million from $5.2 million year over year, due in part to $1.8 million in litigation charges related to the Digene suit.
Third Wave had around $43.6 million in cash, cash equivalents, and short-term investments as of Sept. 30.
The company also reaffirmed its previously announced guidance of 2007 clinical molecular diagnostics revenue of between $26 million and $28 million, and expects total revenue to be between $31 million and $33 million.