Toronto, Canada-based Tm Bioscience has had a recent string of successes licensing its Tag-It reagents, especially its cystic fibrosis panel, but investors have yet to notice the company, which trades on the Toronto Stock Exchange.
"I think the market is really flat, and I think Tm is caught up in that," Greg Hines, Tm CEO, told Pharmacogenomics Reporter this week. "There are a lot of negative things that have been going on in the [Canadian] biotech sector."
Last week, Tm said it had signed a deal to supply Laboratory Corporation with its Tag-It cystic fibrosis tests, taking another step into the big leagues, where CF testing is dominated by a diagnostic from Celera Diagnostics and Abbott Laboratories. The move follows US Food and Drug Administration clearance of Tm's diagnostic as an in vitro device in May, three smaller supply agreements concerning the test, and the launch of an expanded CF test that seems to indicate a market that may be favoring more polymorphisms per test. The company's Ashkenazi Jewish gene panel has been licensing briskly, too, according to Tm's statements over the last several months.
"We've signed on LabCorp and we've signed on Quest [for Ashkenazi-panel tests], and Genzyme is shipping our product."
Investor reaction, however, has been muted, and the company's shares have languished below CA$2.00 (US$1.70) except for two notable peaks in the past six months. Tm's stock rose from CA$1.65 on May 9 to CA$2.00 on May 18, an interval that saw FDA clearance for the company's CF test, disappointing earnings, a Tag-It Ashkenazi-panel supply agreement with Quest Diagnostics, and a CF-test supply agreement with Akron Children's Hospital in Ohio.
The second peak occurred on July 8, when Tm's share price rose 8 percent or CA$.18 to CA$2.25. Prior to that date, Tm announced a supply agreement with LabCorp for Tag-It Ashkenazi-panel tests on June 28, and an agreement to provide Tag-It reagents for an Intergenetics breast cancer test two days later.
Since mid-July, several deals have failed to move the company's stock much. These included the mid-September launch of an expanded CF panel by Tm and Genzyme, and three agreements announced in October: one to supply PathGroup Labs, a diagnostic laboratory company, with CF tests; a supply agreement with William Beaumont Hospital for Ashkenazi-panel tests; and a deal to supply reference lab Arup Labs with P450 tests.
Turmoil in the Canadian biotech market is at least partly to blame for tepid investor reactions, Hines said. "I think the Canadian investor sees that there is going to be a fair bit of consolidation in the Canadian healthcare and biotechnology sector," which he said has had a "negative impact" from events like the break-up and sell-off of MDS Pharma.
Most recently, Tm's stock price nudged up by about 6.6 percent to CA$1.93 following the company's Oct. 13 statement that it would provide its CF tests to LabCorp.
"If there are FDA-approved devices in the marketplace, there are a lot of pressures on companies like ours to supply them or service them," said Paul Billings, LabCorp's senior geneticist and vice president for biotechnology and healthcare strategy, in May. "It depends a little on our contracts," he said. Contracts with managed-care companies often influence the company toward adopting FDA-cleared tests, and contracts that must comply with Centers for Medicare and Medicaid Services regulations often mandate the use of an FDA-cleared test, if one is available, Billings added.
"We've signed on LabCorp and we've signed on Quest [for Ashkenazi-panel tests], and Genzyme is shipping our product," said Hines. In the CF market, Hines estimated that those three companies account for about 60 percent of all US testing.
But the CF-testing market is highly competitive. Quest and LabCorp are both customers of Celera's and Abbott's CF test, David Speechly, a Celera Diagnostics spokesperson, said in May.
Meanwhile, Third Wave Technologies added nine new customers for its InPlex CF test during the second quarter of 2005, bringing its total to 32, although Quest and LabCorp are apparently not among them. Third Wave could not be reached for comment before deadline.
Nanogen withdrew its CF test in late 2004, and in a May conference call with investors, Robert Saltmarsh, the company's CFO, said the company would release an improved version of the product this year.
The CF-screening market is the largest genetic screening market in the US, with "somewhere between 500,000 and 1 million [CF] screening tests" annually, said LabCorp's Billings. "The vast majority of testing in the United States is prenatal screening," he said. Cystic fibrosis occurs in about 2,000 to 3,000 Caucasians in the United States annually, he said with a lower incidence occurring in other ethnic groups.
Expanding CF Panels
Last year, the American College of Medical Genetics and the American College of Obstetricians and Gynecologists reduced the number of SNPs in their recommended cystic fibrosis carrier screening panels from 25 to 23. But Tm's original CF diagnostic interrogates 43 polymorphisms, a more recent version looks at 70, and the test it developed in collaboration with Genzyme examines 97.
According to Hines, "expanded panels are where the market is going." Black and Hispanic Americans are not fully covered by the 23 polymorphisms recommended by the ACMG and ACOG, he said. "Labs that are servicing those populations need to have that expanded panel," in the United States and elsewhere in the world, he said.
The Abbott/Celera CF diagnostic that LabCorp carries interrogates 32 genes, Marcia Eisenburg, LabCorp's vice president overseeing research and development in molecular diagnostics, said in an interview. The reference-lab giant still sees a need to offer the simple ACMG /ACOG panel, but "the reason that we felt it was important to have an adjunct test as an extended panel is that there are some family situations where you are looking for an additional rare mutation," she said.
"Perhaps some competitors have been able to gain some market share by having additional markers, but I also think you have to look at what the current recommendation for screening is, and we've always stood by that," said Eisenberg.
In addition to genetic counseling, LabCorp provides educational material describing the effectiveness of the company's tests "that actually states our ability to detect that disorder by mutation in the different ethnic groups," she said.
Chris Womack ([email protected])