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Exiqon to Shut Down California Lab After Reimbursement Issue Stymies Sale Talks

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By Doug Macron

Exiqon last week announced that it intends to shut down Oncotech, its Tustin, Calif.-based clinical laboratory improvement amendments-certified lab, after reimbursement problems stymied the company's efforts to sell the unit.

Despite the setback, the Danish company remains on track with its strategy of marketing its microRNA-based diagnostics in collaboration with partners, and expects to announce a deal before the end of the year, a company official said.

According to Exiqon CEO Lars Kongsbak, the company has begun selling off Oncotech's assets and expects the lab to cease operations within 60 days.

While Exiqon will, in all likelihood, not be able to recoup its original investment in Oncotech, Kongsbak said that the decision to shutter the lab will have a "positive" impact on the company.

"We were losing money on the Oncotech operations," he said. "Now, of course, that will stop."

In late 2007, Exiqon announced that it had purchased Oncotech for $45 million in a bid to speed its entry into the miRNA diagnostics field (GSN 11/29/2007). At the time, Exiqon said that the deal would provide it with a bank of tumor samples, a sales force, and expertise navigating the US regulatory and reimbursement waters.

About two years later, however, Exiqon disclosed that it would sell off Oncotech and its portfolio of non-miRNA tests in order to focus on developing diagnostics based on the small non-coding RNAs (GSN 12/17/2009).

Exiqon said that it had been in negotiations with companies interested in buying Oncotech, but that these talks ran aground when Palmetto GBA, the Medicare administrative contractor for California, said that it would no longer provide reimbursement coverage for Oncotech's products.

"We … responded in a very diligent way to their non-coverage proposal," Kongsbak told Gene Silencing News this week. "Despite that, [Palmetto] decided to enforce the non-coverage" determination.

Kongsbak said that Oncotech's primary competitor is located in Pennsylvania and works with a different Medicare contractor. "Apparently, there is no issue in terms of their reimbursement and, of course, it's difficult to compete in a market where one competitor is getting reimbursed and the other is not," he noted.

As a result, "it didn't make sense for us to continue the business," he said.

Around the time Exiqon announced that it wanted to sell off Oncotech, it said that it had shifted its strategy away from developing and marketing its own miRNA diagnostics and would instead only commercialize such tests in collaboration with industry allies (GSN 2/25/2010).

"As a consequence of that, a number of diagnostics companies approached Exiqon because they wanted to be a partner," Kongsbak said. Discussions are "ongoing, and we intend to complete those negotiations this year."

An announcement of a partnership will be made before the end of 2010, he added.

Kongsbak noted that the planned partnership could center around any of Exiqon's three development-stage miRNA diagnostics.

The company's most advanced, he said, is a test designed to identify which stage II colon cancer patients are at a significantly high risk of disease recurrence and for whom adjuvant chemotherapy may be an option.

Around 15 to 20 percent of these patients experience a recurrence of the disease, Kongsbak explained, "and the problem is that they are not offered any treatment besides surgery. It would be a great advantage for those patients to be identified so that they could receive chemotherapy, as well."

The company said earlier this year that this test could be ready for the market in 2012.

Exiqon also is developing a test for the early detection of colorectal cancer using miRNA signatures obtained from blood serum. Last summer, the company said that initial data from this program, which is being funded with a grant from the Danish National Technology Foundation, was expected to be available in the first quarter of this year (GSN 9/27/2009).

The company did not release these data yet, and Kongsbak said this week that the company is currently in the process of "identifying microRNA biomarkers in serum." Exiqon has projected that this test could also reach the market in 2012.

Exiqon is also working on a test for identifying the source of cancers of unknown primary origin, which it said in January could become commercially available in next year.

Previously, the company had also said that it was developing tests to detect drug resistance in patients with stage II, III, and IV colon cancer and with stage II, III, and IV lung cancer; and a test for evaluating the risk of disease recurrence in stage I and II endometrial cancer patients. These, however, are no longer listed in Exiqon's formal diagnostic pipeline.

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