What will regulatory clearance mean for companies that manufacture chromosomal microarrays? For Affymetrix, the "biggest thing" that US Food and Drug Administration clearance would provide is the ability to promote its product "more aggressively," according to a company executive.
Doug Farrell, Affy's director of investor relations, told investors at the Leerink Swann Global Healthcare Conference in New York last week that the array vendor this month submitted its CytoScan product to the agency for clearance. Farrell, whose remarks were webcast, said that while the firm's customers are likely to continue to use CytoScan as part of laboratory-developed tests, FDA clearance of CytoScan would "shift the competitive landscape" in the chromosomal microarray market, giving Affy an advantage in winning new customers.
"There are a number of customers that would like to do cross-platform comparisons, and the ability to take that data and promote with it requires you to have FDA clearance," Farrell said. Because of that ability to market CytoScan for clinical use, Affy can be "much more aggressive in promoting the product" than it has been in the past, even though Farrell acknowledged that gaining clearance is unlikely to "change the trajectory of the [CytoScan] business dramatically."
Affy is the first of the three major array manufacturers to state publicly that it has filed a chromosomal microarray product with the FDA for clearance. The company said previously that it expects the FDA could clear CytoScan by the middle of this year, a timeline that Illumina has also provided for its chromosomal microarray product. Representatives from Agilent Technologies have told BioArray News in recent weeks that they are eyeing a 2014 submission date for a cyto-related package (BAN 1/29/2013).
The cytogenetics market is of growing importance for Affy. CEO Frank Witney said during the firm's recent earnings call that cytogenetics represents an annual opportunity of $800 million, with about $500 million of that opportunity in cancer cytogenetics and about $200 million in postnatal constitutional cytogenetics, of which half is still done using classical karyotyping (BAN 2/13/2012).
Farrell noted at the conference that the company's chromosomal microarray sales tripled to $30 million in 2012 from $10 million in 2011, and now account for a tenth of its revenues. Tim Barabe, the firm's CFO, said at Leerink Swann that the shift to cyto benefits Affy in several ways: by offsetting projected declines in its legacy gene expression array business, by making the firm less vulnerable to potential cuts in federal funding, and by helping it reach its goal of being profitable in 2013.
"Cytogenetics is not affected by sequestration," Barabe said when asked by an analyst about the impact of possible reductions in the US National Institutes of Health budget. He noted that about a quarter of the firm's US business is derived from sales to academic clients, and that despite the potential of future NIH budget reductions, management is "pretty confident that we will be able to return to growth in 2013," with projected total revenues of around $330 million.
Another impact of clearance could be on reimbursement. Farrell described the current reimbursement landscape for chromosomal microarray tests as "complex," noting that the firm's customers have been relying on code stacking to obtain reimbursement for those assays.
"Obviously with a clearance, our hope would be to have a CPT code that was tied directly to this product that would simplify the paperwork for customers," said Farrell, adding that being able to sell an FDA-cleared product with a "much cleaner reimbursement strategy" would be "another big benefit" of obtaining clearance.
In general, Farrell and Barabe appeared to be positive about the prospects for the company's array business.
"While there has been a lot of speculation about how relevant arrays are in some of these markets, we had double-digit growth in our volumes for the full year last year," said Barabe. "I know some of our competitors have announced similar type growth trajectories for volumes, so it is our expectation that these are markets that will continue to do very well," he said, likely referring to Illumina CEO Jay Flatley's comments about his firm's array business during its fourth-quarter earnings call (BAN 1/29/2013).
Flatley said at the time that Illumina shipped enough chips to process more than a million samples across all of its array-based product lines, including its BeadArray-based Infinium and GoldenGate arrays, and its digital microbead-based VeraCode assays.
According to Barabe, the throughput and pricepoint of arrays are "not going to be matched by other technologies," such as next-generation sequencing. "If you think of NGS and other things, these are not price points that are achievable in the near term with some of these other platforms, so we think we have a very good runway there," he said.