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Array-Based Tests Advance as Dx Firms Engage FDA, Raise Capital, Report Revenue Growth

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It was arguably a good week for microarray-based molecular diagnostics companies, as Courtagen Life Sciences began the process of submitting its platform for regulatory clearance; SQI Diagnostics closed a fresh round of financing; and GenMark Diagnostics and CombiMatrix reported increases in revenues due to growing demand for their tests.

Courtagen Life Sciences announced last week that it recently submitted its first pre-investigational device exemption information package to the US Food and Drug Administration for its Avantra Q400 BioMarker Workstation and QPDX BioChip multiplex protein immunoassay for the measurement of C-reactive protein, an inflammation marker. Woburn, Mass.-based Courtagen said it is also pursuing a CE-IVD mark for the system to market it in the EU.

Courtagen CEO Brian McKernan told BioArray News that the company is seeking regulatory clearances for the assay because it will provide potential users with a "perspective of how [much less] risky our technology might be relative to other non-FDA approved technologies." Should the company achieve its goal of having the system cleared next year, it should reduce doubt about the product's performance, he said.

"Everyone in the industry strives for the best risk-adjusted returns as possible for their investment, so risk minimization when it comes to technology in the diagnostics space is important," McKernan said.

McKernan told BioArray News sister publication ProteoMonitor last week that the company plans to seek about $15 million in funding at the end of June to support the FDA submission process and other initiatives (PM 5/11/2012).

"We are speaking to some [venture capital firm]s but mostly growth equity investors who understand the value that the Courtagen team brings to the table," McKernan said of the effort. He acknowledged that the VC market in life sciences is "going through changes" and "firms are going out of business and retrenching."

The ability to "go to the table as a VC to do syndicate deals like in the past is not necessarily a given," said McKernan. "Firms don't necessarily know who will be at the table next year or the year after to support continued capital injections into their portfolio companies."

According to McKernan, the ability for companies like Courtagen to secure funding is related to revenue potential, the company's history, business strategy, and the "ability to create a long term competitive moat around the business."

One company that has experienced the challenging capital markets environment is Toronto-based SQI Diagnostics. An agreement to buy German tool vendor Scienion for $15.6 million fell apart last year though when SQI couldn't secure the funds needed to close the deal (BAN 10/11/2011). At the time, executives from both firms blamed a hesitant market for the outcome. "The market is so lousy," Scienion CEO Holger Eickhoff said at the time. "People would rather sit on their money than invest in anything."

SQI has managed to raise more funds in recent days, however. The company announced last week that a private placement of up to $9 million has since closed the first tranche of the financing, with the second tranche expected to close later this week.

Chief Financial Officer Andrew Morris said in a statement that the funds will allow SQI to support its customers, build its menu of autoimmune test panels, and focus on its diagnostic tools and services customers, leading to the "generation of new product and service revenue opportunities."

The company is currently developing additional tests for vasculitis and lupus, but has not provided a potential launch date for either product. Its diagnostic tools and services business enables customers to build panels of existing single-biomarker tests into microarrays that they can then offer to their customers. These multiplexed test panels may in turn be sold and used as either research-use-only or laboratory-developed tests. BioArray News spoke with Morris about the offering last year (BAN 12/6/2011). He could not be reached for comment this week.

Rising Revenues

As Courtagen and SQI made progress in building their businesses, both GenMark Diagnostics and CombiMatrix, firms that already have tests on the market, saw their first quarter revenues spike.

Carlsbad, Calif.-based GenMark led the way, reporting a 185 percent jump in revenues for the three months ended March 31 compared to the same period last year.

Led by reagents revenues, the firm's total revenues increased to $2.2 million from $758,000, as product revenues rose to $2.1 million from $693,000, though license and other revenues dropped to $39,000 from $65,000. Within product revenues, reagent revenues rose 213 percent to $1.9 million from $608,000, and instrument and other revenues climbed 60 percent to $240,000 from $150,000.

The company attributed the growth to an increase in the number of systems placed at customer sites, growth in test menus, and a "significant increase" in the number of tests sold. During the first quarter, it placed 22 analyzers — including eight sales — for a total installed base of 189 analyzers.

The company continues to progress on the development of its diagnostics pipeline. CEO Hany Massarany said last month that GenMark expects regulatory approval for its respiratory virus panel before the end of the year and plans to release a more comprehensive genotyping assay for hepatitis C by the third quarter of this year. Submissions for CYP2C19 and KRAS genotyping assays are also planned (BAN 4/3/2011).

All of the panels run on GenMark's eSensor XT-8 system, which relies on DNA hybridization and electrochemical detection on the company's eSensor cartridges to produce results. Massarany said during an earnings call last week that the firm is developing a next-generation system that incoporates sample preparation, amplification, and other pre-analytical steps. GenMark hopes to have a prototype of the instrument in the fourth quarter with a commercial launch slated for late 2013, he said.

Like GenMark, CombiMatrix has also seen demand rise for its array-based tests. It reported a 36 percent year-over year-increase in first-quarter revenues last week, with total revenues rising to $1.2 million from $913,000 a year ago. The Irvine, Calif.-based company said that it performed 1,377 billable diagnostic tests for 105 customers in the quarter, compared to 958 tests for 86 customers in Q1 2011.

CombiMatrix attributed that growth to array comparative genomic hybridization testing for genetic abnormalities in pediatric and prenatal samples. CEO Judd Jessup said during an earnings call that the firm "continues to see a growing number of opportunities" for its testing services, and remains "optimistic" that it will continue to grow its business throughout the year.

CombiMatrix has changed its market focus however. While it will continue to build on its successes in the cytogenetic testing market, the company plans to direct its attention almost exclusively towards its laboratory partnerships to sell its oncology-focused diagnostics, and will reduce its own oncology efforts.

"While we've made progress with lab partnerships, we've been less successful breaking into the broader pathology and oncology customer bases," Jessup said. As the company monitors and adjusts its strategy, "based on its limited resources, we've determined that we will de-focus that part of the business. Associated with that decision and in other parts of the organization, we are implementing a number of changes to control our expenses, lower our break-even point, and make sure that our resources and capital are deployed in a cost-effective manner."

CombiMatrix last year inked a sales and marketing partnership with Clarient, a GE unit that provides molecular-diagnostics services to pathologists and oncologists, granting Clarient exclusive rights to sell all of CombiMatrix's oncology-related tests to commercial labs "based on certain minimum levels of sales." Clarient had since 2008 been offering CombiMatrix's HemeScan test, which predicts the probable outcome of chronic lymphocytic leukemia at the time of diagnosis (BAN 4/12/2011).

In addition to HemeScan and the impending HemeProfile test, CombiMatrix offers the HERScan test for HER2 analysis in breast cancer patients and an array-based, post-prostatectomy prostate cancer risk-stratification assay.

The firm had been developing other cancer assays, but as a result of the shift in focus, "we are not planning on moving forward with those," Jessup said last week, adding that many laboratories were already offering tests for the cancers that CombiMatrix's assays were targeting.

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