JP Morgan Healthcare, Day 3: Luminex, GenMark, Bio-Techne, Quanterix, PerkinElmer, MGI, and More

SAN FRANCISCO (GenomeWeb) - The 37th annual JP Morgan Healthcare Conference continued here on Wednesday with several life science tools and molecular diagnostics companies presenting before investors. Below are brief reports on the presentations and breakout sessions covered by our team at the conference and in our offices in New York.

For coverage of the first two days of the conference, please see the Monday and Tuesday roundups.

Luminex

Luminex CEO Homi Shamir said that the firm expects to soon wrap up a clinical trial initiated to validate its next-generation, syndromic Verigene II MDx system along with an enteric assay. The firm anticipates submitting the results of the trial to the US Food and Drug Administration with a view to obtaining marketing clearance.

"We believe that most of the systems that we will be selling from the beginning of next year will be Verigene II," which will replace the Verigene I, said Shamir. The firm plans to start shipping systems later this year, pending FDA clearance.

He cited numerous improvements of the Verigene II system over its predecessor, including that it's a fully automated, sample-to-result system with a much smaller footprint, an easier-to-use interface, and the ability to run assays at room temperature, which saves on refrigeration and shipping costs. And for Luminex, the new system will improve gross margins, he said.

Further, he noted, the firm has just initiated a clinical trial to validate the new system with a respiratory panel.

"We've said all along that in order to have an effective launch of Verigene II, we needed to have at least two assays ready to [launch] with it so that we didn't have a one-system, one-assay product," Luminex CFO Harriss Currie said in a breakout session after the firm's presentation.

Luminex is also developing a Verigene II Plus platform that will enable labs to simultaneously run targeted pathogen assays, similar to its Aries system, and syndromic assays, Shamir said.

Overall, the firm's flexible testing and pricing approach gives it a clear advantage over competitors, Shamir claimed. Customers are increasingly concerned by pricing pressures and a shifting reimbursement environment, and "people don't want to pay for something they don't use," he said.

Luminex expects to report about $81 million in revenues in the fourth quarter of 2018.

Its sample-to-answer diagnostics business is expected to book $18 million in revenues within the quarter, a 41 percent increase over Q4 2017.

In its MDx business, the firm anticipates booking $25 million in revenues during the fourth quarter of 2019, which will put it on a $100 million annual revenue run rate for those products, Shamir said. The MDx business includes the Verigene and Aries systems, of which the firm placed more than 260 under contract in 2018. Luminex has grown its customer base for those instruments from 360 in the first quarter of 2017 to about 600 in the fourth quarter of 2018, Shamir said.

The Verigene system, purchased by Luminex with the acquisition of Nanosphere for $77 million in 2016, brings in $100,000 in annual revenue for each active customer, while the Aries system, a legacy Luminex product, brings in $55,000 in annual testing revenues for each active customer.

Importantly, the firm recently added a third primary business segment with the acquisition of MilliporeSigma's flow cytometry portfolio for $75 million. The acquired flow cytometry portfolio has an active installed base of about 5,000 units and annual growth in the high-single digits, he said.

GenMark Diagnostics

GenMark Diagnostics anticipates that it will soon receive FDA clearance for a gram-negative blood culture identification panel running on the ePlex molecular diagnostics system, the firm's CEO Hany Massarany said during a presentation on Wednesday.

The expected regulatory approval will complete all FDA clearances for a suite of blood culture identification panels running on ePlex, a system that was cleared by the FDA with a respiratory panel in 2017 and was an important driver of revenue growth for the firm in 2018.

"We are in a good place with the clearances we received last year and ready to move forward from here," Massarany said.

In December, GenMark received 510(k) clearance for its fungal pathogen and gram-positive panels.

In terms of bringing advanced testing to molecular labs and other patient sites, the company's strategy is straightforward, he said. First, the firm has "automated and integrated the multiplex molecular diagnostic process from the physician ordering a test all the way to the reporting of that test on our ePlex sample-to-answer flexible and scalable system," he said.

Further, the company has been developing a portfolio of multiplexed syndromic panels and software functionality "that have created significant demand for our solution over the past year and half or so," he said.

These components of its strategy have been delivering strong revenue and placement growth in end-user sites around the world, he said, adding that "personalized medicine and value-based care are fundamental drivers" of the firm's opportunities.

Earlier this week, GenMark reported that its preliminary fourth quarter revenues rose about 21 percent year over year, thanks to an increase of about 110 percent in revenues from its ePlex analyzers during the quarter. For the three months ended Dec. 31, 2018, the company said it expects total revenues of about $19.4 million, including ePlex revenues of approximately $12.1 million.

The increase in revenue reflects the popularity of highly multiplexed syndromic testing in hospitals treating patients, particularly among those who are immunosuppressed and are experiencing critical complications, such as sepsis, where getting a fast test result is vitally important, Massarany said.

Flu testing volumes have been lighter in the current season compared to last year, Massarany said. "Notwithstanding that, we grew the business and had expanded the installed base significantly ahead of the current flu season and drove growth with the respiratory panel in the US," he said.

He noted that GenMark placed 42 ePlex analyzers in Q4, finishing the year with an installed base of 354 ePlex analyzers in US and European labs.

In its product pipeline, GenMark is developing a gastrointestinal panel and anticipates seeking clearance for a multiplexed detection panel for central nervous system conditions in the longer term. The firm doesn't expect that either panel will be commercialized prior to 2020.

GenMark has already developed and launched software that links its ePlex instrument results with information in clinical databases for better clinical decisions. New versions of the software are expected this year and in 2020, Massarany noted.

Bio-Techne

Bio-Techne CEO Charles Kummeth said his firm has accelerated growth in recent years, both organically and through business acquisitions, and it has completed 14 acquisitions, including the recent purchase of Exosome Diagnostics for $575 million in August 2018 and Advanced Cell Technologies for $250 million in July 2016.

Exosome Dx and ACT make up Bio-Techne's Genomics business, one component of its Diagnostics and Genomics business segment.

Frank Mortari, vice president of corporate development at Bio-Techne, said on the sidelines of the healthcare conference that the firm is eagerly awaiting a decision by the National Comprehensive Cancer Network (NCCN) about whether updated clinical guidelines will recommend use of the Exosome Dx EPI risk score by physicians.

Bio-Techne anticipates a positive decision later this year on use of the test and has submitted published data from two clinical trials that described the test's clinical utility, Mortari said.

That decision would make it easier for a local Medicare Administrative Contractor in the Northeastern US — where Bio-Techne has a testing laboratory — to approve Medicare reimbursement for the test, Mortari said.

The decision should come soon, Kummeth said, because the NCCN committee has completed its work. "It's time to get this out [to patients]," he said. "It's 92 percent sensitive and PSA [level testing] doesn't work."

Based on the firm's market evaluation, the volume of intellectual property in the business of testing for medical conditions using analysis of exosomes is "substantial," Kummeth said during a breakout session after his presentation.

"This is a hot area of research, and it is going to lead to a lot of innovation but probably a lot of litigation [over intellectual property] as well," he said.

The firm's EPI prostate cancer risk score, a laboratory-developed test acquired with Exosome Dx, is used to determine the likelihood of the presence of high-grade prostate cancer on an initial biopsy in men 50 years old and older, with a prostate specific antigen level of between 2 and 10 ng/mL. Kummeth noted that the test workflow starts with a urine sample and then involves RNA extraction, qRT-PCR analysis, and use of a Prostate (IntelliScore) multivariate algorithmic analysis.

For FY 2019, the firm will report prostate cancer test sales but not revenues as it integrates its acquisition and works to obtain payor approvals, he said.

The firm is also developing a similar bladder cancer test using the exosome platform, as well as a version of the platform that operates using blood specimens, he said. "In a year and half, hopefully, we will be in the same place with bladder cancer [test commercialization] as we are today with prostate," Kummeth said.

Quanterix

Quanterix CEO, President, and Chairman Kevin Hrusovsky said that his firm moved into research markets as the first application for its Simoa immunoassays after previously considering entering diagnostics markets.

"We decided to move into research first where there is no regulatory or reimbursement risk, and taking the technology and applying it primarily in pharmaceuticals and biotech to help drugs get approved more effectively," he said.

The firm has raised $150 million over the past three years as it continues to build out the technology, Hrusovsky said during a presentation on Wednesday.

In December 2017, it raised part of that — $73.7 million — in an initial public offering.

The Quanterix Simoa technology is a detection system consisting of an optical fiber bundle to carry light in and out of each reaction well, a proprietary image-capture device, and image-analysis software to allow researchers to observe the assays on a single-molecule level.

The total available market for its research applications is $1 billion today and "evolving very rapidly," Hrusovsky said, and longer-term, the firm sees a total available market of about $30 billion in diagnostics.

In September 2017, Quanterix terminated a license agreement with BioMérieux that covered commercialization of Quanterix's Simoa immunoassay technology for in vitro diagnostic purposes. With that termination, Quanterix regained control of that portion of its intellectual property and in so doing removed an overhang on the company, Hrusovsky said Wednesday.

The firm launched its Simoa SR-X benchtop instrument in 2018 for neurology research applications. It expects to launch the HD-X, an upgrade to its existing HD-1 instrument, in the second half of 2019, also for neurology research.

Further, Quanterix is planning to launch a multiplex immunoassay technology for cancer applications in the first half of 2019. In November last year, it announced the launch of an early-access program for the new platform, which is called SP-X.

The benchtop platform combines Quanterix's high-sensitivity Simoa immunoassays with higher levels of multiplexing than are offered by its existing systems. By April 1 this year, the firm expects to ship the first instruments, Hrusovsky said Wednesday.

To date, the company has used a bead-based approach in its Simoa platforms, but the SP-X system will use a planar technology, a route to expanding the technology's multiplexing capabilities.

PerkinElmer

With 2018 revenues growing around 7 percent to $2.8 billion and EPS at $3.60, PerkinElmer CEO Robert Friel said the company "feel[s] good about [its] progress but "even better about the opportunities going forward."

In particular, Friel cited opportunities in the areas of reproductive health, applied genomics, immunodiagnostics, and food and cannabis testing.

PerkinElmer acquired Swedish startup Vanadis in 2016, which had been developing noninvasive prenatal testing technology that did not rely on either next-generation sequencing or microarrays, and last year began collaborating with the Women & Infants Hospital of Rhode Island to test the Vanadis platform on samples from around 2,650 women. Prahlad Singh, PerkinElmer's president and chief operating officer, said that data from that study is expected in the second half of the year.

The Vanadis system is not for sale for clinical use in the US yet, but it received CE-IVD marking in Europe last November. In addition, Singh said the firm has already placed between nine and ten systems and has also generated data internally that it is in the process of submitting for publication. "That will give a sense of the product performance," he said. PerkinElmer anticipates placing around 30 Vanadis systems in 2019.

Currently, most pregnancies are screened via biochemical testing, Friel said, and PerkinElmer has a majority of that market. For instance, last year 27 million pregnancies worldwide were screened, and of those 21 million were biochemical screens and 6 million were NIPT. PerkinElmer performed about 10 million of the biochemical screens.

Friel said that the first major opportunity for Vanadis would be to convert its existing customer base from biochemical screening to NIPT via Vanadis. For biochemical testing, Friel said the company is paid on average about $7 per test, and assuming that NIPT would be paid on average $100 per test, that represents a $1 billion market opportunity. He said the risk that some of those customers would instead opt for a competitor's NIPT was low since the majority of PerkinElmer's customers are served by public health laboratories and those labs, either because of the workflow complexity or cost, would not use one of the NGS-based NIPTs currently available.

Another interesting opportunity that has emerged recently, Friel said, is in the food safety and cannabis testing market. The legalization of cannabis "creates a potential market for us," he said, which the company plans to tap into by leveraging much of the same technologies it has developed for its diagnostics business.

For instance, he said, the triple quad mass spec instrument QSight, which PerkinElmer originally developed for newborn screening, is particularly well suited for cannabis testing, Friel said. The instrument is designed to work well with dirty samples that have solvents and oils present in them, because of technology the company developed to eliminate that chemical background.

MGI Tech

BGI Group subsidiary MGI Tech said that it has sold 1,000 of its next-generation sequencing instruments to more than 250 customers in 16 countries, and that it holds 35 percent of the NGS market in China. In addition, Duncan Yu, MGI's president, said that Shenzhen, China-based direct-to-consumer company WeGene had purchased MGI's newest instrument, the high-throughput MGISEQ-T7 instrument, which has the capability of producing 6 terabytes of data per day.

The DTC firm ultimately plans to sequence 40,000 genomes on two instruments this year and will scale up to five T7 instruments in order to sequence 100,000 genomes in 2020, Yu said.

Yu noted that BGI also offers a health promotion program to its employees whereby they have the option to have whole-genome sequencing along with other routine health screens, imaging tests, and other omics testing. Employees get their results returned via web-based and mobile app formats. Geneticists interpret sequencing results and doctors evaluate the health test results. The program is free for employees, which also have the option of allowing their data to be used for internal research. The company does not have plans to commercialize this testing, Yu said.

Somalogic

Somalogic plans to launch a handful of clinical proteomics tests this year in the concierge health and self-pay markets in North America, Hong Kong, and Japan, CEO Roy Smythe said in a presentation.

Throughout 2019, Smythe said the company planned to focus on developing relationships with providers and payors to "bring them on board" during the year and into 2020, with the aim of launching a direct-to-consumer platform in 2021. In the meantime, Smythe said the company would continue to sell to pharmaceutical companies, which has become a reliable source of revenue.

Somalogic launched its SomaScan platform in 2012, and the majority of its revenue has come from its pharmaceutical partners. Over the last year, the firm switched its business strategy from a fee-for-service model to one in which it retains ownership of the data by offering its services at a reduced cost.

Through those pharma partnerships as well as its own internal research and a recent deal it struck with Decode Genetics, it has amassed, according to Smythe, the "largest clinical proteomics database" of more than 300,000 specimens. Its samples all also have clinical information associated with them, which has enabled the company to glean insights about health and disease, Smythe said.

Among the tests that the firm has clinically validated are those for risk of heart attack, risk of type 2 diabetes, complications from type 2 diabetes, the likelihood of maintaining weight loss, and more. In addition, it has hundreds more in development in the fields of cancer risk, predicting drug complications, nutrition, and wellness.

Smythe said that the firm plans to raise additional funds in order to commercialize its tests. Longer term, Smythe said he thought the biggest opportunities would be in medically developing countries that do not have an established medical infrastructure, such as China. While there is an "immense opportunity in the US," there are also major challenges with the "legacy care delivery infrastructure" that's focused on acute care and high-cost interventions, rather than prevention.

Becton Dickinson

In his presentation, Becton Dickinson CFO Christopher Reidy highlighted the firm's strong fiscal 2018 performance and noted that it was due in part to continued benefits of the firm's late-2017 acquisition of medical technology firm CR Bard. "The combination of BD and Bard has significantly accelerated our strategy," Reidy said.

Asked about possible softness in the Chinese market, Reidy said that given BD's comprehensive strategy focused on reducing infection rates, and its purposeful efforts involving local innovation and manufacturing, the firm has not seen any signs of slowing down in the region. Between the BD legacy and Bard businesses, the firm has about $1.1 billion in revenue in China and double-digit growth across all three business segments, Reidy said.

As of the end of the firm's fiscal first quarter 2019 in December, there had been no unexpected changes in the China business. BD has also just signed its sixth memorandum of understanding with the Chinese government regarding improving healthcare by reducing hospital-acquired infections, he said.

The firm's president of the Life Science segment, Patrick Kaltenbach, highlighted the fact that that business was a major driver of BD's overall success last year, regardless of the strong influenza season, with mid- to high-single digit growth over the prior year. Included in this was "exceptional growth" in the Kiestra automation systems, a 30 percent growth in BD Max revenues, and strong adoption of the firm's blood culture solutions. The BD Max is the firm's fully integrated, automated molecular diagnostics platform that performs nucleic acid extraction and real-time PCR.

Reidy also sees "significant runway" for future growth based on the firm's robust assay pipeline. In fiscal 2018 and early 2019, BD got regulatory approvals on an enteric viral panel and assay for carbapenemase-producing organisms, tests for tuberculosis and human papillomavirus, an informatics platform, and assays for protein expression. The pipeline for Life Sciences in 2019 includes the launch of Kiestra IdentifA for automated sample ID; early-access launch of the BD Cor system, a fully automated high-throughput, real-time PCR testing system; and launches of a series of components for the FACSDuet, FACSLyric, and FACSymphony suite of cells sorters.

For fiscal 2019, BD expects revenue growth of 5 to 6 percent year over year, and earnings growth of 10 percent. On a currency-neutral basis, earnings are expected to improve 16 to 17 percent, Reidy said.