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Veracyte Expects HalioDx Acquisition to Drive International Market Growth

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NEW YORK – Veracyte aims to further expand its international reach by using its recently announced acquisition of French immuno-oncology diagnostics firm HalioDx as a steppingstone into the European market.

The South San Francisco, California-based firm also shared new validation data this week on its nasal swab classifier to guide downstream management decisions for patients with unknown lung nodules — one of the tests that could benefit from new manufacturing capabilities as a result of the HalioDx buy.

Veracyte's Percepta Nasal Swab assay combines both genomic and clinical features to stratify lung nodules in smokers and other at-risk individuals. After RNA is extracted from a nasal swab, whole-transcriptome sequencing is performed on the sample to identify biomarkers linked to lung cancer.

"We wanted to … position the nasal swab [classifier] as the first noninvasive test that would be done on patients who are found to have a nodule, either through screening or incidentally found, and referred to a pulmonologist for [a] workup," Bonnie Anderson, executive chairman of Veracyte, explained. "We wanted that test to rule out cancer with a high degree of accuracy for as many truly benign patients as we could, to keep those patients from undergoing procedures and workup in lung cancer."

Veracyte and collaborators shared the new data on the classifier at the American Society of Clinical Oncology annual virtual meeting this week. Carla Lamb, study co-investigator and director of interventional pulmonology at Lahey Hospital and Medical Center, pointed out that there are "millions of lung nodules" in the clinical space that require rapid and objective processes to quickly determine whether a patient may have lung cancer.

Lamb shared initial data from the prospective study, where her team first collected nasal epithelium swabs in patients who were either current or former smokers with a detected lung lesion on a CT scan. The team followed patients up to a year or until they were diagnosed with lung cancer or a benign disease.

Using a training cohort of about 1,120 samples, the group built the final nasal classifier using gene expression and clinical factors such as age, number of packs smoked per year, years since quitting, nodule size, and nodule spiculation.

Lamb and her colleagues selected two decision boundaries for the classifier to rule out cancer in samples: one for low-risk stratification with greater than 95 percent sensitivity to guarantee high negative predictive value and one for high-risk stratification of greater than 90 percent specificity to ensure high positive predictive value.

In addition, Lamb's team included genomic indices — such as the patient's gender, current versus former smoker, and smoking duration — into the final classifier. She said the group also used a layered structure to manage cohort diversity and accurately stratify patients to high, medium, and low risk based on guideline definitions.

After training the assay's algorithm, Lamb and her colleagues validated the 502-gene panel on a cohort of 115 patients with benign nodules and 134 patients with malignant nodules. In terms of low-risk performance, the panel had a sensitivity of 96 percent and specificity of 41 percent. Meanwhile, for high-risk performance, the assay had a sensitivity of about 58 percent and specificity of 90 percent.

"The breakpoints are significant because [they] can help a clinician [decide] when to take action with a biopsy, or when the patient has a low-profile risk that [allows] you [to] follow the nodule and feel comfortable doing that," Lamb explained.

Lamb's team therefore believes that by increasing the accuracy of the initial risk assessment with the Percepta Nasal Swab, physicians might be more likely to stick to current guidelines for lung nodule treatment management.

"You could add [this] tool to that physician's 'armament' … [which] could give a more concrete, more objective number that pushes a patient into a low-risk category or up to a high-risk category," Lamb said. "Nodules will be in the forefront of care for patients with thoracic disease, and it also means we need to have responsible and objective diagnostic tools to couple with a patient's [clinical data] to guide diagnostic evaluation in a meaningful way."

Veracyte CEO Marc Stapley noted that the firm expects to initially launch Percepta Nasal Swab as a laboratory-developed test at a small number of US sites later this year.

Veracyte will look at "50 to 100 sites, across the spectrum, from community centers to larger [sites], which will help us gather the data needed for reimbursement" and eventually port the test to the NanoString nCounter platform in 2022, with hopes of a commercial launch in 2023, he added.

Acknowledging that Veracyte will need to go through an optimization process to port the nasal swab classifier over to nCounter, Anderson said that the firm is following a previously successful model used for its Envisia Genomic Classifier. The firm also plans to eventually adapt recently acquired Decipher Biosciences' bladder and prostate cancer tests to the nCounter platform.

HalioDx acquisition

Veracyte expects that its €260 million acquisition of HalioDx, announced earlier this week, will help expand the market for its nasal swab classifier and other tests on the nCounter platform in Europe.

Anderson explained that Veracyte has steadily widened its international expansion plans over the past two years, starting with the global nCounter licensing agreement with NanoString Technologies in 2019.

"We didn't want to remain as a CLIA service lab in the US, and did not believe the CLIA model would allow us be a global growth enterprise," Anderson said. "We believe that laboratories around the world are going to be more likely adopt and use our tests if they're available in a platform and testing distributed mode, where their labs can run the test locally."

Stapley emphasized that the HalioDx acquisition will primarily help expand Veracyte's manufacturing capabilities, allowing the firm to transfer manufacturing of kits that will run on the nCounter platform to HalioDx's CLIA-certified lab in Marseilles. However, he acknowledged the process will take up to two years.

"Our [primary] goal is to port as many of the tests as possible over to the nCounter system, like Envisia and [the] nasal swab classifier … sometime in 2022," he added. "The transaction is the final piece of a puzzle set many years ago … to cement [the] growth of the global business." He also noted that Veracyte intends to preserve HalioDx as a standalone business.

Stapley also pointed out that the HalioDx acquisition marks Veracyte's entry into the field of immuno-oncology, which he said is a "different strategy" and operation than what Veracyte has pursued with the nCounter and its own RNA-sequencing platforms.

HalioDx's Immunogram multimodal analysis platform uses immunohistochemistry to measure patients' immune response to cancer, analyzing their tumor microenvironment for more than 300 immune biomarkers.

"[The platform] helps see what's happening with the patient when they have a tumor, within their own immune system," Stapley said. "It's a really important way to help personalize medicine and see what's going on with the individual on a cellular level."

Veracyte will also receive full rights and patents to HalioDx's Immunoscore assay — which helps determine therapy or aggressiveness of a patient's cancer — and expands Veracyte's market into CRC detection. A version of the test, called Immunoscore Colon, measures the density of two T lymphocyte populations in formalin-fixed, paraffin-embedded tissue samples from tumor resections or biopsies.

Anderson emphasized that HalioDx's immunohistochemistry platform is a separate technology and does not adapt to the nCounter system. At the same time, she believes it complements Veracyte's long-term commercial goals in the oncology space.

Veracyte will potentially adapt HalioDx's platform to diseases it already has developed diagnostic tests for, including lung, breast, and thyroid cancer. The firm may also eventually use HalioDx's technology as part of an integrated diagnostic workflow for cancer patients.

In the US, HalioDx's predominant business includes partnerships with biopharma companies out of its CLIA-certified lab in Richmond, Virginia.

"We do a lot of our genomic testing on the tumor [and] we're now adding the ability to measure the patient's immune response to that tumor through their technology," Anderson explained. "We can get leverage in that, both in the clinical setting, but also more in the biopharma setting in every indication that we are in [for] cancer."

Stapley said the financial benefit of HalioDx's Immunogram platform on Veracyte's revenue will ultimately depend on when the firm closes the acquisition later this year. However, he pointed out that HalioDx generated revenues of about €20 million in 2020, and about €5 million in Q1 of 2021. Veracyte also expects to benefit from HalioDx's biopharma revenues.

While Veracyte plans to kit its suite of cancer diagnostic tests in Europe and other international markets, Anderson said that the firm will continue to follow a CLIA model in the US as part of its near-term strategy.

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