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Rosetta Builds Dx Pipeline, Seeks Partners As It Reports Higher Q2 Loss on R&D Costs

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Rosetta Genomics last week provided an update on its diagnostic and therapeutic pipelines during a conference call to discuss its second-quarter financial results, which included a 27 percent jump in its net loss on sharply higher research and development spending.
 
Rosetta officials said that the company has expanded its diagnostics pipeline to include two new tests for differentiating certain types of lung cancer and is nearing in vivo testing in its liver cancer therapeutic program.
 
Michael French, president of Rosetta’s US operations, also hinted during the call that the company may be nearing a collaboration with a big pharma or diagnostics company.
 
“We continue to advance our lead diagnostic program for cancer of unknown primary” origin, Ranit Aharonov, Rosetta’s executive vice president of diagnostics, said during the call.
 
Development of the CUP diagnostic, which is designed to help clinicians identify the source of metastases, is now expected to be completed in the third quarter and is capable of distinguishing 15 different cancer types based on 28 miRNA biomarkers, she said.
 
“Previously, we had reported that our CUP [test] was based on 19 microRNAs,” Aharonov noted. “With the addition of only nine microRNAs, we have been able to increase the overall accuracy [of the test] to more than 90 percent, and in many cases more than 95 percent.”
 
As previously reported by RNAi News, the CUP diagnostic is expected to reach the US market sometime in 2008 (see RNAi News, 5/3/2007). While this test was expected to be Rosetta’s first commercialized product, Aharonov said that it would likely be commercialized in the second half of next year but that two newly developed cancer diagnostics may hit the market sooner.
 
“In addition to the CUP test, we expect to launch [next year] … a diagnostic for differentiating adenocarcinoma versus squamous cell carcinoma in the lung, and a diagnostic for differentiating lung adenocarcinoma … from mesothelioma,” she said.
 
In response to an analyst’s question during the conference call regarding the introduction of the two lung cancer tests, Aharonov said “we are aiming at expediting at least one of these [differential diagnostic] products and … it may actually be launched in the first half of ’08.”
 
She also provided an update on Rosetta’s earlier-stage miRNA-targeting therapeutics pipeline, noting that its lead liver cancer program, being conducted in collaboration with Isis Pharmaceuticals (see RNAi News, 2/23/2006), has yielded “several antisense compounds against several microRNAs, all of which, when inhibited, have demonstrated decreased proliferation of liver cancer cells in vitro with excellent dose-response properties.”
 
“With Isis, we plan to begin testing leads to several microRNAs in animal models by the end of this year,” she added.
 
Amid growing interest in the RNAi and miRNA fields, Rosetta is also aiming to forge a partnership with a big pharma or diagnostics firm — a deal that would “provide us further validation of both our intellectual property estate and proprietary platform technology,” French said last week.
 
“We see opportunities to establish alliances in several areas such as the development of diagnostic products for early detection and disease classification, the development of diagnostics supporting targeted therapies, and the development of therapeutic agents directed at microRNA targets,” he said.
 
When asked during the call whether he sees a partnership in one field as more likely than the other, French said that “in trying to be prudent about how we present the company’s performance, we talk about having a [either] diagnostic or a pharmaceutical collaboration, but of course we’re looking at both.”
 

“In trying to be prudent about how we present the company’s performance, we talk about having [either] a diagnostic or a pharmaceutical collaboration, but of course we’re looking at both.”

However, “a diagnostics partnership would be on a [slightly] grander level than a therapeutic just because of the progress that we’ve made in developing the diagnostic engine and pipeline,” he said. At the same time, “we believe there is sufficient interest in pharma right now to establish a therapeutic collaboration.”
 
French also noted that while there has been a flurry of deals between RNAi drug developers and big pharmaceutical players over the past year and a half, “none of those preclude the establishment of a relationship” with Rosetta Genomics in the microRNA space.
 
Those arrangements, such as Alnylam Pharmaceuticals’ recent tie-up with Roche (see RNAi News, 7/12/2007), have been “straight-up oligonucleotide/siRNA-directed relationships, and we still feel there is significant room [for Rosetta] to establish [an industry] relationship.”
 
The Financials
 
For the second quarter, Rosetta’s net loss jumped to $2.3 million, or $0.19 per share, from a year-ago loss of $1.8 million, or $0.71 per share.
 
Driving the net loss increase was an increase in research and development spending to $1.7 million from $1.1 million in the second quarter last year. Pushing up the firm’s R&D costs was the continued development of its diagnostic product candidates; the hiring of new employees as the company works to expand its staff from around 40 to 75 staffers by year-end; and the cost of license fees.
 
Rosetta’s business development expenses fell slightly in the second quarter to $412,000 from $447,000, while general and administrative spending climbed to $595,000 from $438,000 in the second quarter of 2006.
 
Rosetta reported no revenues in the second quarter, but saw its net income, which is derived primarily from interest on bank deposits and income on marketable securities, rise to $455,000 from $203,000 a year earlier.
 
As of June 30, Rosetta had cash, cash equivalents, short-term bank deposits, and marketable securities totaling $34.2 million.

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