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Rosetta Genomics Unveils Two New Development-Stage Tests

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By Doug Macron

Rosetta Genomics this week unveiled two new microRNA-based tests under development, one a kidney cancer diagnostic and the other a mesothelioma prognosis assay, and disclosed that it will be building up an in-house sales force to market them and certain of its other second-generation products.

The company also disclosed that its dispute with Prometheus Laboratories, the US distributor of its three commercialized diagnostics, is set to go before an arbitration panel shortly. Meanwhile, Rosetta's top executive noted during a conference call held to discuss the firm's second-quarter financial results that a number of undisclosed companies have expressed interest in gaining distribution rights to the tests should Prometheus lose them.

Currently, Rosetta's product portfolio consists of miRview Meso, which is designed to differentiate lung cancer from mesothelioma; miRview Mets, which is designed to determine the source of cancers of unknown primary origin; and miRview Squamous, which is designed to differentiate squamous from non-squamous non-small cell lung cancer. All three are marketed under the ProOnc label in the US by Prometheus.

Meantime, the company has been developing five second-generation tests, only three of which have been disclosed until now.

The first of the two new product candidates is miRview Kidney, which is being developed to "accurately identify four histological types of renal … tumors, namely clear cell, papillary, and chromophobe renal-cell carcinoma, as well as oncocytoma benign tumor," Rosetta CEO Kenneth Berlin said during the call.

"Treatment options for renal cell carcinoma have increased significantly over the past decade, with targeted therapies playing an increasingly important role," he noted. "We expect to be ready to launch miRview Kidney in [the US in] the second quarter of 2011."

The second newcomer to Rosetta's pipeline is miRview Meso Prognostic, "which is being developed to sub-classify mesothelioma patients based on their prognosis," Berlin said. "The ability to predict the likely severity of the disease is clinically important as this knowledge can help guide future diagnostic testing and treatment options."

This test is expected to be ready for US commercialization in the fourth quarter of 2011.

Closer to market introduction are the three second-generation diagnostics Rosetta had previously disclosed. The first, miRview Bladder, is designed to assess the risk of superficial bladder cancer becoming invasive.

"To date, we have identified biomarker candidates for this test and are currently optimizing the microRNA biomarker panel," Berlin said. "We remain on track to launch this new product in [the US in] the second half of 2011."

The second, miRview Lung, is an enhanced version of miRview Squamous. It is designed to distinguish between neuroendocrine and non-small cell lung cancer, and sub-classify non-small cell lung cancer patients into squamous and non-squamous subtypes. In the case of neuroendocrine lung cancer, it sub-classifies between small cell and carcinoid tumors.

This test detects and amplifies miRNAs "in minute amounts of fine-needle aspirate cell blocks, as well as in biopsies and resection specimens," Berlin noted. "We are in the final development stages of miRview Lung and are pleased to announce we're moving up the [US] launch date for this test to the first half of 2011, six months earlier than originally projected."

Prometheus holds the right of first refusal to market this test in the US.

The third is an expanded version of miRview Mets that includes more than 40 cancer types. According to Berlin, Prometheus currently has the US market rights to this test under its arrangement with Rosetta. As such, "we remain on track to launch this test outside the US by the end of this year, [but] are in the process of determining our US launch strategy."

He cautioned that the planned launch dates assume that the US Food and Drug Administration "does not implement any significant changes in the way that it regulates laboratory-developed tests. Any such changes could impact the timing of the US launch of some or all of these tests."

The FDA is currently soliciting public comments regarding its plans to modify its oversight plans for laboratory-developed tests. Earlier this summer, the agency said that it planned to oversee all LDTs — a change from its previous strategy of allowing the Centers for Medicare & Medicaid Services to regulate these tests under the Clinical Laboratory Improvement Amendments. The comment period is open until Sept. 15.

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For those products not covered under its deal with Prometheus — miRview Kidney, miRview Meso Prognostic, and miRview Bladder — Rosetta plans to take a new approach to commercialization, at least in the US, by handling a portion of the sales push itself.

"Our plans for these [second-generation] products consist of us having our own, dedicated selling team of approximately 68 sales professionals … located in key oncology markets in the US," Berlin said during the conference call. "We plan to supplement this selling effort by forging appropriate relationships with third parties to leverage their existing sales infrastructures, as well as to leverage the access and relationships that these third parties have established with oncologists and pathologists."

Additional details will be provided as the tests near market launch, he added.

Prometheus Problems

Earlier this summer, Rosetta disclosed that it had run into problems with Prometheus over funding related to the development of certain new miRNA tests (GSN 6/3/2010).

Prometheus in early 2009 obtained the US rights to miRview Meso, miRview Mets, and miRview Squamous, as well as a second generation of miRview Mets, and picked up an option for miRview Lung (GSN 4/16/2009).

Prometheus is also obligated to "share costs for the further development of the tests licensed under the agreement and the development of additional diagnostic tests," Berlin said at the time the dispute was announced.

According to a Rosetta filing with the US Securities and Exchange Commission, the companies have "engaged in negotiations regarding the development plan" for other diagnostics but are "in disagreement with respect to the scope and funding of the development plan" as spelled out in their licensing agreement.

The filing also stated that Rosetta has accused Prometheus of failing to use "commercially reasonable efforts" to market the three miRNA diagnostics, the SEC filing states.

In response, Prometheus alleged that Rosetta breached a stock-purchase agreement signed at the time the licensing arrangement was consummated, the filing adds.

This week, Berlin said that Rosetta has submitted its response to Prometheus' "original demand for arbitration and filed our arbitration counterclaims against Prometheus.

"Prometheus has since filed a response to our counterclaims, arbitrators have been selected by both parties, and a third independent arbitration has also been chosen," he said, adding that "the arbitration tribunal [is expected] to be seated shortly."

In terms of when the dispute may be settled, Berlin said that should the arbitration proceed through to its end, a final decision by the tribunal will likely be rendered "in the middle of next year."

However, he noted that Rosetta and Prometheus could reach an agreement on their own that could end the matter sooner.

Berlin also noted that Rosetta has been "approached … by several companies who have said, 'If you get rights back to those products, we'd be interested to partner with you on them.'"

As such, should the rights Prometheus now holds revert to Rosetta, "there is interest [from] other parties to help us commercialize those products," he said.

Q2

For the three-month period ended June 30, Rosetta said revenues surged to $70,000 from $14,000 in the same period a year earlier.

Research and development spending in the quarter rose to $1.9 million from $1.4 million, while marketing and business costs climbed to $1.6 million from $1.4 million.

General and administrative expenses were $854,000 in the second quarter of 2010 compared with $749,000 in the second quarter of 2009, Rosetta said.

Rosetta's net loss for the second quarter edged up to $4.2 million, or $0.25 per share, from $3.8 million, or $0.28 per share, in the year-ago quarter.

The company ended the quarter with cash, cash equivalents, short-term bank deposit and marketable securities totaling $7.7 million.

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