Seattle-based NanoString Technologies has been maneuvering over the last couple years to get into the diagnostics business, and now it has gotten itself in position to start bringing in real revenues from this new line of business.
NanoString is announcing today it has gotten a CE Mark designation from the European Union, which allows the company to begin marketing its nCounter instrument as a diagnostic tool for patients with breast cancer. NanoString will now take the next steps in sharpening its European marketing strategy in major countries, hiring local sales reps, and negotiating for reimbursement from health authorities in each country. The plan is to start selling its first diagnostic systems in Europe by early 2013, says CEO Brad Gray.
“This has been the culmination of two-plus years of work to establish our diagnostics business,” Gray says. “It’s the end of a major process and beginning of a whole new era of Nanostring’s existence.”
NanoString, a spinoff from the Institute for Systems Biology in Seattle, introduced the first commercial version of its tool in the summer of 2008, for research only. The technology provides scientists with a digital readout on the extent to which genes are dialed on or off in a sample—what’s known as gene expression analysis. The tool has gained popularity the past couple years with academic customers, especially those at The Broad Institute of MIT and Harvard, because of its ability to help spot patterns in complex diseases like cancer where 50 or 100 genes might be perturbed instead of just one.
But Gray, a former Genzyme executive, was brought in as CEO to help the company branch out from a scientific toolmaker into a more diversified company that makes instruments for scientific and diagnostic purposes. The company moved in that direction in December 2010 when it got a license to use the PAM50 gene signature on its system, which enables doctors to look at how an array of 50 genes are expressed in a breast cancer sample. NanoString presented data a year later which said this 50-gene array was able to help researchers determine when a woman with breast cancer had a “low,” an “intermediate,” or a “high” risk of a cancer recurrence.
Those findings, presented last December at the San Antonio Breast Cancer Symposium, were the basis of NanoString’s application for regulatory approval in the EU, and they will be part of a planned application to the U.S. Food and Drug Administration, Gray says.
Those results also put NanoString in competition with a leader in the field of breast cancer diagnostics, Redwood City, CA-based Genomic Health (NASDAQ: [[ticker:GHDX]]). Genomic Health has had success in the U.S. with its Oncotype DX test, which looks at a 21-gene signature to evaluate risk of breast cancer recurrence. Besides looking at different set of genes, NanoString is planning to offer its test through a different business model. Genomic Health runs its test in a central company lab that requires doctors to ship samples from patients. NanoString, by contrast, is looking to sell its nCounter instrument to a hospital’s local pathology lab, where the physician can go down the hall to get the diagnostic work done at the same site most other clinical lab tests get done. Once the hospital buys the NanoString machine, the company will seek to make money by selling the chemical reagents that the local pathology labs will need to run each individual patient’s test.
Partly because of reluctance among European countries to pay for the Genomic Health test, and reluctance to ship samples overseas for analysis, NanoString is betting its buy-the-instrument model will have greater appeal in Europe. Gray called Europe a “greenfield” opportunity for NanoString, because so few physicians and patients have had access yet to such molecular diagnostic tests.
“The centralized lab model has been successful in the U.S., and has served patients well for some time, but it’s not globally scalable. Medicine is appropriately practiced near the patient where all other diagnostic testing is provided,” Gray says.
About 229,000 people in the U.S. are diagnosed with breast cancer each year, according to the American Cancer Society, and estimates are that a similar number of people are diagnosed annually in Europe, Gray says.
