For more than a decade researchers have been unleashing a deluge of information about the role of genes in disease, based on automated sequencing of DNA. Genetic tests on individual patients are slowly becoming more common, more detailed, and less costly.
But patients won’t benefit if their doctors don’t know what to make of those test results. They need interpreters, and that’s the role being staked out by small companies like San Francisco-based CollabRx (NASDAQ: [[ticker:CLRX]]) and Lexington, MA-based N-of-One, which help doctors wade through the flood of genetic information and choose the best treatments.
Both these companies were founded in 2008, when the market for DNA-based diagnostic tests was much less robust than it is now. The question is whether their early investment in the emerging niche will pay off for them soon. Their revenues depend on the number of tests performed, and health plans are often slow to approve reimbursement for new tests based on recent genetic insights.
Both CollabRx and N-of-One see favorable trends on the horizon, though—not least of which is the declining cost of DNA sequencing due to innovations by companies like San Diego-based Illumina (NASDAQ: ILMN) and other suppliers of next-generation sequencing equipment to medical centers and commercial labs such as Quest Diagnostics (NYSE: [[ticker:DGX]]).
“They have spent a lot of money and time making it very simple for labs to do sequencing, and do it very cheaply,” says CollabRx CEO Thomas Mika (pictured above.)
DNA-based diagnostic tests are gradually becoming a more routine part of clinical care. Research continues to reveal details about the specific genes behind inherited disorders, and about specific mutations in tumors that indicate which cancer drugs might work best for a particular patient.
Prospects for the data interpretation field have also been strengthened by companies such as Cambridge, MA-based Foundation Medicine (NASDAQ: [[ticker:FMI]]), which has influenced oncologists to order its broad, multi-gene tests of tumor tissue, rather than simpler tests for single genetic abnormalities.
In its third quarter earnings report this month, Foundation reported revenue from clinical testing of $9.8 million, a 122 percent increase over the same period last year. The company predicted that its clinical testing volume for the full year will be 22,000 to 25,000 tests. Foundation has also been a pioneering advocate for genomic test reimbursement; it recently secured coverage for two of its key tests from Priority Health.
Broad test panels like Foundation’s, which are marketed by an increasing number of diagnostics firms, may identify treatment options for some individuals that simpler tests would have missed. They also make test interpretation more complex—a boost for companies that can analyze the data for doctors.
“It’s getting more complex every day,” says N-of-One CEO Christine Cournoyer.
Information about the genetic code, a key to our biological fate, has often rested with companies such as Illumina and Foundation, which actually handle patient samples as they sequence DNA strands and study genes that contribute to disease.
But bioinformatics companies have also stepped in to mine the genomic data from many sources, and explore generally how diseases work. This has helped pharmaceutical companies find new ways to design drugs.
CollabRx and N-of-One are pioneer members of a new class of independent data analytics companies that evaluate information from the point of view of individual patients. This data includes the known links between specific genes and diseases, the new drugs that target those troublesome genes, and the patient’s medical history. That history can include the disease stage, prior treatments, and the results of genetic tests.
As the cost of sequencing continues to drop, the business of evaluating medical and genomic evidence for individual patients may some day pull in revenues to rival those from sequencing itself, according to Mika and other industry observers.
“Sequencing is a commodity,” Mika says. “The value is in the interpretation.”
The young sector has already seen competitive shifts. In 2012,
