One of the fastest-growing areas in biotech is not the drugs that giants like Genentech (NYSE: DNA ) , ImClone Systems (Nasdaq: IMCL ) , and Amgen (Nasdaq: AMGN ) try to develop, but rather the diagnostic tests and aids used to help determine whether patients should receive these drugs.
On Tuesday, Invitrogen (Nasdaq: IVGN ) announced that the Food and Drug Administration had given it premarket approval for one of its diagnostic test aids, Spot-Light, that will help determine whether a cancer sufferer will respond effectively to Genentech's Herceptin for breast cancer.
The reason why genetic tests are so popular is because drugs like Herceptin are ultra-expensive and can carry some serious side effects. Equally as important, Herceptin and other targeted cancer therapies are most effective in only a subset of patients for the cancer that they treat.
If doctors and insurers can use a genetic test to ensure that only patients who are likely to respond to compounds like Herceptin or ImClone's Erbitux actually get the drug, then they likely would improve a patient's outcome and save tens of thousands of dollars per patient by avoiding treating them with drugs that won't work. This is obviously a win-win for everybody.
For the above reasons, drugmakers that develop these kinds of predictive diagnostic aids and tests for patients at risk of developing a disease have been experiencing rapid sales growth in these divisions. Companies like Genzyme (Nasdaq: GENZ ) , Myriad Genetics (Nasdaq: MYGN ) , and Third Wave (Nasdaq: TWTI ) all sell such tests, and the demand for them has been strong, helping to push up some of these companies' share prices significantly.
Invitrogen is so diversified that sales of no single cancer diagnostic aid like Spot-Light will have an outsized effect on its top line, and it has some potent competition across its range of businesses as well. Nonetheless, the FDA's premarket approval does remind us of one of the fastest-growing areas in the health-care space.