Over the past two days, I've been commenting on Boston's War on Cancer, the biotechnology forum organized by Xconomy. The event consisted of a few company presentations and also some organized discussion sections. As is the purpose for attending these occasions, the forum has had me considering and reconsidering some aspects of oncology research, pharmaceutical operations, and of course, attractive investments in and surrounding these enterprises.
One such business segment that is currently very closely linked to drug development, especially in oncology, is molecular diagnostics. The term "companion diagnostics" refers to a biological test that helps direct the use of a specific drug treatment. Test results may indicate whether a patient is likely to respond to a therapeutic treatment, experience an adverse reaction, or in some cases, optimize proper dosing levels. The FDA maintains a list of approved partnered diagnostics and treatments, most of which are in oncology.
Understanding companion diagnostics
The development of companion diagnostics is often not straightforward, nor does it follow a simple path. Increasingly, drug therapies are being designed to treat situations where a particular identifiable biological change has already occurred. Under these circumstances, a companion diagnostic test can often be developed alongside the therapeutic. This is a preferred situation for the FDA as it simplifies the process of evaluating both the drug and the test together. Examples of drugs approved at the same time as their diagnostic tests include Eli Lilly's (NYSE: LLY ) Erbitux (cetuximab) and Amgen's (Nasdaq: AMGN ) Vectibix (pantiumumab). The original companion diagnostic for each drug was developed by partnering with Danish firm DAKO.
Often, however, associations between a drug and those patients that best respond to it are discovered during clinical development. Companies are increasingly building these continued discovery operations into clinical programs, as finding such a relationship can improve a drug's odds of ultimately gaining regulatory approval.
During the Xconomy forum, Alexis Borisy, CEO of Foundation Medicine, noted that full genetic sequencing is reaching a price point where it can become part of clinical investigations. He noted that Illumina (Nasdaq: ILMN ) currently offers individual genome sequencing for under $20,000, and for under $10,000 for eligible clinical sample sets. These prices still add substantial cost to a clinical development program, but they are becoming increasingly practical for consideration, especially in situations where the drug, by design, is suspected to best act when certain genetic mutations may be present.
Evaluating genomic information in clinical development can also help identify how a cancer eventually escapes treatment and continues to proliferate. Sprycel (dasatinib), for example, from Bristol-Myers Squibb (NYSE: BMY ) , has been found to be effective in chronic myeloid leukemia where a genetic mutation of the BCR-ABL gene has rendered patients resistant to Novartis' (NYSE: NVS ) Gleevec (imatinib). Associations such as these may perhaps suggest preferred future co-therapy options that could have cumulative or extended benefits.
Entering the mainstream
Insurers are also embracing appropriate assignment of drug treatments through the use of diagnostic testing. Cancer therapies are often quite expensive, and providing them to those patients who are identified as most likely to benefit from them can improve the efficiency of health-care spending.
OncotypeDX is a genomic test provided by Genomic Health (Nasdaq: GHDX ) for certain forms of breast cancer. By evaluating a panel of genes and their levels of expression, the company can assist in identifying the aggressiveness of an individual cancer and thus more appropriately direct treatment decisions. The test has been increasingly embraced by insurers since better and more effective early decisions can save money on repeated, ineffective, or exploratory treatment regimens. The company is developing similar panel tests for colon, prostate, and other cancers as well.
Reading the human genome
With the recent advances in genomic analysis, not surprisingly a lot of the focus has been directed to genetic changes and mutations as identifying factors for cancer progression. But not all cellular changes that result in or lead to cancerous progression are necessarily genetic.
At the forum, Mark Goldsmith of Constellation Pharmaceuticals noted that epigenetic factors -- those that alter how DNA is packaged and expressed -- can often play a substantial role in oncology, and these changes must also be effectively tested. Dr. David Okrongly of Quanterix pointed out that we frequently measure protein levels in body fluids to evaluate cancer progression, with PSA for prostate and CA-125 for ovarian cancers being examples. Improvements in sensitivity of protein level measurements should enable new associations to be made, and it may also lead to earlier, more effective treatment decisions.
How to invest
Investing in biotechnology companies with development stage therapeutics can be a very risky endeavor. Companies' fortunes are made or broken based on the successful evaluation of one or a few drugs that have represented large prior investments. As we gain a better appreciation for the underlying biology of different cancers, we also gain a means of testing for and assessing the type and state of it as well. Diagnostic companies partnering with drug developers can make for an attractive investment segment, often with a lower reasonable risk profile. If an investor is attracted to a drug developer, it may well be worthwhile to see who they are working with to develop that drug and consider that partner for investment as well.
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