NanoString Technologies is now officially in the diagnostics business.
Seattle-based NanoString is announcing today that it has begun selling its first diagnostic product in the European Union and Israel. It’s called the Prosigna Breast Cancer Prognostic Gene Signature Assay, and it’s designed to provide a digital readout on the expression of 50 genes that are implicated in the growth and spread of cancer. Women who get this test will be given a score that estimates the chance that they will suffer a recurrence of their cancer, after they get the usual hormone-blocking therapies.
The beginning of European sales is a big milestone for NanoString, which has sought to branch out from its base as a maker of instruments for research use only. NanoString is now in position to compete with Redwood City, CA-based Genomic Health (NASDAQ: GHDX), which has a different business model. While Genomic Health performs a service that requires physicians from all over the world to send a tumor sample to its central lab in California, NanoString is using a traditional razor/razor blade sales model. NanoString plans to sell its instruments to the hospitals directly, and keep selling them the chemical reagents on a recurring basis so the hospitals can perform the diagnostic tests on site.
NanoString’s big wager is that healthcare providers, especially those in Europe who haven’t fully embraced the Genomic Health test, will finally opt this time for predictive testing based on the genetic profile of a breast cancer patient.
“We think we’re doing a great thing to bring localized genomic testing for breast cancer to parts of the world where it hasn’t previously been available,” Gray says.
Genomic Health has had success convincing physicians and payers that its new type of genomic test has value, since it first hit the market in 2004. The company generated more than $235 million a year in sales for its Oncotype Dx test last year, but hasn’t made the same inroads in Europe that it has in the U.S. NanoString sees Europe as a “greenfield,” Gray says, because reimbursement authorities have tended to balk at Oncotype’s price—$4,000 a test in the U.S.—and many physicians have been reluctant to ship their valuable tumor samples overseas to get a result.
Part of NanoString’s pitch is about science, but a large portion is also about economics and practicalities. NanoString’s test looks at 50 genes rather than Genomic Health’s 21-gene test, and one study has suggested that NanoString can reduce the number of patients who fall into the gray zone with an “intermediate” risk of recurrence, compared with the Genomic Health test.
The economic question, of whether NanoString’s product is more affordable, will depend on whether hospitals get a lot of usage out of their nCounter instrument. That’s because NanoString is seeking to sell its nCounter instrument—currently priced at 205,100 Euros—to European pathology labs who don’t already have one. For those who spend the money upfront for the instrument, the chemical reagent kit to perform each breast cancer test will be 1,550 euros, Gray says. Those who choose to rent an nCounter instrument will pay a slight premium for each reagent kit, but the amount will depend on volume commitments, Gray says.
Although exchange rates will vary over time, it’s clear that NanoString is giving its customers an incentive to buy the machine and use it a lot. The more they use the instrument, the cheaper each patient’s test will be when you factor in the cost of the instrument on top of the 1,550 euro reagent kit. The overall size of the market is anybody’s guess at this point, but Gray notes that market research by Globocan says there were 1.4 million cases of breast cancer diagnosed worldwide in 2008, and one-fourth to one-fifth were in Europe, when including part of Russia.
Like with any new product rollout, much work needs to be done. The company has hired European sales people, whose job will be to explain the value of the Prosigna test, as described in a pair of clinical trials that looked at 2,400 patient samples. The other big task is securing reimbursement from health authorities in each of the EU member countries. NanoString plans to focus initially on big EU countries like Germany, France, Spain, and Italy, Gray says.
Gray didn’t have much to say about the reimbursement picture just yet.
“It’s very early days,” he says. “Unlike in the U.S., where this category of medical care has been widely reimbursed, outside the U.S., reimbursement is very spotty. We are just beginning engagement with government payers.”
Gray, a Genzyme veteran who joined the company as CEO in June 2010, picked up a license to the PAM50 intellectual property six months later, and then spent the next two years gathering data it needed from clinical trials to make it into a diagnostic test. The company isn’t yet ready to start selling the product in the U.S., where it plans to seek FDA approval first. It got clearance from European regulators in late September, and pledged then to start selling the breast cancer product in the EU by early 2013.
“It’s been a rush, a lot to achieve in a short period of time,” Gray says. “We basically built the diagnostic capabilities from scratch. It will be tremendously rewarding to see the first wave of breast cancer patients being helped by our product.”
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