Molecular diagnostics companies are continuing to show a lot of promise. Currently, we are taking a look at Exact Sciences (EXAS) – one of the best up-and-coming plays in the colorectal cancer (CRC) space. We will also look at a much newer company that is gaining a lot of traction in Europe – VolitionRx (VNRX).
Undoubtedly, this is a market with large potential and we believe this will represent one of the fastest areas of growth for in in vitro cancer diagnostics. However, new tests will want approval by the FDA/EMA and some sort of competitive advantage over existing blood/fecal tests that are used as screeners for colonoscopy.
Colorectal Cancer Overview
CRC is the second leading cause of death related to cancer. Survival of CRC patients is pegged at ~2/3, and this is often due to late detection of the cancer in patients. Screening for this disease has become a big priority, and it is the reason behind the increasingly large number of colonoscopies that are being performed on an older population. Other risk factors, including genetic predisposition to CRC and type-2 diabetes, are also considered.
However, these procedures can be incredibly expensive. Although many patients are insured by the time they are going in for colonoscopy screening, low patient compliance and increased pressure on soaring healthcare costs creates more need for effective and scalable in vitro testing for colorectal cancer. Millions need to be screened every year, which makes low relative cost and scalability necessary for market dominance.
The current options are quite limited. Perhaps the most common screener test right now is the fecal occult blood test (FOBT), which identifies the presence of blood in a stool sample. However, these tests have a very high false positive rate and are generally considered unreliable. They are also incapable of detecting the presence of precancerous polyps, which start as benign growths but should be removed before a possible transition into malignancy.
Cologuard
Exact Sciences has developed a non-invasive in vitro test to challenge the colonoscopy/FOBT routine that is currently used. It is called Cologuard, and it is a test that uses genetic markers that are related to colorectal cancer and precancer.
Cologuard is very convenient for both doctors and patients, and it doesn't require patients to go on a certain diet – or to prepare their bowels prior to the actual test. It would also be significantly less expensive than a colonoscopy, which can cost about $10,000 when performed in a hospital. Because of these basic but important advantages, we'd expect adoption of Cologuard to be quite rapid given that it becomes FDA approved as a colorectal cancer test. Patient compliance and ease-of-use are incredibly important factors to consider, and they can make or break medical products.
Cologuard's most recent data, from a ~10,000 patient trial (Deep-C) showed 92% sensitivity to colorectal cancer and a 42% sensitivity to pre-cancerous polyps and 87% specificity. We believe that they still represent a huge upgrade from FOBT figures, which is a very poor indicator because of its sensitivity.
Many sales figures have been thrown around, and we believe that the $100-200 M range is quite reasonable for year 2016 given that the development of Cologuard continues to progress according to the company's expectations. The growth could be quite amazing after the first few years, since it will take a while for physicians to get used to a new test.
Exact Sciences is putting this product through the final stages of the premarket approval (PMA) regulatory pathway. There will be an advisory committee on March 26, 2014.
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VolitionRx NuQ Panels
VolitionRx is another CRC-focused diagnostics company that is developing and looking to commercialize its NuQ® suite of high throughput, non-invasive blood tests for cancer. These products are based on the company's proprietary Nucleosomics® technology, which detects specific changes in genetic expression that are associated with certain forms of cancer. These include, but are not limited to: pancreatic, lung, colon, and breast cancers.
NuQ® products will be based on a panel of assays, which will detect specific modifications in gene expression. Because of the scalability of in vitro diagnostics, these can be used in larger patient populations at a lower cost, making them an efficient alternative to current diagnostic procedures. Data collected thus far suggest that the tests show equal, if not greater, ensitivity and specificity to existing fluid-based tests on the market.
Patient Compliance
Another important factor that is often ignored is the matter of patient compliance. Colonoscopy compliance is particularly low (<40%), since it is an embarrassing and painful procedure that also requires extensive preparation. Fecal occult blood test compliance is also supposed to be quite low, with estimates usually ranging between 40-60% - possibly due to the embarrassing nature of the test. Blood test compliance is usually very high (>80%), which bodes well for Cologuard and NuQ.
CRC Diagnostic Capacity
Diagnostic tests are generally measured with two main statistical parameters: sensitivity, and specificity. Sensitivity (the true positive rate) is expressed as a % of correct positives identified by the test. Specificity (the true negative rate) is the opposite, and is a % of correct negatives identified by the test.
Here are the estimated sensitivity and specificity rates for currently-used and developing CRC tests:
| CRC Sensitivity | Precancer Sensitivity | CRC Specificity | |
| Fecal Occult Blood Test (FOBT) | 77% | 27.6% | 57% |
| Cologuard (Exact Sciences) | 92% | 42% | 87% |
| 2x NuQ® Assay (Volition) | 85% | 50% | 85% |
FOBT data was taken from this abstract (link)
Cologuard data was taken from Exact's Phase III top-line data release (link)
NuQ 2x panel data was taken from VolitionRx's most recent press release (link)
These datasets aren't perfect, although they imply that Cologuard and NuQ assays should eventually take market share away from FOBT due to superior detection of both CRC and pre-CRC.
Valuation
There is a huge valuation gap between VolitionRx and Exact Sciences. The market cap of EXAS is $1.1 B and the market cap of VolitionRx is $25 M. This is likely because Exact has more data, and is on the verge of a potential FDA approval. VolitionRx is on the verge of approval in the EU, where they will initially market the product.
Takeaway
We are optimistic on molecular diagnostic tests in colorectal cancer, and we believe there is a lot of upside potential with leaders in this sector. Although it may take a few more years to play out, we believe that there is huge potential to replace FOBT and other in vitro diagnostic tests for CRC screening. These new genetic tests may also be used along with current tests, although we will hopefully see them as a standard precursor to colonoscopy 5 years from now.
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