The Market For DNA-Sequencing-Based Down Syndrome Tests Could Exceed $6 Billion

by Matthew Herper from Forbes:

...The New England Journal of Medicine published a study showing that a new, DNA-sequencing based blood test provides a dramatic improvement in accuracy at screening for Down syndrome and a second, deadly disorder. That could open up a $6 billion market to the biotechnology companies that are already marketing these tests.

Each year in the U.S. there are 6.6 million pregnancies and 4 million births, according the Centers for Disease Control & Prevention. The list prices of the tests, which are sold by four different companies, range from $700 to $2500. Assuming that pricing settles in the middle of that range and that there are 5 million women who choose to have the test, that would be a $8 billion market.

But give that number a haircut. “I have to imagine pricing could come down more aggressively if guidelines expanded,” says Douglas Schenkel, an analyst at Cowen & Co. Not every pregnant woman will ever get the test. But he still argues that the market for these tests could increase six-fold from its current size of about $1 billion. Isaac Ro, an analyst at Goldman Sachs, offered similar estimates in a note to clients.

Such a market expansion could be important to all of the companies that make the tests, including Ariosa, which makes the lowest price test, Natera, and Sequenom SQNM 0%. But the biggest winner could be Illumina, the San Diego maker of DNA sequencing gear that funded the trial and that purchased Verinata, a fourth maker of the new tests, for $350 million last year.

Illumina says it believes Verinata has strong intellectual property position in this booming new market. Beyond that, though, all four manufacturers run their tests on Illumina’s DNA sequencing machines, meaning the company wins no matter what. Francis DeSouza, Illumina’s president, said in an interview that, if anything, he expects to spend less on marketing Verinata and that the company is taking care for there to be an even playing field for the tests. It prices its test in the mid-range of the market, at a $1,500 list price.

Illumina also says that it doesn’t expect a price war, because the market expansion will be dependent on medical societies writing guidelines that endorse the new test. Right now the American College of Obstetricians and Gynecologists recommends the DNA-based tests only for mothers at high risk, including those over 35.

But the NEJM paper makes a strong argument for expanding that recommendation. Right now it’s recommended that all pregnant women be offered a pair of tests – a blood test and an ultrasound to look for fluid at the base of the fetus’ neck – to screen for three disorders caused when the baby has an extra copy of one of the 46 chromosome bundles that contain the human genetic code. There are three such disorders that occur commonly: trisomy 21, or Down syndrome, is the most common, causing diminished intellectual ability and slower growth; trisomies 18 and 13 are less common, but are often fatal for the infant.

Current screening tests yield a large number of false positives, so they must be followed up with an invasive test that samples cells from the fetus. One such test, chorionic villus sampling, has a miscarriage rate of 1 in 200; the other, amniocentesis, causes miscarriages 1 out of every 600 times.

These invasive tests would still be needed to confirm positives from the DNA tests, but they’d be used in women whose fetuses don’t have Down or other trisomies far less often. The NEJM study gave the old screening tests and the new DNA-based test to 1,914 pregnant women and followed them until the baby was born. For Down Syndrome, the new test gave just 6 false positives compared to 69 for the old screening tests. For trisomy 13, there were 3 false positives with DNA sequencing compared to 11 with the traditional number. For trisomy 13, the numbers were 1 and 6.

Assuming 5 million women are tested each year, that would mean 245,000 would be spared an invasive test, and 358 miscarriages might be prevented. Even at a higher cost, that could be hard for insurance companies to say no to. Some experts, including Illumina, expect that more studies will be needed to change the guidelines.

How does the new test work? Basically, by counting. Because some of the fetus’ cells circulate in the mother’s blood, researchers can sequence DNA and see if genes from any chromosomes appear too often. For a more complete description, check out the video embedded from Steve Quake at Stanford, who co-invented Verinata’s technology.

Not everyone is sure that the new technology, known as non-invasive prenatal testing, is an unmixed blessing. Hank Greely, a professor of law at Stanford Law School who has written extensively on genetic issues, says that the new test is “more reason to think NIPT will largely take over Down screening.” But he warns that these same methods might lead to tests for more complicated tests. “If, say, 70% of American pregnancies received broad genetic screening, the next generation would look different – some will say for better, some for worse.”

Illumina Buys Maker of Test for Down Syndrome

from Deal Book by Andrew Pollack:
Illumina, the leading manufacturer of DNA sequencing machines, said on Monday that it would buy the privately held Verinata Health for at least $350 million in cash to expand its push into the diagnostics business.
Verinata, based in Redwood City, Calif., sells a test that uses a blood sample from a pregnant woman to determine whether her baby will have Down syndrome or some other chromosomal abnormalities.
Such tests, which have been available for only about a year, have been rapidly catching on as an alternative, in some situations, to invasive tests like amniocentesis that carry a slight risk of inducing a miscarriage.
Illumina’s stock fell almost 8 percent in early trading on Monday, though that was probably more because of reports that Illumina itself would not be acquired by Roche Holding, the Swiss pharmaceutical and diagnostics company. Illumina shares closed at $50.88, down 7 percent.
Roche’s chairman, Franz B. Humer, was quoted on Sunday by a Swiss newspaper, Sonntags Zeitung, as saying a deal was off because Illumina wanted too high a price.
In April, Roche had dropped a hostile bid for Illumina, valued at $51 a share, or about $6.7 billion.
But a different Swiss newspaper had reported in December that Roche was trying to buy Illumina again, this time for $66 a share. Neither Illumina nor Roche commented publicly on that report.
Both Roche’s interest in Illumina and Illumina’s acquisition of Verinata suggest that DNA sequencing, which until now has mainly been used for research studies like the Human Genome Project, is moving toward being used for medical diagnosis.
Illumina wants to be more than a seller of sequencing machines. It already offers a service sequencing the genomes of people to help diagnose rare diseases or figure out the best treatment for a cancer. In September, it bought BlueGnome, a British company that uses sequencing to screen for various genetic abnormalities.
“The agreement with Verinata demonstrates Illumina’s commitment to developing innovative diagnostic solutions and providing our partners with the most advanced technologies for improved patient care,” Jay T. Flatley, chief executive of Illumina, said in a statement.
Verinata’s test, called Verifi, uses sequencing to analyze fragments of fetal DNA that can be found in a pregnant women’s blood. That allows for detection of Down syndrome, in which a person has three copies of chromosome 21 instead of the usual two.
Such noninvasive tests for Down syndrome appear to be catching on rapidly. Verinata, however, is believed to substantially lag the market leader, Sequenom, in market share.
Sequenom, a publicly traded company, introduced the first noninvasive Down syndrome test in October 2011.
It said on Sunday that it had performed 60,000 of its MaterniT21 Plus tests in 2012, and by the end of the year was operating at an annualized run rate of 120,000 tests.
Others selling or developing such tests include Ariosa Diagnostics and Natera. The companies are involved in various patent lawsuits against one another. They are also broadening their tests to detect chromosomal abnormalities beyond Down syndrome, including those linked to abnormalities in the sex chromosomes.
Some of these other companies use Illumina sequencers to perform their tests. It is possible they may now become more reluctant to rely on machines made by a company that is a competitor.
Illumina said there were about 500,000 high-risk pregnancies a year in the United States that would be candidates for a noninvasive prenatal test. It said the potential market for such tests would be more than $600 million in 2013.
Verinata said on its Web site that it would continue to operate as a subsidiary of Illumina. Beyond the initial payment of $350 million, Verinata shareholders will be eligible to receive up to an additional $100 million in milestone payments through 2015.
Illumina said the deal would dilute its earnings per share by 20 cents in 2013 but add to them in 2014.
Bank of America Merrill Lynch and Covington & Burling advised Illumina on the deal.
Illumina made its announcement on the eve of the J. P. Morgan Healthcare Conference in San Francisco, an annual Wall Street and medical industry gathering at which numerous companies make announcements.

Distribution Announced for Down Syndrome Prenatal Testing Pamphlet

Website harnesses local distribution, Sequenom CMM to provide national footprint
press release from GDSF & NDSC:
The Global Down Syndrome Foundation and the National Down Syndrome Congress have announced distribution agreements for the hallmark Down Syndrome Prenatal Testing Pamphlet that provides current, accurate information about Down syndrome to pregnant women and families.
The organizations anticipate distributing 25,000 pamphlets in the next year through the pamphlet’s new corresponding website, www.downsyndrometest.org. In the two weeks since the website launched, more than 1,000 pamphlets have been requested and are in the process of being distributed to several states, including California, Michigan, West Virginia, Texas and Florida. These pamphlets will be delivered free of charge by the end of the year, and distributed to pregnancy centers, OBGYN offices, parent support groups and to participants at an upcoming perinatal conference.
In addition to local distribution accessed through the website, the pamphlet will be distributed nationally by Sequenom Center for Molecular Medicine ^TM (Sequenom CMM), one of the largest prenatal testing laboratories in the United States. Sequenom CMM will provide medical professionals with the pamphlet, and will recommend that those who administer their test offer the pamphlet to patients / expectant parents at the point of testing and diagnosis. In the next year, Sequenom CMM anticipates providing between 75,000 and 100,000 printed copies of the pamphlet to the medical centers and facilities administering the MaterniT21^TM PLUS LDT.
“Sequenom CMM has expressed a desire to better understand the Down syndrome community’s concerns regarding prenatal testing, which opened up a discussion for them to distribute our pamphlet,” said David Tolleson, Executive Director of the National Down Syndrome Congress. “We appreciate their input on our pamphlet, and particularly the acknowledgment in their marketing materials that these tests can help a woman or family to ‘prepare medically, emotionally and financially for the birth of a child with special needs’.”

Sequenom slumps as analyst cites test competition

from Bloomberg Businessweek news:
Shares of Sequenom Inc. declined Tuesday after a Credit Suisse analyst started coverage of the stock with an "Underperform" rating, saying the company's fetal Down syndrome test is facing tough competition from lower-priced tests.
THE SPARK: Analyst Vamil Divan praised Sequenom's MaterniT21 Plus test, but noted that it is significantly more expensive than some similar tests.
"We are concerned that the aggressive competitive dynamics we are already seeing (most notably with pricing) will limit the commercial potential of the test," he wrote in a note to investors. Divan believes that within five years, about 65 percent of women who are at high risk for carrying a fetus with Down syndrome will have a blood test like MaterniT21 or Ariosa Diagnostics' Harmony test.
Sequenom's tests do have some advantages over the competition, including faster results, he said. But based on commentary from physicians, Divan said they are either not noticing the differences in practice, or those differences are too small to be meaningful. And MaterniT21 Plus costs about $2,700, more than triple the price of a Harmony test.
Divan set a price target of $4 per share, saying Sequenom won't do as well as competing stocks.
THE BIG PICTURE: On Monday, an analyst for Piper Jaffray downgraded Sequenom shares to "Neutral" from "Overweight," saying Sequenom would increase its spending as competition grew. The company lost more than $54 million in the first six months of 2012, a 60 percent wider loss than the first half of 2011. The company reported $33.2 million in revenue through June 30, up 24 percent from the previous year.
William Quirk, the Piper Jaffray analyst, said it will take a while before insurers widely cover MaterniT21 and Sequenom was ramping up its spending as it hired new sales representatives, worked on new tests, and tried to speed up its development process.
SHARE ACTION: Sequenom stock fell 18 cents, or 4.7 percent, to $3.52 in afternoon trading. The decline came on top of a 6 percent drop in Monday's session. Volume both days was well above normal trading.
Shares of Sequenom have changed hands between $2.65 and $6.06 in the last 52 weeks.

Coventry ends deal to cover Sequenom's Down Syndrome test

from Reuters:

Genetic analysis products maker Sequenom Inc said insurer Coventry Health Care Inc terminated an agreement to provide coverage for its prenatal test to detect certain chromosomal abnormalities including Down Syndrome.

Coventry had agreed to provide coverage to its 2.2 million members for Sequenom's MaterniT21 PLUS testing service, which needs only the mother's blood to detect chromosomal abnormality, from July 1.
Sequenom said on Thursday that Coventry terminated the agreement without citing any cause, effective August 31.

Sequenom shares fell 12 percent to $4.22 in after-market trade. They closed at $4.77 on Thursday on the Nasdaq.

Sequenom stock price rises on new Down syndrome test forecast

from Business Week:

Shares of Sequenom Inc. jumped Monday after the company said demand for its MaterniT21 Down syndrome test is continuing to grow.

THE SPARK: Sequenom said it performed more than 4,900 MaterniT21 tests in the first quarter, and it now expects to run 40,000 tests in 2012. The San Diego previously expected to run 25,000 of those tests.

THE BIG PICTURE: MaterniT21 is a prenatal blood test intended for women who are at high risk of carrying a fetus with Down syndrome. Sequenom says the test can detect the chromosomal anomaly that causes Down syndrome as early as 10 weeks of pregnancy. It is intended to be less invasive than amniocentesis and hormone testing.

Sequenom said in March it was aiming to perform at least 25,000 billed tests in 2012, but it also said those figures should improve because it has expanded its sales force. The company is scheduled to report its first-quarter results after the market closes on May 3.

Sequenom also paid $1.3 million to buy patents belonging to Helicos BioSciences Corp.

THE ANALYSIS: Jefferies & Co. analyst Jon Wood said Sequenom's revenue is going to be uneven until health insurers and government programs formally cover MaterniT21. He does not expect that to happen until early 2013.

SHARE ACTION: Shares of Sequenom rose 36 cents, or 9 percent, to $4.35 in afternoon trading. Sequenom stock is down 24 percent since Feb. 6.

What's Up With the Back-Slapping, Sequenom?

from The Motley Fool:

The future of Sequenom (Nasdaq: SQNM  ) rests in the hands of the company's MaterniT21 LDT, which offers mothers a way to test for Down syndrome with a simple blood test. An update on the progress of the launch that started in October sure would be nice.

Investors got their update yesterday, but there were no sales numbers in the release. There was nothing beyond a qualitative announcement that "numerous leading health-care providers across the United States" have begun ordering the test. The thing reads more like an advertisement for MaterniT21 LDT than anything else. Although I'm not sure that peer pressure -- "look, your colleagues are ordering it, so you should, too" -- is the best advertising message for doctors.

It's not the number of sites prescribing the test that's important, but the number of tests ordered.

They could be correlated, but they don't necessarily have to be. Sometimes persuading doctors to try a product out on one patient is the easy part and getting them to continue using it regularly is substantially harder. Shares spiked as high as 9% yesterday, although investors seem to have come to their senses, with shares ending up just 2.7%. I'm not sure the news is worth even that much.

Back-slapping should always be treated as suspect because biotechs are eternally in need of cash. BioSante Pharmaceuticals' (Nasdaq: BPAX  ) chief executive officer hinted that multiple companies were interested in its female libido drug, LibiGel, and then followed up the rise in stock price with a secondary offering. Good move, too, since the drug failed. And last week, Cell Therapeutics (Nasdaq: CTIC  ) used the jump in share price after announcing that it had resubmitted its marketing application for pixantrone to the Food and Drug Administration to raise some additional capital needed to retire debt. Geron (Nasdaq: GERN  ) has been another serial good-news capital raiser. Not that I blame the companies; just as investors should hit the sell button if valuations get out of whack with reality, companies should, too.

Is a capital raise by Sequenom coming? Absolutely. The company's CFO said as much during the company's analyst and investor day last month. The company ended the third quarter with just over $100 million in the bank, which should last the company into early 2013. But no company wants to be sitting on that little cash, so Sequenom plans to raise cash "sometime during 2012."

If the launch of MaterniT21 LDT goes well, I'd expect the share price to rise from here, and I suspect management thinks the same thing. So if management decides to raise capital now, before providing sales figures for the launch, I'd take that as a bad sign.

I'm not saying that's going to happen for sure -- perhaps the company's press-relations department was just on a candy cane-induced sugar high and decided it needed something to do during a notoriously slow week -- but it's certainly something investors should look out for.

some Utah doctors are cautious about using Sequnom's MaterniT21 test

from The Salt Lake Tribune:

Salt Lake City is one of 20 national launching sites for a new blood test to detect Down syndrome in the womb. But some Utah doctors are cautious about using it, including the Salt Lake City physician who participated in a study showing how the blood test works.

San Diego-based company Sequnom, Inc., launched the MaterniT21 test this week, touting it as a way to better screen for Down syndrome and reduce the need for invasive diagnostic tests that pose a risk of miscarriage.

Using blood drawn from the mother, the new test measures circulating cell-free DNA to detect Trisomy 21, the most common chromosomal anomaly that causes Down syndrome. It can be done as early as 10 weeks with results in about 10 days, according to the company.

The test was launched in 20 cities — large metropolitan areas and those with high birth rates like Salt Lake City. The test must be ordered by a physician, and it’s meant for women at high risk of having a baby with the disorder — those who are 35 years and older or who have an ultrasound showing fetal anomalies, for example.

The company estimates the test would cost insured patients $235.

But Intermountain Healthcare facilities will not be using MaterniT21 yet, said physician Nancy Rose, director of reproductive genetics for the hospital system, even though Intermountain and Salt Lake City-based ARUP participated in a study of the blood test that Sequnom is using to bolster claims that it works.

"I don’t think it’s ready for prime time," said Rose, noting that she participated in the industry-funded study because it was overseen by Brown University. "This study has proven that it works in a certain population of patients, but that’s a long way from actually implementing it in your clinic. What does it cost? Will insurance cover it? What do we know about its effectiveness? If someone screens negative, is that good enough?"

Rose noted that the new test doesn’t detect other chromosomal abnormalities like spina bifida, while traditional screening tests do. And it hasn’t been proven useful among low-risk women, the majority of pregnant women, she said.

The study, published this week in Genetics in Medicine, included 4,600 high-risk women from 27 sites (including 78 Utahns). Among the 1,600 women on whom the genetic test was used, MaterniT21 detected Down syndrome with 99 percent accuracy with one false positive and two false negatives.

The fact that there were only three wrong results shows "that this test is actually ready for prime time," said physician Mathias Ehrich, Sequenom’s senior director of research and development. He acknowledged some details need to be worked out, including whether it will work on heavier women (13 samples couldn’t be analyzed because the percentage of fetal DNA in the mothers’ blood was too low).

Still, "It’s a young but not immature field," he said. "The test has certainly withstood all the necessary validations you need in order to implement it."

Existing screening tests — which combine ultrasound with maternal blood tests — have lower accuracy rates with higher false positive rates, according to the study. That means more women may go on to get amniocentesis or chorionic villus sampling, the study said. Those tests, which involve sampling amniotic fluid or placental tissue, can cause miscarriages in up to one of 200 procedures.

Ehrich said women now can take the MaterniT21 test before the invasive tests if the screening tests show they are at risk. If the genetic test comes back negative, he said doctors would "most likely" not recommend an amnio or CVS. If MaterniT21 is positive, women who want confirmation would need one of the invasive tests.

Physician Robert Silver, chief of the University of Utah’s maternal fetal medicine program for high-risk women, sees value in using MaterniT21 as a second screen. He noted that women who seek confirmation aren’t always doing it to terminate the pregnancy. They want to rule out a problem or prepare themselves emotionally for a child with special needs.

Women, he noted, are anxious about the invasive diagnostic tests. "The emotional baggage of potentially harming a normal baby is very difficult for families. There’s a lot of potential and certainly a desire to have a test like this," he said. "The downside is the test has not been perfected."

Sequenom's MaterniT21 prenatal test

from Bloomberg:

Sequenom Inc. (SQNM) said its prenatal test for Down syndrome will be available in 20 U.S. cities today, two years after an earlier effort was delayed because employees mishandled research data.

The blood test is accurate in detecting Trisomy 21, the genetic chromosomal abnormality that most commonly causes Down syndrome, 99.1 percent of the time as early as 10 weeks into a pregnancy, the San Diego-based company said in a statement. The test, and others that will be able to identify genetic abnormalities early in pregnancies, will alter the debate over abortion, said Art Caplan, director of the center for bioethics at the University of Pennsylvania.

“For many people this test makes it morally, emotionally and psychologically easier to have an abortion,” Caplan said in an interview.

Caplan said future prenatal tests may be able to indicate if the fetus had biomarkers for Alzheimer’s disease, or breast cancer, or other diseases. Those tests will raise questions about what issues will trigger potential parents to choose an abortion. A survey published last month in the American Journal of Medical Genetics showed that only 4 percent of parents with Down Syndrome children regretted having them.

“Ethically, we are now starting to see the shift in the issue of what counts as a medical disorder, what’s significant enough to test for, what’s a genetic disability or just a difference,” he said. “Many in the Down syndrome community would say it’s just a difference.”

from the New York Times:

“The number of American women who will have to grapple with this information prenatally will substantially increase,” said Dr. Brian G. Skotko of the Down syndrome program at Children’s Hospital Boston. His sister has Down syndrome, he said, and he pointed out that these tests could encourage more people to end their pregnancies, causing a decline in the numbers of people with the condition and leading to diminished support for them.

Sequenom’s test, called MaterniT21, would be ordered by doctors, not directly by consumers. All samples will be sent to Sequenom’s laboratory for analysis. The test is expected to cost about $1,900, about as much as amniocentesis.

The company said that privately insured women would have to pay $235 out of pocket, with the company assuming the risk of getting insurers to pay the rest. It is not clear how willing insurers will be to cover this test.