As newer therapies for cancer hit the market, there’s a silent churn going on as diagnostic companies prepare for the future by stepping into unchartered territories. By Shalini Gupta
In 1989, Rama Modali founded Bioserve. Bioserve India headquarted in Hyderabad started out as a molecular kit manufacturer serving both the research and clinical markets and has grown its clinical diagnostics capabilities in oncology and next-generation sequencing today to position itself as a state-of-the-art genomics services provider. Operating out of a state-of-the-art 14,000-square-foot genomics facility, it also managed to get a backing from Ventureast, a pioneering venture capital institution, that has enabled over 80 seed, early and growth stage businesses in a broad array of sectors including technology, life sciences and clean environment so far.
A nascent yet promising market
The feather in the cap came recently when it was acquired by Cancer Genetics Inc (CGI), A US-based company, which is emerging as a leader in DNA-based cancer diagnostics, servicing some of the most prestigious medical institutions in the world. To be renamed Cancer Genetics India, the new company will become a subsidiary of CGI, and will be renamed Cancer Genetics India. CGI plans on retaining all 33 current employees of BioServe India, and further expanding and strengthening the sales and clinical teams in India. The transaction worth $1.9 million (primarily in CGIX stock and other deferred consideration) is expected to close during the third quarter of the year.
The acquisition is a prime example of the seeds of consolidation in a highly fragmented market in the country like India and perhaps shows the way forward for it to thrive. A look at the numbers explains the potential attractiveness of the Indian market. The global diagnostics market is close to $60 billion and is growing at a rate of three to four per cent, with a third of it spent on oncology. The Indian diagnostics market on the other hand is a measly $2 billion with an estimated growth rate of 18 per cent per annum. Personalised oncology is a nascent part of the market, but it is gradually moving in that direction. The increasing incidence of cancer and a burgeoning middle class represents an emerging market of patients and clinicians who want clinically validated tests that comply with the standards of US healthcare companies.
At the same time there is a significant intellectual shift going on amongst pathologists and clinicians who increasingly want genomic assessments of cancers. However, there are very few providers with the quality and expertise required to meet the demands of the Indian market. This is where the unmet need lies and hence there is a strong demand for companies providing high quality, clinically validated tests at a cost point that makes sense for the broader Indian market. Cancer Genetics India is well suited to serve these needs. The market is also shifting from biological testing to genomics testing with genetics testing being used widely for detecting breast cancer, colorectal cancer etc. Usage of diagnostics as a part of clinical trials, approval of personalised diagnostics by the FDA, and increasing consumer awareness are some of the other drivers.
Ravi Jain, Principal, Ventureast enumerates, “Diagnostics has been transformed over the years by the use of applied genomics. Conventional methods which are more culture based are now evolving into molecular diagnostics which is in turn getting sophisticated, for eg, are you looking at a single nucleotide in a combination being different versus seeing a combination of genes which is different. Big pharma is backing their data of why a drug works and why it doesn’t with a lot of genomic analysis to understand the mechanism of action. We are also seeing companies where half of their drug development is focussed on companion diagnostics.” He is quick to note that diagnostics of cancer is still based on visualisation(CT scans, biopsies etc). That is slowly changing with oncologists looking at genetic testing for diagnosis and prognosis of the diseases owing to an increasing awareness.
The right fit
Chips in Panna Sharma, President and Chief Executive Officer, CGI, “Structurally, we are beginning to see a lot of M&As in the sector, that is a driver for a lot of consolidation that is happening, be it small or big companies. For us, BioServe India was an attractive company for a variety of reasons. It had a history of being an entrepreneurial company that was able to adapt to a variety of challenges, a solid management team, great technical expertise, and excellent relationships with customers and top Indian research institutions. With a desire to move into the clinical oncology market, it demonstrated a willingness to transform their business model. This was a critical piece in our decision to acquire it.” “The company already had started on next-generation sequencing efforts, with a founder (Modali) who was very familiar with American business and could help bridge any cross-border or cultural integration issues that might arise during such an acquisition,” he adds.
Bioserve has operations both in the US and India, when Ventureast backed it, the Indian arm was almost non existent. “The fact that it had operations in India made the case of the acquisition stronger given the labour arbitrage and market demand which was expected to show up after a few years. Usage of genomics in therapy will change the way medicine is being practised in this country. Bioserve has the core competencies for next generation sequencing, bioinformatics, capability for analysis and manufacturing competency for probes and conducting the tests,” says Jain.
The acquisition further positions CGI to access the high-growth Indian healthcare and diagnostics market, and increases its global presence in personalised cancer care. BioServe India has the equipment and scientific experience required to integrate CGI’s DNA-FISH probe manufacturing and proprietary FHACT business into the Indian market that accounts for more than 25 per cent of the global deaths attributed to cervical cancer. FHACT is a non-invasive genomic test that can work as a reflex test from a pap smear and that can identify cancer and pre-cancer lesions caused by persistent HPV infection. The test can provide physicians with crucial information in making treatment decisions in cervical and HPV-related cancers.
It has been launched for clinical use through a collaboration with Kamineni Hospitals. Sharma has a three-step plan to expand CGIs portfolio in India. He says, “We have further plans to put this test into the hands of hospitals and women’s health groups throughout India. Secondly, we plan to launch a cancer hot spot panel that utilises Next Generation Sequencing (NGS). This would be launched through our own lab and partnerships with leading hospitals and cancer research institutes. Finally, we plan to transfer CGI’s proprietary portfolio of launched tests for leukemia, lymphoma and kidney cancer into the Indian market. In order to ensure quality and clinical relevance of these tests for the Indian context, they’ll require re-validation since those validated in the US may not have the same levels of underlying mutations as present in the Indian subcontinent. This is essential in order to provide high-quality personalised medicine.”
The future
While the Indian market is still figuring its act, there is a lot of buzz surrounding companion diagnostics in the US. There are a number of drugs being used under the guidance of clinicians (which are not FDA approved) and a number of tests being conducted, so there is a lot of testing that guides those decisions. However, there are only 19 FDA approved companion combinations where a drug and a test are combined and most of them are for HER-2, which is for breast cancer. Many more might get approval in the coming years, and the pipeline looks quite significant. “This is good news for us at Cancer Genetics. We have almost 20 different trials going on for companion diagnostics specifically in pharma at our company, so it is a big growth area of the future. We have high quality labs to actually do the testing, validate the results and do that on a global basis,” stresses Sharma.
The regulatory pathway for approval of companion diagnostics is very different and varies country by country. And that is where the complexity of delivering a companion diagnostics come in, because its extremely important that a companion diagnostic also goes through companion testing. There are several hundreds in testing right now, however, with a cumbersome regulatory pathway, it takes large scale trials, and it is not going to get any simpler, which is why we are seeing a lot of consolidation in the industry with mergers and small companies getting picked up by big companies in order to meet the demands, he emphasises.
With diagnostic tests driven by genomic data, as this data becomes more and more important as opposed to biology, cost cutting will be imperative. “The bottleneck in the future is not going to be biological testing, but rather the cost, time and the managing of the data, it then makes sense to have operations in India and China is a huge advantage,” says Sharma.
Jain offers an investors point of view and adds that two areas look full of possibilities. Low cost diagnostic products which can reduce the margin of error and increase the specificity and accuracy of the test and point of care diagnostic devices that solve the problem of fragmentation by providing standardised tests.
“Specialist diagnostics chain model will emerge in the future. Right now, when the size of the market is small, it is difficult to scale up given the subjectivity in diagnosis. Point of care diagnostics and proprietary tests identifying unique biomarkers will be the differentiating technologies of the future,” he adds. Sharma has put plans in place for the next two years. “We intend to expand our footprint in the clinical market and deepen our presence among the research and biopharma customers. Our goal is to triple the workforce, further support large scale adoption of our cervical cancer test, and increase revenues by five to six times with the services we offer,” he concludes.
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