In 2015, President Obama gave fresh impetus to an already vibrant sector by unveiling the Precision Medicine Initiative. The project formalized the interest of the world’s largest pharmaceutical market in the concept of precision medicine, setting the stage for increased dealmaking involving the two assets that enable the approach: targeted therapies and medical technologies.
Over time, selecting a therapy on the basis of a patient’s genetics could reshape all areas of medicine, and the huge unmet needs, significant market opportunities and molecular knowledge that characterize cancer R&D and treatment today are the ideal proving ground. This status is reflected in current dealmaking trends, which show that drug developers and medical technology companies alike are spending time negotiating deals regarding oncology-related diagnostics and devices.
Demand for complex tests spurs deals
The appetite for technologies that can quickly and affordably identify the genetic causes of cancer has driven the creation of a large, fast evolving collection of tools. Although the precision medicine movement began with searches for single biomarkers, the industry is now migrating toward hot-spot panels that analyze multiple genes, broader pan-cancer tests and whole-genome sequencing. The most advanced of these technologies have naturally attracted the greatest attention from dealmakers.
Current activities at Roche are indicative of the areas of interest for the sector. In 2015 alone, the company has invested US$1.2 billion in pan-cancer test developer Foundation Medicine, bought circulating cell-free DNA analysis business Signature Diagnostics and acquired next-generation sequencing reagent player Kapa Biosystems. “We consider biomarkers and diagnostic tools as key differentiators,” said Jason Coloma, global head of oncology and cancer immunology at Roche Partnering.
The big medical technology companies have also sought to include their tools in research and clinical settings. Illumina, whose sequencing technology is used by Foundation Medicine and other major companies in the sector, has created the field of population-scale genomics, leading the United Kingdom to probe the DNA of 100,000 people with cancer and rare diseases.Complete Genomics, a unit of Chinese sequencing firm BGI, has since started inking deals for its own large-scale sequencer.
Illumina and Complete Genomics are enabling research groups and clinical diagnostics services to generate data at previously unimaginable rates, but sheer scale is useful only in certain contexts. In other fields, such as the umbrella trials of multiple treatments being pioneered by the US National Cancer Institute (NCI), the ability to use small samples and fast turnaround times are the main priorities. NCI is using Thermo Fisher Scientific’s Ion Torrent next-generation sequencer for its Molecular Analysis for Therapy Choice (MATCH) trial.
“The assay will enable these laboratories to reliably sequence a large range of tumor sample types in a timely manner, including small biopsiesand fine-needle aspirates,” said Mike Nolan, vice president and general manager of oncology at Thermo Fisher Scientific. The test will analyzesingle-nucleotide variants, copy-number variants, insertions and deletions, and gene fusions across 143 genes, moving the sector away from a model with one companion diagnostic per drug and toward one test for all cancers.
Shifting economics
Observers view this transition, which dealmaking over the past year shows is already under way, as a defining trend for the oncology medical technology field. “We see the market gradually shifting to increasingly complex panel-based tests and away from single-marker tests or small panels,” Tim Evans, senior analyst at Wells Fargo, wrote in a note to investors in December 2014. This trend is being driven by an improved understanding of cancer, the proliferation of targeted drugs, and money.
Work by Illumina and others means sequencing is now cheaper than ever, making tests that were once prohibitively expensive an option for researchers and clinicians. Robert Klein, chief business officer at Complete Genomics, cited the trend for sequencing to become “more automated, higher throughput and less expensive” as key to the move away from limited panels. Ongoing attempts by the likes of Complete Genomics to win shares from Illumina should push prices down further.
When paired with a new understanding of the health economics of single-biomarker and pancancer panels, the falling costs of sequencing are tipping the financial balance in favor of broader tests. “Next-generation sequencing companion diagnostics … can be used to expand the potential patient reach of these therapies. This then improves the potential health economics equation of selecting the right therapies and can reduce the cost back to the payers,” Nolan said.
At the same time, what companies look for and how they use the data are continuing to evolve. “There are several technologies in development that can detect certain molecular markers in ways that were not possible before, such as circulating nucleic acids or circulating tumor cells in blood. These could potentially be used to develop novel clinical endpoints, such as minimal residual disease, that we can discuss with regulatory agencies and apply in clinical development,” Coloma said.
As the causes of cancer become understood and the technologies for detection advance, Coloma and his peers at rival large pharma companies will identify new ways to treat diseases and ensure that patients receive the most appropriate drugs. This, in turn, will encourage drug developers to strike new deals while also providing payers with ways to accelerate their push to extract full value from the therapies they reimburse.
The ongoing need to sign deals
The trends in cancer R&D and care continue to head in one direction. After a long lag following the approval of Herceptin (trastuzumab) for HER2-positive breast cancer, the wave of targeted therapies that were expected following the Human Genome Project has arrived. When paired with the falling cost of sequencing, the proliferation of targeted drugs has given physicians a growing toolbox of therapeutic options and tests to assess how best to use this asset. Biopharma companies are tapping into the same resources to gain insights into new drug targets, ideas for combination therapies and ways to stratify patients in clinical trials. No single company has the mix of drugs and medical technologies to execute this strategy without dealmaking—a fact that will keep companies returning to the negotiating table as they seek out the tools or methods that could give them an edge in the fiercely fought race to meet unmet needs in oncology.
