Inside the Lab Industry: Cancer Genetics Wants to Take the Biopsy Out of Oncology Diagnoses

Although growing fast, Cancer Genetics Inc. is currently about one-thousandth the size of LabCorp and Quest Diagnostics. While it lacks the heft of those two leading national players, the New Jersey-based Cancer Genetics does have some things those much larger labs do not: a burgeoning joint venture with the Mayo Clinic and rapidly growing revenues. Where Cancer Genetics heads next will rely primarily on its young chief executive officer and whether the medical community and patients believe its biopsy-avoiding line of oncology-related molecular tests are worthwhile investments. The bulk of Cancer Genetics’ revenue is currently generated from molecular tests that can assist in predicting the progression of patients with non-Hodgkins lymphoma, leukemia, and renal cancer. An affiliate operation known as Expand DX provides consulting services to community hospitals and cancer centers in order to compress the diagnosis-to-treatment times, a process that often takes six weeks or more for many cancer patients receiving treatments at smaller facilities. Cancer Genetics currently works with about 10 hospitals primarily in the East and Midwest to provide this service. However, Cancer Genetics is also in the middle of ramping up a product that shows the promise of a blockbuster: a test focusing on four biomarkers that allow it to detect and predict the progression of human papillomavirus-related cervical cancer through a routine Pap smear exam. The test, known as the FHACT, recently received CLIA approval and was launched in the United States on Nov. 18. According to Cancer Genetics Chief Executive Officer Panna Sharma, the typical diagnosis of cervical cancer occurs in stages: an abnormal Pap smear, with a follow-up colposcopy scheduled at a later date. According to Sharma, 80 percent of patients do not require further follow-ups. But among those that do, a biopsy is the next step. “A lot of women don’t want the biopsy,” Sharma observed in a lengthy interview with Laboratory Industry Report. It’s a combination of physical and psychological dread that’s also common with men who have abnormal prostate exams. As a result, appropriate follow-up care does not always occur. And cervical biopsies themselves are inefficient, with just some 3,700 cases of squamous cervical carcinoma diagnosed from the 2.5 million biopsies that are performed in the United States every year. Instead, the FHACT can be ordered from the original Pap smear test without a colposcopy or biopsy. Any positive test is also accompanied by the cancer’s stage of its progression. The total turnaround time for FHACT is three to five days. Sharma indicated the test can be adapted for the quick detection of head, neck, and anal cancers as well, noting that those conditions have chromosomal abnormalities similar to cervical cancer. The company’s other assays also have a similar benefit of eliminating follow-up visits and often exceedingly uncomfortable—and expensive—biopsy procedures. For example, Cancer Genetics’ test for renal cancer, which was developed jointly with the Cleveland Clinic and Memorial Sloan-Kettering Cancer Center, can be performed in conjunction with a needle aspiration. That replaces a nephrectomy, a partial removal of the suspect kidney that is undertaken about 18,000 times a year. It requires general anesthesia and hospitalization and can cost up to $15,000, according to Sharma. By comparison, the average revenue derived from a Cancer Genetics test is between $400 and $500. Cancer Genetics received a patent on its kidney cancer assay earlier this year. Meanwhile, Cancer Genetics’ joint venture with the Mayo Clinic, known as OncoSpire Genomics, will focus on assays to address lung cancer, multiple myeloma, and follicular lymphoma. The latter disease, a type of non-Hodgkin’s lymphoma, is particularly problematic when it comes to rapidly diagnosing whether it has transformed into the indolent form, where life expectancy is often less than a year. “The big question is if there is a way to better place diagnoses into different risk classes up front,” Sharma said. Cost Savings Potential The potential cost savings for such assays is apparently catching on in the medical community, although slowly. For the third quarter of 2013, Cancer Genetics’ test volume was up 71 percent compared to the third quarter of 2012. However, the numbers themselves remain small: 2,920 tests performed during the quarter, compared to the 1,704 performed in the year-ago quarter. For the first nine months of 2013, the company performed 8,035 assays, compared to 4,937 for the first nine months of last year. However, those numbers could rise quickly if the FHACT test catches on. Cancer Genetics is also in talks with accountable care organizations in New York, New Jersey, Iowa, and Texas about using its tests as a potential component toward cutting costs and improving health care delivery. Anywhere from 10 percent to 30 percent of oncology-related tests have to be done a second time because of errors—a huge cost Sharma said his company can help providers eliminate. The 42-year-old Sharma took over the reins of Cancer Genetics in the spring of 2010 after a life sciences consulting firm he co-founded, TSG Partners, had been retained to counsel the company. Within a few months he was approached by John Pappajohn, an Iowa-based billionaire venture capitalist who owns a significant stake in Cancer Genetics, to take over as CEO. Sharma, who immigrated from the Punjab region of India with his family when he was four years old, matriculated at Boston University at the age of 16 through a special program. He threw himself into the new job at Cancer Genetics, regularly working late hours seven days a week. Late last month, Cancer Genetics’ public offering was closed, raising a relatively modest $46 million. However, given it had less than $1 million in cash on hand in 2012, it now has far more resources to fuel growth. The company’s sales staff of about 14 is expected to more than double in the next year. Peter Francis, president of Clinical Laboratory Sales in Woodstock, Md., noted that while there is some competition for such assays among smaller esoteric labs, Cancer Genetics has brought to market some promising applications involving microarray-based comparative genomic hybridization, which is a relatively new technique for detecting copy number variations in solid tumors. However, Cancer Genetics also faces challenges in terms of getting paid. “The issue I see is reimbursement on those proprietary tests,” Francis noted. He added that the way Medicare reimburses for molecular testing on the final Physician Fee Schedule will likely foretell the future for many of the smaller esoteric labs, although the company itself currently derives less than 15 percent of its overall revenues from the Medicare program. Francis also sees promise in the Expand DX program, which accounts for more than 40 percent of the company’s revenue. “I interpret this as akin to what other national labs offer to help with the local hospital’s outreach program by providing an avenue for local physicians to use Cancer Genetics through the hospital,” he said. “However, hospital administration and their lab’s administration must be keenly aware of the negotiated fees charged by CGI versus insurance reimbursement to ensure the hospital is not losing money.” Cancer Genetics reported a loss for the last quarter, compared to a modest profit a year ago. But Sharma called it “phantom net income” tied to liabilities with some derivative warrants the company issued. In the meantime, he considers Cancer Genetics to have reached a new stage beyond developing products, and it will now be focused on selling them. Although he has cut back on the frantic hours from when he first took over the company, Sharma has morphed from being slightly less hands-on to spending more time soliciting input. “Since I’m not a medical doctor and not a pathologist, I have to get people’s input in terms of how [our] offerings will be viewed,” he said. “I have to engage in dialogue and ask the right questions. I am not relying on my own perspective.” Takeaway: Cancer Genetics could be on the cusp of dramatic growth, but its long-term future has yet to be determined.