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Nanogen makes it easier, faster for hospitals to check for diseases
(San Diego Union-Tribune, The (KRT) Via Thomson Dialog NewsEdge) Jun. 23--Is a particular patient genetically prone to dangerous clotting problems? Is someone carrying the gene linked to cystic fibrosis? Is the patient who feels run down and lethargic suffering from mononucleosis or some kind of influenza virus?
Typically midsize hospitals must draw blood and send it out to an independent laboratory for costly testing before any of these questions can be answered days later.
Nanogen, a tiny San Diego biotechnology company, is now offering these hospitals another option: a desk-top sized machine that can quickly read tests of blood or urine for viruses, genetic mutations or other biological indicators linked to disease.
The company is also selling the reagents, or chemicals, that react to the gene mutations and other disease indicators.
"When we were developing our technology, we realized that only 5 (percent) to 10 percent of the labs in the United States are doing molecular testing," said Nanogen's chief executive, Howard Birndorf. "A lot of places don't think that they are big enough or sophisticated enough to buy the technology and do the testing themselves. We wanted to offer them choices."
Three years ago, with funds dwindling and products far from market, Nanogen reworked its strategy to better position itself for the evolution of personalized medicine -- testing individual patients' genes to determine their predisposition to disease and how their body would metabolize the possible treatments.
Molecular diagnostics is a hot, emerging market with growth estimates of 30 percent to 50 percent a year from a relatively low base.
About 75 percent of the market is for infectious disease testing, and the other 25 percent is for human genetic testing. The genetic testing sector is expected to have the most rapid growth in the next few years.
Nanogen, which was founded in 1993, has never turned a profit and had spent years trying to get products to market. To accomplish its new goals, the company had to invest in products and companies that would create an instant revenue stream.
The company hired David Ludvigson, a company board member with long biotech roots, as chief operating officer. The company also hired an investment banker to start searching for investment opportunities with companies around the world.
Since then Nanogen has acquired several companies, made a strategic investment in a tiny Finnish biotech, and for $15 million gave Fisher Scientific, a global diagnostic tool company that recently merged with Thermo Electron, a 9 percent stake in the company.
Last year Nanogen also began selling its NanoChip 400, the desk-top molecular test-reader priced about $75,000, which Nanogen hopes many midsize hospitals and research labs will find affordable.
Florida Hospital, a midsize facility in Orlando, bought the NC400 last year and installed it in its molecular diagnostics laboratory, which runs tests in genetics, infections disease and solid tumors.
The lab is ramping up its testing capacity but is using Nanogen's technology to detect gene mutations linked to an increased risk of blood clotting, scientist George Corpus said. Possible future uses include using the technology to find genetic mutations linked to cystic fibrosis and hemochromatosis, he said.
The technology is a good fit for his hospital, Corpus said.
"Because Nanogen fits well with our goal, budget and volume, and because we've been happy with the technical support staff, I envision using the NC400 for at least the next two years," he said.
Birndorf expects his company will be better positioned by then.
"This year it will all begin paying off," Birndorf said.
A number of biotechnology companies have been founded around technology for identifying the presence of just one disease, often with lackluster results, Birndorf said. Nanogen set out to acquire or develop several markers of disease, and the reagents that could be used on its machine or another company's.
In summer 2004, Nanogen took its first step in that direction with the acquisition of SynX, which makes point-of-care diagnostics that test for the presence of antibodies. The acquisition brought Nanogen markers for stroke, diabetes, Alzheimer's disease, traumatic brain injury and congestive heart failure.
In March, the Food and Drug Administration approved the test for congestive heart failure, but the company has not yet begun marketing it.
The market for such a test is estimated to be about $300 million. Another San Diego-based diagnostics maker, Biosite, has a test on the market.
Six months after the SynX deal, Nanogen merged with Epoch Bioscience, a Seattle company that sought to enhance the detection of disease markers in DNA testing. The company's technology, which generated $6 million in revenue, was used to develop 18 infectious disease products, six cancer assessment products and five for genetic disorder and cardiovascular disease.
"The merger greatly enhanced Nanogen's ability to address the needs of the clinical laboratory market in a more immediate fashion without having to develop these products independently," Stonegate Securities analyst Laura Engle wrote in a report in November.
In January, Nanogen bought Toronto-based cardiac diagnostics maker Spectral Diagnostics for $7.8 million. Together with the congestive heart failure product, Birndorf said the deal gives Nanogen a full portfolio of cardiac diagnostics and manufacturing capabilities. Spectral made $6 million in revenue last year with $1 million in profit, he said.
And in April, Nanogen acquired the Italian diagnostics maker Amplimedical, which has contracts with the Italian government and is now the European base of operations for the San Diego company.
Last spring, Nanogen made a $3 million investment in a tiny Finnish biotechnology company because of its ties to a unique population.
Oy Jurilab has exclusive access to 20-years worth of genetic information for what is thought to be one of the most genetically pure populations in the world.
Because of the somewhat isolated location of a part of Finland, and the long family lines that exist without the addition of people from outside the geographic area, researchers have found it easier to pinpoint genetic indicators of disease in the population.
Last month, Nanogen announced that it would collaborate with Jurilab on the development of markers for Type 2, or adult on-set, diabetes.
"If we can identify genetically who is predisposed to Type 2 diabetes, there's a lot we can do to try to prevent the onset of the disease," said Birndorf, who has Type 2 diabetes.
Jurilab was happy to have a well-placed partner in the United States.
"Its knowledge of clinical diagnostics and assay design, and presence and existing contact network in the U.S. which is the biggest single market for Jurilab products," said chief executive Kari Paukkeri.
The markets aren't as enthusiastic about Nanogen. Shares sold for $1.62 at the close of market yesterday.
But one of the two analysts who cover the company is optimistic about the coming months.
"Nanogen has pursued a strategy based on addressing large markets with cutting-edge, products," said Engle, of Stonegate. "If the new point-of-care
tests for congestive heart failure are successfully launched and the NanoChip 400 is well-received in the marketplace, Nanogen could experience significant growth in the upcoming year."
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