In Conversation With Cancer Genetics CEO Panna Sharma

| About: Cancer Genetics, (CGIX)

As CEO of Cancer Genetics (NASDAQ:CGIX), Panna Sharma was attracted to the emerging leader in DNA-based cancer diagnostics and services by its rich heritage in understanding genetic changes and aberrations that have clinical value. A former managing partner and founder of TSG Partners, a specialty life sciences consultancy and advisory company, Mr. Sharma led the development of strategic initiatives, corporate growth strategy and corporate turnarounds for both public and private companies. He also led over 70 buy and sell-side transactions in the healthcare sector. At TSG, he established the Global Diagnostics Index, the Global Biotools Index and several other life science capital markets indices that are still used today. In this interview with, Mr. Sharma discusses how molecular diagnostics is changing the vision of personalized medicine and how Cancer Genetics' products and services are tailored to the specific genetic profile of the individual to better diagnose and guide treatment decisions in hematologic and urogenital cancers.

Let's begin with a brief sketch of Cancer Genetics.

Our full-service, go-to-market strategy is focused on three strategic pillars:

First is partnering with community hospitals through our ExpandDx program, which generates about 46% of our revenue today and is experiencing double-digit growth. Eighty-five percent of all U.S. cancer patients are initially diagnosed in community hospitals and laboratories. ExpandDx is designed to help the over 4,000 community hospitals in the U.S. expand their capabilities in genomic testing of complex cancers and keep patients locally

Second, we serve the biotech and pharma industry by helping them with patient selection, stratification and monitoring through our biomarker-based testing for clinical trials. This is currently our fastest growing program, which we have branded SelectOne. Through SelectOne we are developing both companion diagnostic programs for biotechs and also doing extensive genomic profiling for clinical trials for the pharma companies.

Third, we are focusing on the needs for advanced cancer testing and molecular diagnostic products for blood-borne and urogenital cancer in emerging economies through partnerships and distributors. We are putting in place a strong set of regional partners, such as Nikon (OTC:NINOF) in Europe, Dasa in Brazil, Roche (OTCQX:RHHBY) in Central and Latin America, Kamenini in India, and Quimilabs in Mexico. These partners provided us with good international exposure which accounted for about 8 percent of our revenue in 2012, and that continues to grow.

Over the past several quarters, we have successfully launched five unique, molecular diagnostic products, three products for leukemia and lymphoma, and two products for renal and cervical cancers. These products have been developed and validated through our research collaborations with world class institutions such as the National Cancer Institute, Memorial Sloan-Kettering Cancer Center, University of Iowa, Georgia Health Sciences University, Dana Farber, and Cleveland Clinic. Our unique products also are being incorporated into biopharma's clinical trials, such as the trials being done in B-cell neoplasms by Gilead (NASDAQ:GILD) and in companion diagnostic programs by Roche.

Can you discuss your recent joint venture with Mayo Clinic?

This is something we're really excited about because the joint venture, OncoSpire Genomics, will improve cancer care by discovering and commercializing diagnostic tests that leverage next-generation sequencing. Next-generation sequencing will change the face of cancer care in the future by moving from platforms to disease-specific applications and we'll be at the forefront of accelerating cancer biomarker discovery research already underway at Mayo. Our company will be committing operating capital and commercial expertise over the initial three-year period of the joint venture and Mayo will be committing in-kind services and support, the use of their facilities, clinical data and specimens. Over the next couple months, a joint scientific review committee will be announcing three initial projects in key oncology categories for OncoSpire.

What is the promise of personalized medicine and where does Cancer Genetics fit in?

Individualized medicine and genomic testing give us a fundamental understanding of the inner workings of wellness and disease. Clinicians and patients are demanding it as are pharma companies, with their biomarker-specific drugs and clinical programs. Today, only 15% to 20% of hematologic cancers are genomically characterized during routine clinical workups and we think that will reach 60% to 70% over the next few years. Take breast cancer, for example, HER2, BRCA, ER, PR biomarkers and other genomic signatures have been instrumental in diagnosis and prognosis for less than a decade and they've created billion dollar companies like Genomic Health, Myriad (NASDAQ:MYGN) and GE's (NYSE:GE), Clarient. We think the same phenomenon is beginning to happen in blood-borne cancers and other more challenging urogenital cancers. In the past four years, our view of blood-borne cancers has gone from thinking there were 10-to-12 different types of lymphoma and leukemia to now having 90 different types of leukemia and lymphoma cancers to categorize. These type and sub-types have very different genomic characteristics with potentially different outcomes and different disease progression and different reactivity to therapeutic regiments. This creates significant challenges in properly characterizing the disease and then mapping that to the potential treatment options for the patient. Today, there's a renaissance in the types of targeted therapeutics coming out for these more complex disease that is extending patient lives from a few months to years or putting cancer into remission. Our view is that during the next five-to-seven years, we'll see explosive growth moving cancer management and treatment towards more comprehensive genomic profiling.

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CGIX's Unique Focus & Approach Supports Entire Cancer Care Continuum

Are we talking about early diagnosis or therapeutics here?

It's both, but more accurately, it's about diagnosis that's more comprehensive; how we manage treatment and patient outcome. On the flip side, genomic sequencing is changing drug discovery and you can see that as drug companies are now buying diagnostic companies because they realize the future of drug discovery will be different than it was in the past when approaches using chemistry and compound libraries were fundamental. It's estimated that by 2016, over 55% of oncology drug will be associated with biomarkers, up from 20% in 2011. For example, there's a multibillion-dollar race underway to develop the next big cholesterol-lowering drug as a result of the discovery of a genetic mutation.

How does your business model achieve personalized cancer treatment?

We have developed a hybrid business model that serves the needs of patients through our testing services and at the same time serves the needs of biopharma to develop drugs at less cost. So we have launched clinically-validated molecular diagnostics and we use those products to develop comprehensive testing services for community hospitals. We use that same infrastructure to create custom solutions for biopharma companies, such as biomarker discovery and companion diagnostics, and based on our knowledge, we can help biopharma stratify patients for clinical trials. We can't provide those services in every category but our focus is on blood-borne, urogenital and gynecological cancers.

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CGIX's Hybrid Business

What's the market potential for molecular diagnostics?

There are about 600,000 new cases each year in blood-borne, urogenital and gynecological cancers, with death rates of 37% in blood-borne cancers, 34% in gynecological cancers and 25% in urogenital, where if you remove prostate cancer, death rates jump to 50% or so. Molecular diagnostic testing is currently a $6-billion-plus market in the U.S. and over the next several years, we expect to take a big share of that testing market because we have comprehensive products that look at very unique genetic signatures in these categories.

Can you discuss your lead product for hematologic cancers?

MatBA stands for Mature B-cell Array. It identifies multiple genomic profiles in mature B-cell neoplasms that are unique, scientifically relevant and clinically validated for each subtype of chronic lymphocytic leukemia, small lymphocytic lymphoma and diffuse large B-cell lymphoma. There is no other company that has a commercially validated molecular profile for diffuse large B-cell lymphoma, which has a 47% death rate, and properly categorization is critical in patient care. MatBA can subtype the disease into aggressive and non-aggressive, which has a huge impact on how a patient is managed in terms of treatment, and then map the appropriate response to treatment and prognosis. We think this will be a blockbuster application. The next two MatBA products, which are delivered today as a laboratory developed test in our CLIA lab, in our pipeline are for mantle cell lymphoma and multiple myeloma, which is a very large indication and where we expect to be the first to market a personalized molecular diagnostic test for both critical cancers. Again, as our strategy indicates we will validate these products in large scale trials that are underway now with partners such as Memorial Sloan Kettering and University of Iowa.

Can you explain how MatBA improves risk stratification and prognosis?

Fluorescent in situ hybridization or FISH-based testing uses four genomic markers to stratify patients with chronic lymphocytic leukemia and small lymphocytic lymphoma who will have a poor outcome, but misses accurately profiling the remaining 85% of the population. MatBA is able to find an additional 8% to 10% of cases with an unfavorable prognosis that are often missed by FISH. In the remaining 85%, MatBA is able to determine 38% of cases that have a favorable prognosis and fall under the "watch and wait" approach, and 39% of cases with a mid-range or intermediate prognosis. All this impacts therapy selection and clinical management of patients, resulting in personalized treatment based on a genomic profile of the disease. We think this will usher in a whole new era of how you manage cancer patients and turn these hematologic cancers into a manageable disease.

MatBA-CLL/SLL Provides Improved Risk Stratification and Outcome Prediction
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MatBA-CLL/SLL Provides Improved Risk Stratification and Outcome Prediction

Can we talk about urogenital cancers and your product line?

We've launched the UroGenRA-kidney array in collaboration with Sloan-Kettering and Cleveland Clinic after validating over 300 specimens. This is the only product that can genomically characterize kidney cancer from a fine-needle aspirate. So we think this has the potential to be a real blockbuster product and save the health care system thousands of dollars in the diagnosis of a patient with kidney cancer. We're also beginning clinical valuation studies of UroGenRA-kidney as a tool for prognosis of disease and theranosis to see whether a patient has a good response to the current first line therapy. Those studies are being done in conjunction with Sloan-Kettering now.

And what's your product line in gynecological cancers?

We've launched FHACT for cervical cancer outside of the U.S. because the disease is the No. 1 killer of women in emerging countries, where they don't often have a good OB/GYN infrastructure. FHACT is the only product that can work from a Pap smear to provide information on the existence and stage of cervical cancer and if therapeutic intervention is required. Any cytogenetic lab can use our test, which looks at four very specific markers, on a left over Pap smear. The test can determine whether the woman has cervical cancer and can stage the disease. So again, we think this will be a blockbuster product going forward, and we are now in the middle of a product launch in several emerging countries.

Any plans to launch FHACT in the U.S.?

We think we'll be launching the test in the U.S. in the coming quarters, both Because FHACT was developed in conjunction with the National Cancer Institute, it is particularly focused on countries where cervical cancer burden is particularly high. In addition, we've move our manufacturing of the product to India so we have favorable price controls and ability to scale the manufacturing of the product.

What else is in the pipeline for in urogenital cancers?

FHACT for head and neck cancer will be next. We've found that the same chromosomal aberrations in cervical cancer caused by the human papillomavirus (HPV) are very similar to those in head and neck cancer and anal cancer that are caused by the virus. We have a number of collaborations under way to validate and hope to launch the test for head and neck cancer by the first quarter of 2014, both in the U.S. and overseas. It's a highly underserved market and growing rapidly. We expect to work with existing swabs or biopsies in order to make a definitive diagnosis of the stage the cancer is in.

We've designed FHACT to be a simple and lower cost product that can work from Pap smear while our UGenRA is a DNA microarray product and is suited for the diagnosis of complex cervical cancer. HPV is not the only cause of cervical cancer and UGenRA, which we hope to launch early next year, is a more comprehensive test for the disease. We are also validating UGenRA tests for ovarian and endometrial cancers, which are very complex cancers with high death rates, and are planning to launch these as laboratory developed test during 2014.

CGIX Pipeline
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CGIX Pipeline

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.