Positive data from GlaxoSmithKline's (GSK) two pivotal trials of its darapladib cardiovascular drug could provide a huge boost to the utilization of diaDexus' (OTC:DDXS) PLAC test, which is being used on patients in the studies to measure their levels of Lp-PLA2, a biomarker that identifies risk of heart attack and stroke.
"If the darapladib trials are successful, it would mean that the Lp-PLA2 enzyme may be considered a risk factor for cardiovascular disease, which could increase utilization of the test by physicians and result in positive reimbursement decisions," diaDexus president and CEO, Brian Ward, says in an interview with BioTuesdays.com.
"The FDA also may require a companion diagnostic for GSK's drug, and diaDexus has the worldwide distribution rights for the companion diagnostic," he adds.
GSK is attempting to target and inhibit the Lp-PLA2 enzyme with darapladib in order to reduce the risk of cardiovascular events in patients with heart disease. With more than 27,000 patients enrolled, the combined Phase 3 clinical program is one of the largest ever conducted to evaluate the efficacy and safety of any cardiovascular medication.
GSK, which originally used the PLAC test to exclude enrolling patients without Lp-PLA2, expects to report data from its STABILITY study by the end of 2013, with the SOLID-TIMI 52 study scheduled to close by the end of the first quarter of 2014.
Feltl & Co. analyst Ben Haynor, who initiated coverage of diaDexus in July with a "strong buy," contends that the GSK trials represent a "free call option" for diaDexus. "We have not factored in the potential approval of darapladib into our valuation, which we believe would massively accelerate adoption of the PLAC test."
Dr. Ward, who was part of a new management team that moved into diaDexus in the third quarter of 2011, agrees.
"Even if the darapladib trials are not successful, it's business as usual for us," he suggests. "Lp-PLA2 is a well-established predictive marker for increased risk of heart attack and stroke, and our base business addresses a sizeable market. Our growth drivers are substantial."
The FDA-cleared PLAC test helps uncover a hidden risk of heart attack and stroke by measuring the risk of plaque rupture-which is important because half of all heart attacks and more than 60% of strokes occur in patients with normal cholesterol levels, an established culprit for cardiovascular risk.
High levels of Lp-PLA2 are associated with increased cardiovascular risk in healthy people, according to a study published in Clinical Chemistry in 2012. Additional studies have shown that high levels of Lp-PLA2 double the risk of heart attack and more than triple the risk of stroke.
High levels of Lp-PLA2 Double heart attack risk and more than triple stroke risk
"We estimate our test has a potential U.S. market of 85 million people, with 35 million immediately addressable in terms of having health insurance and seeking health care," Dr. Ward points out, adding that those figures correspond with the U.S. population on cholesterol-lowering statins.
Feltl's Mr. Haynor figures that penetrating the addressable market would translate into more than $500-million in annual sales for diaDexus at a gross margin above 80%.
diaDexus generated revenue of $20.8-million for all of 2012, and Dr. Ward says guidance for 2013 is $24-million to $25-million, which represents a 28% compound annual growth rate over the past four years. Quarterly revenue has grown in 12 consecutive quarters.
DiaDexus Revenue Overview (Millions) (*2013 guidance of $24-25M as of May 6, 2013)
In August, the company reported second quarter revenue of $6.2-million and a reduced per-share loss, beating consensus. It also announced a favorable Medicare coverage decision impacting several states that makes the PLAC test universally available via Medicare throughout the U.S.
Cash and cash equivalents and investments at June 30, 2013 were $12.0 million compared to $13.0 million at March 31, 2013 and $13.6 million at December 31, 2012. Accordingly, the company appears to have sufficient cash to support its growth strategy.
Last week, Mr. Haynor raised his price target on the stock to $2.15 from $1.80, after traveling with Dr. Ward and CFO Jean Viret on a non-deal road show. "We came away with a new appreciation for diaDexus' unique competitive positioning," Mr. Haynor wrote.
The company's base business is focused on enhancing brand messaging for the PLAC test, conducting physician education programs about advanced lipid profiling, and ongoing partnerships with eight national cardiovascular specialty laboratories (CSLS).
"We sell test kits to the CSLs, and CSLs sell services to physicians," Dr. Ward explains, noting that the company's 12-person commercial team leverages the CSLs sales forces to drive growth of the PLAC test. "We co-brand and co-market with these labs and provide educational services to primary care physicians who use those labs."
The PLAC Elisa kit is FDA-cleared, and the PLAC test for Lp-PLA2 Activity has a CE Mark in Europe. Dr. Ward says diaDexus is currently in discussions with the FDA to identify a clinical trial in order to obtain regulatory approval for the Lp-PLA2 Activity test. "The Lp-PLA2 Activity test is run on automatic chemistry analyzers, which nearly every U.S. lab has, and FDA clearance would facilitate expansion of the test into numerous clinical labs," he adds.
Dr. Ward also notes that diaDexus is planning for long-term growth through pipeline expansion, with a focus on high-value cardiovascular predictive markers. "At year end or in early 2014, we'll begin discussing where we're going with developing our pipeline."