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Veracyte, Johnson & Johnson Innovation Collaborate on Lung Cancer Dx

NEW YORK (GenomeWeb) – Veracyte said today that it has struck a collaboration agreement with Johnson & Johnson Innovation to focus on developing Veracyte's lung cancer tests.

Under the terms of the deal, Veracyte will join J&J's Lung Cancer Initiative, which aims to prevent, diagnose and treat, and cure lung cancer. The partners will combine study cohorts, including a J&J cohort of around 5,000 patients with multiple years of clinical outcome data and some patients who were enrolled in a global National Cancer Institute-sponsored clinical trials. The companies will also collaborate on enrolling new cohorts of patients. Veracyte will contribute bronchial brushing and nasal swab samples from its biorepository and will perform whole-transcriptome sequencing on the entire cohort.

Veracyte will use the data to further develop two diagnostic tests: the second generation of its Percepta genomic classifier test, which is used in conjunction with bronchoscopy to rule out cancer in lung nodules; and a nasal swab test that will use RNA sequencing to identify lung cancer. J&J will be able to use the data in its drug development programs.

"Our goal is to advance the development and commercialization of novel diagnostic tests to detect lung cancer at its early stages when this disease is most treatable and where more lives can be saved," Veracyte CEO Bonnie Anderson said during a conference call with investors to discuss the collaboration.

Johnson and Johnson Innovation is the venture capital arm of J&J, and as part of the deal, J&J will pay Veracyte $5 million upfront and up to $15 million in milestone payments. Some of those milestone payments will be associated with the commercialization and reimbursement of the second-generation Percepta test while other milestones will be tied to the longer-term development of the nasal swab test, Anderson said.

In addition, Anderson also estimated that the deal would provide Veracyte with around $30 million in non-monetary value in the form of access to clinical cohorts that Veracyte would otherwise have to spend millions of dollars to establish over several years. 

J&J will have the potential to receive 1 percent in royalty payments from sales of Veracyte's second-generation Percepta test and a "low single-digit percent" for the nasal swab test, Anderson said.

The collaboration will also expand Veracyte's market opportunity to $30 billion to $40 billion, she said. Currently, the market opportunity just for Percepta is around $500 million, Anderson added, since it is limited to patients who have already had an imaging test that has found a nodule but that can't be classified as low or high risk. While the second generation of Percepta may expand that market slightly, the real opportunity will be the nasal swab test, Anderson said, which will "open up the clinical care continuum to be able to address earlier-stage detection, [and] guide stratification at perhaps the stage of nodule identification." It also opens up the possibility of screening such that "we could potentially test patients and try to get them into a lung cancer screening program — those with a higher risk of lung cancer," she added.

Veracyte's Percepta test is used in combination with bronchoscopy to help rule out cancer in suspicious-looking lung nodules. Lung cancer is difficult to diagnose early because noninvasive tests like bronchoscopy and imaging have high false positive rates and obtaining a biopsy of lung nodules for diagnostic testing is invasive, costly, and risky for patients. According to the clinical validation study for Percepta, combining the genomic classifier with bronchoscopy resulted in a sensitivity of 97 percent, Anderson said.

As a result of the J&J collaboration, she noted that the second-generation version, which will be based on RNA sequencing, would be launched in the first half of 2019, an earlier timeline than previously anticipated.

Anderson said that in early 2019 the company would also present early data from its nasal swab test with additional data and details on commercialization coming in the next 18 to 24 months. The goal for the nasal swab test is to use Veracyte's RNA-seq and machine learning platform to detect lung cancer from a nasal swab, which would be even less invasive than a bronchial swab. Last year, Veracyte and Boston University researchers published initial proof-of-concept data showing that there were gene expression differences in nasal swab samples between individuals with and without lung cancer.

Ultimately, the goal for the nasal swab test would be to enable lung cancer detection at earlier and earlier stages, including identifying patients "with precancerous conditions," Anderson said.

She noted that while a number of companies are developing liquid biopsy tests for early lung cancer detection, "evidence is lacking on how early liquid biopsy can detect cancer in the blood. In contrast, airway genomic alterations have already been validated in the bronchial airway and have been shown to be feasible in the nasal airway, giving us strong confidence in our approach and plans."

A nasal swab test would also be amenable to being performed in a variety of settings, including a patient's doctor's office or even a pharmacy.

The collaboration with J&J is expected to also accelerate the development of Veracyte's biorepository of samples that are paired with transcriptome sequencing data. As Anderson previously mentioned, that biorepository and sequencing data will serve as a valuable tool to drive additional deals with pharmaceutical companies looking to develop precision medicine therapies.

In Thursday morning trading on the Nasdaq, Veracyte's stock was up more than 3 percent at $12.40.