Cepheid today unveiled a slew of innovations that it is developing for its flagship GeneXpert platform to help it move beyond infectious disease diagnostics and increase its presence in the oncology, epidemiology, and biodefense markets.
Namely, over the next five years Cepheid will be introducing new amplification and detection technology, as well as a new disposable test cartridge design that will enable multiplexed, nested PCR amplification and detection of up to 1,000 targets in a single disposable.
In addition, Cepheid is developing for its consumable test cartridges protein detection capabilities and the ability to run nucleic acid amplification assays directly from formalin-fixed, paraffin-embedded tissue. It is also rejiggering its GeneXpert instrument system to include remote connectivity and data management through cloud computing.
And while each of these features will be rolled out piecemeal over the next five years, Cepheid plans by 2016 or 2017 to offer a new GeneXpert platform called the "Heterogeneous" GeneXpert, or HGX, that will integrate all of the new features.
Cepheid CEO John Bishop discussed these and other recent and upcoming company developments at the company's annual analyst day, held today in New York.
Bishop framed the new innovations as "foundational pillars" on which the company will innovate and grow over the next several years, joining three other such pillars that the company believes it already has in place.
The first of those pre-existing pillars, Bishop said, is how the company has differentiated its molecular testing system from all others on the market by allowing it to compete with higher-complexity and higher-throughput systems but with a much easier workflow, and with more cost savings for laboratories in terms of reduced labor and operating cost.
In addition, Bishop underscored the company's decision several years ago to make real-time PCR its modality of choice for molecular testing because it is proven to be reliable, is broadly applicable, and enables features such as multiplexing, which competing technologies such as isothermal amplification cannot do.
And lastly, Bishop noted that Cepheid has invested heavily in its ability to develop novel and specialized organic and nucleic acid chemistry, which allows the company to develop assays that are optimized for specific gene targets in a variety of fields from infectious disease to oncology to chromosomal aberrations.
Joining these "foundational pillars" will be several new technological developments. First, Bishop noted that the company has already begun the process of moving into intermediate-level multiplexing of its real-time PCR tests by moving to a 10-color fluorescence detection scheme, which trumps the current six-color detection capabilities that are currently available on the GeneXpert platform.
Cepheid has previously hinted at its ability to perform such high-level multiplexing on the GeneXpert. In 2009 the National Institute of Allergy and Infectious Diseases awarded $7.5 million to Cepheid and academic discovery partner the University of Medicine and Dentistry of New Jersey to develop the 10-color detection schema.
And, as PCR Insider reported in 2010, the company had been developing a GeneXpert blood culture assay that would potentially use melt curve analysis to detect and discriminate between as many as 100 different species of the most important clinical bacterial species. The status of that project is unknown, and a company scientist said at the time that Cepheid had been developing the test on its previous generation SmartCycler system, but that it could be adapted to the GeneXpert (PCR Insider, 11/11/2010).
Today, Bishop said that the company now plans to move into high-level multiplexing, with the ability to interrogate as many as 1,000 gene targets in a single GeneXpert cartridge, using nested PCR with both qualitative and quantitative capability.
The new test cartridge, currently called the Honeycomb, will be slightly larger than the current GeneXpert test cartridge, and as such each cartridge will take up the space of two standard test cartridges in a GeneXpert instrument.
"We've already completed substantial feasibility work," Bishop said, "In order to have this function, we had a number of go/no-go decisions, one of which was being able to do single-sited thermal cycling with the system and being able to get a good determination of result.
The Honeycomb cartridge will feature a "pre-amplification" chamber to perform the first step of nested PCR – commonly referred to as an amplification of an amplification – and hundreds of microliter-scale reaction chambers fabricated into the disposable and containing PCR reagents for hundreds of individual nested PCR reactions.
This innovation will be particularly salient for oncology applications, allowing Cepheid to develop highly complex multi-biomarker assay panels for tracking disease progression or therapeutic response, for instance.
"Our head of oncology … said to me, 'Now that you've given me an aircraft carrier, I can do quite a few things,' … and this whole field and expansion into oncology is going to move very dramatically," Bishop said.
Another technological innovation that will directly impact Cepheid's burgeoning oncology play will be the ability to run GeneXpert assays directly from formalin-fixed, paraffin-embedded tissue samples.
"We've been doing the work and the fact is, we can actually extract from the solution and run [assays] directly looking at mRNA expression in the GeneXpert cartridge," Bishop said. "What would happen is you'd take the sections off the [FFPE] block, right into the tube that would be heated up for a short time at 98° C. You'd then transfer that solution right into the GeneXpert cartridge, and we'll be able to … detect directly mRNA expression. That of course is very important for the oncology field."
Proteins and Genes
Another area of innovation will be protein detection capabilities on the existing GeneXpert instrument.
"We're [currently] doing everything except proteins, and we looked at that, and felt all along that we likely could do protein detection with the GeneXpert system," Bishop said. He added the company has "done all the feasibility work, and done some assays … in house" for thrombin, although Bishop noted that the company would not likely bring that particular test to market.
"The same module that is running the molecular test will also run the protein test," he said. "Also … we'll be … using aptamers relative to the targets. We may also then with the apatmers run a PCR process to give us even more exquisite sensitivity relative to those targets."
Examples of market areas where this capability would be useful include, for example, Clostridium difficile testing, where there is "an issue of how you distinguish between a carrier state and an active clinical infectious state. It turns out … there has been discovery of some specific host-response receptors, so proteins, that are indicative of an active clinical state versus carrier state," Bishop said. "Something that we're contemplating, then, is … in the same cartridge, give a host-response detector protein, in conjunction with the C. diff [molecular] detection product, and thereby you can actually, if you wanted to do surveillance, find out if you're dealing with C. diff… and say [whether] it is active clinical or not."
In addition, protein detection capabilities could benefit the company's oncology play by allowing interrogation of "downstream" disease markers that could be correlated with "upstream" genetic markers detected using GeneXpert's molecular capabilities.
Protein detection could also benefit the company's biothreat detection business, which, while not a "core focus area" of the company, "is still an ongoing need," Bishop said; and could add to the platform's selling points for hospitals and emergency departments by offering "platform consolidation," he added.
Lastly, the company plans to upgrade the remote connectivity and data management capabilities of GeneXpert, primarily for disease surveillance and epidemiology purposes.
"We are not reinventing the wheel here," Bishop said. "There are a lot of people working in cloud computing, collecting a lot of data, and we're working with other people doing that, so we're certainly not spending our R&D dollars in that area, but we're tapping it."
Bishop said this idea was born out of the company's tuberculosis diagnostic work, as public health officials participating in Cepheid's high-burden developing country program noted that the huge amounts of data generated as GeneXpert TB testing continues to expand could be highly useful.
"It would be absolutely outstanding if we could get access to all of that data coming in around the world, to understand where are our hotspots, what's going on with TB relative to positive patient results, but also drug-resistant strains of TB," Bishop said.
Specifically, Cepheid is working with an unnamed Stanford University group to enable GeneXpert users to upload clinical diagnostic data into the cloud, then download it in other parts of the world and integrate it into, for instance, a geographic "heat map" of TB outbreaks or drug resistance.
This capability would also allow clinical laboratory managers to better track and control molecular testing as it becomes more decentralized, allowing them to monitor and control diagnostic data from a central location even as it is being generated nearer the patient's bed.
"As we look at this moving forward, we have all of these foundational items … so what we're doing then is to take all of this and put it into one package … and introduce the HGX, or as we refer to it, the Heterogeneous GeneXpert system," Bishop said. "This will be applicable to all of our systems … and one of the things I want to stress [is that] anyone who has purchased a GeneXpert system today, [it] will not be obsolete. The new module coming up today will be able to go side by side with any [existing] system."
Further, all new test cartridges will be interchangeable between platforms, and will be able to run side-by-side in single instruments; for instance, the larger honeycomb cartridge could operate in the same four-test GeneXpert platform at the same time as two other single test cartridges.
"One of the items we've considered [is] just because you can do it, doesn't mean you'll use all of these tools," Bishop said. "It's going to be important as we look at a clinical standpoint, how is this really used, and how is this power really going to be used in the hands of the clinician? Do we always need to have big panel tests? And the answer to that is no. Sometimes we'll have a single or double target."
In terms of timing, Cepheid plans to introduce the remote connectivity and mid-level, 10-color multiplexing next year; the protein detection and FFPE extraction capabilities in 2014 or 2015; and the Honeycomb module and new HTX integrated platform in 2016 or 2017. All of these innovations coincide timing-wise with Cepheid's aggressive test menu expansion, which a company executive outlined last week at the UBS Global Life Sciences conference (PCR Insider, 9/20/2012).
In addition to the high-level innovations that Cepheid is planning over the next five years, Bishop also for the first time addressed some technological innovations that the company has developed for its Xpert CT/NG test for chlamydia and gonorrhea and believes will differentiate it from competing tests offered by the likes of Roche, Hologic's Gen-Probe, and Abbott.
In particular, David Persing, Cepheid's chief medical officer, said during the analyst presentation that the company hopes to address many of the limitations of first-generation tests.
For instance, many in the industry are interested in moving testing to a "self collection" modality, where patients being tested collect their own urine samples or swabs and bring it to the clinic for testing.
One of the problems with this is that patients, in order to avoid a stigma or avoid potential drug testing, will submit non-human or non-biological samples, which can result in additional work for clinical staff and longer test turnaround time.
To address this, Cepheid has developed a built-in "specimen adequacy control" in the CT/NG test cartridge, which will provide sample quality control "much like a molecular cell counter," Persing said, with the added benefit of immediately distinguishing between infected and non-infected patients.
Further, many current CT/NG molecular tests are riddled by false positives, Persing said. As such, Cepheid's test uses a two-target system for each bacterium, and developed and validated its own molecular targets, eschewing many of those commonly found in current molecular tests.
"We didn't trust the ones that are out there," Persing said, adding that Cepheid's targets are expected to provide "better sensitivity and … dependability."
Cepheid's CT/NG assay already has the CE mark and is being sold in Europe, and Bishop during his presentation reiterated previous expectations that Xpert CT/NG would be cleared by the US Food and Drug Administration by the end of this year.
Today's announcements effectively overshadowed some negative news that the company announced earlier in the week and addressed immediately during a Q&A session with analysts preceding the company's prepared presentation.
First, the company announced earlier this week that it had reached a settlement agreement with Abaxis over litigation that the firms had filed against each other over the past few years regarding the alleged infringement of certain patents related to Cepheid's Xpert MRSA test.
Bishop noted during today's presentation that of the $17.25 million settlement that it agreed to pay Abaxis, $14.25 million will be logged on the books in the third quarter of this year, with the remainder to be amortized throughout 2013.
In addition, Cepheid after the close of market yesterday informed investors that it expects to report third-quarter revenues of between $79 million and $81 million, below its own target and Wall Street's average estimate of $83.8 million.
In a statement yesterday, Cepheid blamed the shortfall on "intermittent interruptions in the supply of Xpert cartridge parts," adding that it is working to address the issue, but that it expects to exit the third quarter on Sept. 30 with more than $5 million in backorders that are now expected to be fulfilled by the end of October.
The company also blamed the shortfall on softness in the capital expenditures market, a situation that it had previously warned investors about and built into its financial guidance for the year.
Today Bishop told analysts that the manufacturing snafu was completely related to the plastics, and not the biologics, in Cepheid's disposable cartridges, and that it was a "good news, bad news" situation in that the company has experienced high demand for its tests but is temporarily unable to meet that demand.
"We're back to a steady state, the parts are flowing, but not at the rate needed to meet demand," Bishop said. As a result, the company "has its arms around the issue" and expects to satisfy the backlogged orders in October, Bishop said.
In addition, to help mitigate the situation, Bishop noted that Cepheid is in the process of acquiring its own plastics molding company and will establish its own consumables manufacturing site in Sweden. That transaction will be in the "millions of teens" dollar range, the company said, and is expected to be completed by the end of this year or early next year.