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Roche Will Focus on Genia's Nanopore Technology for Dx Market After Ending Deal With PacBio

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NEW YORK (GenomeWeb) – Roche's decision to end its diagnostic development agreement with Pacific Biosciences, announced yesterday, was not a signal that the company no longer intends to pursue the clinical sequencing market, but rather an indication that it will focus its efforts on Genia, the nanopore sequencing startup it acquired in 2014. In addition, Roche plans to launch next-generation sequencing-based circulating tumor DNA assays next year.

Head of Roche Sequencing Solutions Neil Gunn told GenomeWeb that Roche made the decision to end the agreement with PacBio after determining that it would not be able to meet its "strategic objective of becoming the leader in clinical sequencing" in the timeline that it had set out. 

Now, the company plans to focus its efforts on developing Genia's nanopore technology for clinical use, and it also plans to launch circulating tumor DNA products based on technology from its CAPP Medical acquisition.

Gunn said that Genia's technology has "progressed very well" and that Roche would announce a timeline for the commercial launch of the system next year.

Researchers from Genia published a proof of principle study in April, although Genia CEO Stefan Roever said at the time that the final product would be substantially different. Gunn said that the development team working on the technology has made significant advances, including in the chemistry, biology, and electronics of the system.

Roche's "development focus from a sequencing perspective will be very much on that platform now," Gunn said. "Ultimately, our objective is to have an end-to-end solution within the clinical sequencing space."

Next year, Roche also plans to launch three circulating tumor DNA assays, based on technology it acquired from CAPP Medical last year, a Stanford University spinout. Those assays will initially be for lung cancer, shortly followed by indications for colon cancer, Gunn said, since "that's where the clinical utility is today for ctDNA."

Roche previewed two of the so-called Avenio ctDNA kits, a 17-gene and 77-gene assay, at the Association of Molecular Pathology meeting last month.

Under the terms of the initial agreement struck by PacBio and Roche in 2013, Roche had exclusive rights to develop PacBio's technology for diagnostics, but also could not develop another sequencing technology for diagnostic purposes. Gunn said the decision to end the agreement was based on a long-term strategic plan that took into account the PacBio technology and requirements for a clinical instrument, as well as the market itself and the types of assays that would best perform in the market.

Based on those evaluations, Gunn said, Roche concluded that the timeline for the technology to reach the level Roche wanted for diagnostic purposes would be too long.

He added that PacBio did meet all the development milestones set out in the original agreement. When the agreement was first made, Roche intended to develop clinical sequencing assays in the fields of virology and HLA, a decision that was not driven by the market size for those applications, but because those applications would be best suited for PacBio's long-read technology, Gunn said. "Now, our initial focus in clinical sequencing will be oncology," he said, with the launch of the Avenio kits.

The news hit PacBio's shares hard — they fell 44 percent during Thursday trading on the Nasdaq to $3.89 at the close of the market.

PacBio's CEO Mike Hunkapiller said on a conference call on Thursday that despite Roche's decision to end the agreement, PacBio still expects its product and services revenues to grow in 2016 and 2017.

The company is "on pace" to grow between 55 percent and 65 percent in 2016 compared to 2015 and projects that it will grow another 40 percent to 60 percent in 2017, Hunkapiller said.

In addition, he said that PacBio could now also pursue opportunities to work with its customers to develop clinical assays on the Sequel. "We've been speaking with customers interested in using our technology for clinical sequencing applications," he said, and now, "rather than referring them to Roche, we will work with them directly."

For instance, HLA typing firm Histogenetics has already developed clinical assays on PacBio's RS II instrument. The company also purchased a Sequel system from PacBio for research purposes, but under the terms of the Roche deal, PacBio could not work with Histogenetics to develop a clinical assay on the Sequel. Now, it is free to do so.

Hunkapiller added that he thinks the regulatory space for clinical sequencing has changed in the last three years. When PacBio and Roche first made their agreement, the thought was that sequencing would take the path of other traditional diagnostic technologies with closed systems and assays that go through in vitro diagnostic clearance. However, sequencing "doesn't fit into the classical model of regulation," he said, and the space has "been difficult for even the FDA to figure out how to regulate."

He predicted that as many as 95 percent of the clinical sequencing assays will be developed as laboratory developed tests rather than IVDs, and "we think we are particularly well-positioned to go after that market."

As part of its work with Roche the company pursued and received ISO 13485 and ISO 9001 certifications, standards related to the quality management system for designing a diagnostic device and reagents, respectively. Those certifications will help it tap into the clinical sequencing market. PacBio also plans to expand its sales force and target its marketing more toward clinical customers than it would have with the Roche deal still in tact, Hunkapiller said.

Separately, PacBio has worked with Roche's NimbleGen business unit to develop targeted enrichment technology that would work with its system. Those efforts will not be impacted by the clinical deal, the companies said.