(Submitted by Steve Potts, CEO of Flagship Biosciences, a digital pathology services company).
On July 12, 2011, the FDA released a new draft guidance on the development and review of companion diagnostics (CDx). I would encourage anyone working in anatomic pathology to review the draft, as it will have widespread impact on digital pathology companies, antibody providers, and anatomic pathologists in both private practices and large reference laboratories. The guidance was also discussed in Dr. Elizabeth Mansfield's presentation available at the Molecular Diagnostics for Cancer Drug Development June meeting in Boston.
The most important point can be summarized by one equation:
Failure/lack of test approval = no therapeutic product approval
If this doesn't make get your attention, nothing will. An approved drug can cost from $200M to $1.2B to develop (wide variability in costs is largely due to indication type, you can make your own calculations). Let's recast the equation in terms of the cost of failure for the companion diagnostic and the cost of failure for the therapeutic. A good example is HER2 IHC, which brings in $50M in total global annual sales divided across a handful of chemistry and image analysis players. Let's assume the next big companion diagnostic is almost this big — and the firm has only four other competitors. So $10M in lost sales per year, perhaps spread over 10 years, and perhaps $10M spent on development. Total cost of failure for the CDx — $100M.
Now let's look at the failure cost of the therapeutic due to CDx failure, continuing with the HER2 example. Herceptin had total ten-year sales from 1998 to 2008 of $7.7B, and has climbed higher the last two years. Let's assume only 10 year sales, meaning total cost of failure is lost development costs of $1B and lost ten-year sales of $7.7B.
$100M =? 7.7B Lost Sales Cost
$10M =? $1B Lost Development Costs
One can see the imbalance clearly between the diagnostics and therapeutics industry. Having worked in both diagnostics and therapeutics, the only thing the two industries have in common is biology.
Clearly every pharmaceutical executive will re-examine carefully all the risks involved in their companion diagnostics programs, as CDx competency becomes a determining factor in success or failure for pharma. Does their translational companion diagnostic team have experience launching diagnostic products? Do they have experience in regulatory filings of 510k and PMAs? Is there any part of the diagnostic technology that is not already well proven and widely used in clinical laboratory settings? Has their CDx internal pharma team or external CDx team actually worked in clinical laboratory settings?
In the next several posts, we will look at the specifics in the CDx policy, and then what impacts we might predict for IHC and FISH/CISH based anatomic pathology testing.