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Here's What The Latest Thermo Fisher Approval Really Means And Why It's So Important

Here's What The Latest Thermo Fisher Approval Really Means And Why It's So Important

Thermo Fisher Scientific Inc. (NYSE: TMO) just announced that the Food and Drug Administration (FDA) has approved its Oncomine Dx Target Test, a next-generation sequencing test that simultaneously screens tumor samples for biomarkers associated with various available lung cancer therapies.

The company is trading down on the announcement, suggesting there exists some uncertainty as to the implications of this approval for Thermo Fisher and its shareholders going forward. This uncertainty seems rooted in the complexity of the technology involved, and that testing equipment is not as enticing from an investor perspective as a drug approval proper. Laboratory-based testing, whether it be oncology or otherwise, is a complex field, and interpreting developments in the space can be difficult.

With this in mind, here is a look at the approval, the technology involved, and what it means for both Thermo Fisher and for the wider healthcare space as a whole.

The Oncomine Dx Target Test itself is not the primary technology here; instead, it is designed to work as an add-on to what's called the Ion PGM Dx System, another Thermo Fisher technology that picked up approval as a Class II medical device back at the end of 2014.

To understand why the system is important, it is important to understand its precursor.

Before the Ion PGM Dx System, the profiling of a genome sample required a large amount of base material, primarily because the methods used were only able to draw a very small and limited amount of usable material from the genome under analysis.

Through a process called PCR amplification, the PGM Dx System is able to take an incredibly small amount of starter material and draw a usable test sample from it. There's no need to go into too much detail here, but by way of a brief introduction, the technology uses a silicon chip that somewhat resembles the silicon chip that stores data in a camera. Instead of storing image-based information on pixels, however, the chip stores genetic information in little wells spread evenly across the chip. The genetic information is derived from applying the PCR amplification process to a tiny sample of genetic material. Once this genetic information is stored, the wells are filled with various primers and if the primer matches the genetic base stored in the well, it releases a hydrogen ion, or a proton. The technology then measures this ion's release, effectively reading its electronic charge, and converts this into a genetic sequence readout. Sort of like binary except protons and lack of protons.

The key thing here isn't necessarily understanding exactly how the technology works, but rather the implications of using ions in this way on the time taken to process a sample.

Current processing methods take anywhere between 30 to 40 hours for culturing and, in a typical laboratory setting, this can translate to a physician waiting a week or more to receive results from tests. With PCR amplification and subsequent employment of Thermo Fisher's PGM technology, the time taken is reduced to a few hours, meaning the physician can receive results within days as opposed to weeks.

So what does all this have to do with cancer?

The processed sample is then subject to testing using add-on tests, one of which is the Oncomine Dx Target Test that Thermo Fisher just got approval for from the FDA. The test can use the sample that has been amplified to compare the genetic sequence to a range of database treatments, each of which has been shown to induce a varying degree of responses in patients.

In this instance, these are lung cancer patients, and the test is going to help determine whether they should receive one of three already approved treatments in combination with Tafinlar – Roche's Mekinist, Pfizer's Xalkori or AstraZeneca's Iressa.

To explain this in a little more detail, patients with non-small cell lung cancer (NSCLC) rooted in EGFR L858R and Exon 19 deletions (two gene mutations) have been shown to respond better to treatment with Iressa. Those with NSCLC based on BRAF V600E mutations have been shown to respond better to treatment with Mekinist. Finally, those with ROS1 fusion mutations respond better to Xalkori.

Obviously, a physician wants to figure out which treatment regimen works best for the patient, so he will test a sample of the tumor to determine which mutation it's based on.

If it's a BRAF mutation, the physician will recommend Mekinist. If ROS1, Xalkori, etc.

As mentioned, the current version of this test can take weeks to return. The just-approved version takes a day or two. In a condition like NSCLC, days matter, and that's the importance of this technology's approval right now to healthcare as a whole.

From Thermo Fisher's perspective, the importance is relatively straightforward. The improvement in feedback time that this technology offers makes it a strong contender for attracting a large portion of the PCR/PGM market very quickly – a market that analysts expect will be worth $4.4 billion by 2021.

So what is next?

Much of this company's valuation right now is rooted in the expansive application potential of the ion sequencing technology and, specifically, the PCR process that underpins it. The ability to amplify tiny samples into usable sequences is not only applicable to oncology but also a wide range of disease subtypes. Going forward, the effectiveness with which Thermo Fisher can expand into these subtypes is going to be pivotal to its long-term valuation.

Take the company's recent supply agreement with infectious disease company OpGen Inc (NASDAQ: OPGN) as an example. OpGen has developed what's called the Acuitas Rapid Test – a test designed to identify pathogens and use the identification to inform physicians as to potential bacterial resistance.

The two companies have just closed out on a supply agreement that will see OpGen use the Thermo Fisher PCR system to process and amplify its pathogen samples before subjecting them to its own Acuitas Test.

If successful in bringing this test to market, Thermo Fisher and OpGen are going to be able to reduce the testing time for pathogens considerably, meaning physicians can administer the right antibiotics to patients infected with various pathogens right away, as opposed to the best-guess method that happens currently (and which results in a large number of patient deaths globally because of antibiotic resistance).

In a sense, the relationship between the amplification technology and the pathogen test in this system is similar to the relationship between the PCR technology and the oncology test outlined above. It's all about sample size and speeding up the process to allow physicians to make better decisions based on better information, faster.

This is just one of a number of examples of Thermo Fisher leveraging its assets to expand revenue potential, leveraging that is crucial to driving revaluation long term.

This latest approval then is not just important because it could dramatically reduce the time it takes for an NSCLC patient to receive optimum treatment, but also because it serves as the latest example of validation for the real world application of this technology. In healthcare, and especially in oncology, being able to choose the optimal treatment is as important as having a variety to choose from. The drug development pathway that dominates so much of Big Pharma, then, is only half the equation. The companies that are building the technological framework that underpins the therapeutic side of the space, companies like Thermo Fisher, are the other half. 

I have no positions in any of the stocks mentioned in the article and do not intend to open any positions near term.

The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Posted-In: Biotech Long Ideas News FDA Trading Ideas General


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