Carrier, Prenatal and Pediatric Genetic Testing Still a Big Draw for Investors and Labs

Carrier, Prenatal and Pediatric Genetic Testing Still a Big Draw for Investors and Labs

Genetic testing for inherited diseases has been a volatile industry space in recent years headlined by Myriad Genetics’ hold over BRCA testing and the subsequent opening of that market to competition with a 2013 Supreme Court ruling. Outside of testing for patient testing for oncology risk, a significant component of genetic testing is reproductive health-oriented testing for carrier genes and prenatal conditions. Atop the high-growth market for non-invasive prenatal testing (NIPT) are Sequenom and Illumina, the latter positioned through its acquisition of Verinata and as a supplier of sequencing reagents, consumables and instruments. Despite the success and consolidation of share between Sequenom and Verinata, ample opportunity remains as signaled by recent investment to the two companies’ competitors and Illumina’s unique business strategy in the NIPT space.

With its acquisition of Verinata in January 2013, Illumina strained its relationship with customer Sequenom that had been using Illumina’s sequencing instruments, reagents and consumables for its own NIPT lab. The relationship was ultimately preserved through a January 2015 agreement between Sequenom and Illumina that provided for the pooling of intellectual property (IP) between the two companies relating to NIPT. Major provisions of the agreement included:

  • Eventual settlement of patent infringements claimed by Sequenom against Verinata and Verinata against Sequenom
  • NIPT patent pooling between the two companies, including those under previous dispute
  • Exclusive worldwide rights to Illumina for the development and sales of NIPT test kits with royalties paid to Sequenom for kits developed from pooled IP
  • Illumina’s right to license pooled IP to third-party laboratories seeking to develop their own lab-developed tests (LDTs)
  • Mutual rights of Sequenom and Verinata to develop LDTs from pooled IP
  • Revenue sharing from patent pool
  • An amended and restated sale and supply agreement between the two companies for Illumina’s instruments and other lab products
  • Up-front $50 million payment to Sequenom

While highlighting NIPT’s contentious IP landscape (Sequenom has outstanding infringement claims against Natera, Ariosa Diagnostics [Roche] and DNA Diagnostics Center), Sequenom and Illumina’s 2015 agreement reflects the latter’s view that NIPT remains a wide enough market space for the company to function as both service provider and lab supplier. Illumina can now also more effectively seek out clients worldwide for NIPT technology licensing, which is significant to the development of a more globally distributed and robust testing market.

Ongoing infringement claims and the uniting of Sequenom and Illumina have done little to dissuade investment in other companies within the NIPT testing space:

  • December 2014 - Roche acquired Ariosa Diagnostics, a private molecular testing service company that provides a cell-free DNA NIPT testing service on an Affymetrix microarray platform. Roche seeks to also commercialize the test on a next-generation sequencing (NGS) system.
  • February 2015 - CombiMatrix entered into an agreement to issue securities in a direct offering to institutional pre-existing investors for proceeds totaling $4.9 million.
  • April 2015 - Natera raised $55.5 million in funding led by investment firm Sofinnova Ventures. Other investors in the financing round included Capital Research and Management, Franklin Templeton Investments, Jennison Associates, RA Capital Management, Healthcor Partners and OrbiMed Advisors.

CombiMatrix’s microarray-based NIPT service functions as a reflex or confirmatory test to Sequenom’s NGS-based tests. In addition to the deals listed above, Claritas Genomics and Invitae attracted funding in early 2015 of $15 million and $117 million respectively; the two companies product portfolios prominently feature pediatric genetic screening.

For more information regarding inherited disease testing service and test kit markets - including prenatal, neonatal and carrier genetic testing and screening - Kalorama Information offers the 2015 market research report  The Market for Prenatal, Newborn and Carrier Genetic Testing.