Friday, December 18, 2009

Rosetta Genomics Business Strategy Back on Track

Following the recent hiring of Kenneth Berlin as CEO, Rosetta Genomics is re-focusing their microRNA diagnostics efforts to leverage their extensive bioinformatic know-how and associated IP in the field. Having emerged as the leader in microRNA diagnostics churning out 3 microRNA tests in short order, initiatives such as betting the future on an early-stage blood-based colon cancer screening test and an one in plant biology ('Rosetta Green') first left investors perplexed and eventually disappointed. According to today’s press release and conference call, however, the company has decided to revisit its proven strategy of going back to their treasure trove of bioinformatic information and select new development candidates.

What is also remarkable is that, for the first time, the company is providing guidance about market size and clarity on pricing. This is a welcome change from previous years that had investors in the dark about expected revenues. In hindsight, it would appear that this was actually was due to lack of strategic planning. It is therefore expected that with the strong commercialization background of Mr. Berlin as former worldwide General Manager for the J&J molecular cancer diagnostics outfit Veridex, this essential aspect of Rosetta Genomics' business can only get better. Predicted revenues of only 2010 $2-4M based on 1,200-2,400 samples processed from their first 3 tests, however, represent business development challenges considering current cash levels of about $10M and a predicted $900k monthly burn-rate in 2010.

Mr. Berlin will therefore largely be measured for his ability to

a) penetrate the following predicted markets (annual numbers of potential tests US/ex-US):

1) miRview Squamous: >60k/250k; 2) miRview Meso: >60k/200k; 3) miRview Mets: >60k/300k;

b) develop 5 tests for which they already have identified the microRNAs, among which were disclosed the following tests and time-line:

1) an extended miRview Mets test (H2 2010 launch); 2) a test predicting superficial bladder cancer to become invasive (late 2011 launch and 350k annual market); 3) a test further differentiating lung cancers from fine-needle aspirates (2011 1M annual market)

c) achieve all this all the while minimizing shareholder diluation

As to the last point, I am curious whether, considering the first 3 tests have obviously been partnered already, Rosetta can further monetize their IP and know-how in the microRNA therapeutics area, and find a Roche-like partner for developing companion diagnostics. Because of trends making it more and more difficult to get reimbursement for home-brew tests, it is surprising that unlike Rosetta’s competitor Asuragen (companion Dx deals with Biogen and Merck), we have heard nothing about their plans in the high-value area of molecular companion diagnostics. Ongoing post-marketing studies for their present tests, however, should partly address the reimbursement challenge in addition to convincing patients/physicians to adopt the tests.

With the proposed strategic review, Rosetta Genomics should become a company worth considering again given their strong scientific foundation. It will take some time, however, to re-build confidence in management. After all, the misguided colon cancer ambitions did not seem to have been based on scientific progress from their exploratory published data, and it would not seem fair to blame the former CEO alone for all these blunders. Rosetta Green also needs more explanation. However, I do want to credit former management for having established the scientific engine behind Rosetta and having brought to market 3 out of the 4 currently marketed microRNA Dx tests. Privately-held Asuragen should also receive credit in this regard. This could also mean that people like Victor Ambros, Gary Ruvkun, and maybe 'even' (because plant biologist) my D.Phil. examiner David Baulcombe are even stronger contenders for a Nobel Prize for their discovery of micro- and other silencing small RNAs which in turn could give companies like Rosetta Genomics a significant boost in the near- to midterm.


Anonymous said...

In your opinion, why is the Rosetta-Regulus liver cancer program (Rosetta miR-191) not well-promoted by Regulus? Is it because Alnylam has another liver cancer program under development?

How much money (upfront payment plus royalties) do you think Regulus/Isis/Alnylam would pay to take this program over from Rosetta? The data presented so far looks very encouraging.

Dirk Haussecker said...

It is certainly possible that the fact that Alnylam already has a liver cancer program would lower the priority of another such program at Regulus. It is also possible, however, that Regulus has other programs that are more advanced at this stage.

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