Rosetta Genomics Obtains First Medicare Coverage of a MicroRNA Dx

It all looked like it would be the first commercial success story of small silencing RNAs when Rosetta Genomics launched a series of microRNA tests in late 2008, among them mirView Mets for the identification of the tissue origin of Cancers of Unknown Primary (CUP).  This PCR-based test took advantage of two critical properties of microRNAs for cancer diagnostics: 1) stability (unlike messenger RNAs used e.g. in the comparable PCR-based Oncotype Dx test by Genomic Health, microRNAs are relatively stable); 2) surprisingly informative on cancer biology.

[Correction May 17, 2012: While the first-generation miRview Mets test was qRT-PCR-based, the Medicare-covered second-generation miRview Mets2 involves the parallel detection of 64 microRNAs on a micro-array.]

Less than four years after the launch, however, the test (actually that of the improved version miRview Mets 2) was hardly selling (less than $100k/quarter) and Rosetta Genomics, which only yesterday had a market cap of ~2M with important chunks of debt maturing next week and in early 2013, was fast approaching bankruptcy, this time for real it seemed. Matters were made worse after falling out with former US distribution partner Prometheus Labs.

However,  the CUP Dx market should have been an attractive half-a-billion-dollar opportunity with approximately 150-200,000 cancer patients in the US alone that may benefit from such tests according to Rosetta Genomics and its closest competitor, Pathway Diagnostics.  By determining the tissue origin of metastatic cancers and of primary tumors that are highly dedifferentiated and where this is not possible by other means (such as classical histological examination), the tests would aid in the diagnosis of the cancers, thus informing treatment decisions.  According to a recent cost-effectiveness study by Pathway Diagnostics, that company’s Affmetrix gene expression array-based CUP test has real positive impacts, including improved quality-adjusted life expectancies enabled by better treatment decisions based on the improved diagnoses (caveat: this study used historical controls).   

Just like Rosetta Genomics today, Pathway’s Tissue of Origin (TOO) received Medicarecoverage last summer.  The reason why Rosetta Genomics shares (ticker: ROSG) popped today by a cool 200% (!) is that coverage by major healthcare providers is critical for the adoption of today’s molecular diagnostics as these often come at price tags on the order of $3500 a test (e.g. the price of TOO according to a presentation by Affymetrix).   

The importance of Medicare coverage (other major insurance companies usually follow Medicare’s lead) is also illustrated by the OncotypeDx test which can probably be considered the most successful of that type of expression-based molecular diagnostics in the space: launched in early 2004, it sold a mere $400,000 a quarter the year thereafter.  When it, however, received Medicare coverage in early 2006, sales exploded 10-fold.  Today, Genomic Health is selling around $200M worth of that test annually and sports a market capitalization of a billion US dollars- >100x that of Rosetta Genomics despite today's pop.  Numbers for Pathway Dx are more difficult to come by as it is privately held (it completed a $30M financing in 2010 though).

Today’s news is a huge step towards similar commercial success, at least in the sense that it makes an immediate bankruptcy of Rosetta Genomics quite unlikely. The remaining employees, however, have their work cut out for them: get a foot in the door with oncologists, possibly by winning over KOLs and other activities such as cost-effectiveness studies, gently growing the sales organization from the currently only four oncology specialists to compete with Pathway and take a decent piece of the market.  

For the sake of long-suffering shareholders, the company may also consider avoiding excessive dilution partly by effectively shutting down the commercialization of their other microRNA diagnostics which by comparison look much less attractive commercially.  At the same time, they should strive to monetize their relatively strong IP position in microRNA Rx and Dx, foremost the recently issued European patent for the promising miR34a replacement cancer therapy to which microRNA Therapeutics company Mirna Therapeutics would probably require access.

For more numbers on the miRviewMets2 test performance, clinical use along with immunohistochemistry, and competitive profile with regard to the mRNA-based Pathwork and bioTheranostic CUP tests, the Meiri et al. paper just published in The Oncologist is a must-read.

Update (May 17, 2012): Shortly after the close of the markets, Rosetta announced the issuance of $2.2M worth of stock (no options, it seems) at a 30% discount, increasing the share count by about 50% (about 2 million shares will be outstanding after the secondary).  The pain from the dilution will be mitigated by the fact that this should take care of the $750k+interest payment due to their friends at Prometheus by May 22nd, thus allowing the company to stay in business.  Also worth noting are the overhang stemming from ~200k shares that will likely be converted from existing debt at a share price of ~$1.4, representing another approx. 10% dilution at significant discount.  


And finally, here's a youtube video giving you an introduction to Rosetta's scientists:

Has Rosetta Found the Cornerstone to Corporate Success?

Last week’s formation of Regulus Therapeutics should give a boost to the whole field of microRNA-based therapeutics as it lends credibility to microRNAs as a new drug development and diagnostics platform. Part of this boost should come in the form of funding from larger pharmaceutical and diagnostics entities for companies with a credible and well-developed microRNA IP estate.

I would therefore like to take a closer look now at Rosetta Genomics, next to Regulus arguably the only other major pure-play microRNA-focussed company. Rosetta has pleasantly surprised me by assembling a strong IP portfolio, which it has then followed up with a series of well-designed corporate and academic partnerships. This is complemented by a growing tool-box allowing for clinically-relevant extraction, detection and measurement of microRNAs. Like other players in this field, Rosetta believes that given the emerging importance of microRNAs in gene regulation, these molecules would also be involved in human disease so that they could be both harnessed for clinical diagnostics and therapeutics.

Rosetta is an Israel-based company, founded on the discovery and patenting of human microRNAs using high-throughput computing and bio-technologies (2005 Nature Genetics study). In the wake of the Human Genome and other sequencing projects, the founders of Rosetta hypothesised that the key to human complexity was not due to an increased number of genes, but at least partly due to the emergence of primate- and even human-specific microRNAs, and their search for new microRNAs consequently accommodated that notion. This was against the mainstream of most microRNA discovery efforts then which heavily relied on the notion of biological conservation, and Rosetta would be able to detect a number of microRNAs that had been missed.

Indeed, their hypothesis was supported by their 2005 Nature Genetics paper, almost doubling the number of sequenced human microRNAs at that time (adding 89 microRNAs), a number of them not conserved beyond primates. Based on partly theoretical considerations, predictions as to the total number of microRNAs were also revised upwards from initial estimates in the field of around 250 to well over 800. These efforts have resulted in patent applications exceeding 500,000 pages, probably using the same computing power used for predicting microRNAs.

I should add, however, that most of these non-conserved microRNAs were restricted to 2 clusters in the genome and should therefore be of less diagnostic value as would be expected for an equal number of more randomly distributed microRNAs. Furthermore, most of the previously cloned microRNA, particularly those by Thomas Tuschl, licensed exclusively for therapeutics use to the parent companies of Regulus, Alnylam and ISIS, should be amongst the biologically most important microRNAs simply based on their higher expression levels (the reason why they were detected by cloning in the first place).

At that point, I thought just another publication based on bioinformatics that was showing that the complexity of microRNAs may be higher than initially thought. Also, their theoretical approach and computer-driven technologies made me wonder whether this would ever develop into a meaningful hands-on biotechnology operation.

Rosetta took a number of steps to change this perception. First, it has gained access, at least for diagnostic use, to the large majority of human microRNAs through licensing agreements, most importantly with the Max-Planck Institutes and Rockefeller. Next, similar to what Alnylam has done, they have come out with a number of high-quality, peer-reviewed publications, ranging from microRNA detection technologies to the functional elucidation of certain disease-associated microRNAs. Partly, this was done through academic collaborations which allows them to stay product focussed and capitalise on opportunities should they arise from discoveries in microRNA research. Other collaborations with corporate and clinical partners have given them access to relevant technologies such as one with ISIS for the therapeutic targeting of microRNAs using antisense technology, and clinical specimens from hospitals which will be used to test their diagnostics.

How they were able to orchestrate this transformation is not clear to me and quite impressive, but looking at the line-up of illustrious early investors and SAB (scientific advisory board), populated with Nobel Laureates and the likes of Robert Langer (also on Alnylam’s SAB), suggests that they have enough influence to get the attention of key audiences. The expansion of their activities in the US should further nurture current and future partnerships and attract new investors.

These investors may be attracted by Rosetta’s first issuances of microRNA patents and its strategy to use early revenues from their more mature microRNA diagnostics efforts to fund the potentially more lucrative area of microRNA-based therapeutics on quite attractive financial terms. It is their aggressive goal to have 3 microRNA diagnostics products on the markets by the end of next year, with their most advanced program being for the classification of Cancer of Unknown Primary (CUP) where the goal is to identify the original tissue from which a cancer has spread. A recent presentation at the AACR cancer meeting suggests that this can be achieved with 85% accuracy by profiling 19 microRNAs. Their initial therapeutic pipeline, meanwhile, focuses, similar to Regulus, on diseases of the liver, such as liver cancer and HCV infection. This is done in collaboration with ISIS Pharmaceuticals, and it will be interesting to see how the recent formation of Regulus will affect this relationship.

After a difficult IPO and little attention from Wall Street, the time is ripe for Rosetta and Regulus to lead the charge in translating the important biology of microRNAs into medical use.