OncoCyte (OCX) has news. This firm, which develops non-invasive blood and urine liquid biopsy diagnostic tests has good news about its lung cancer liquid biopsy. Liquid biopsy is a term recently coined for a simple blood test that can replace current invasive and expensive biopsy procedures for the detection of cancers at their early stages. This simple blood test is expected to lessen the need for invasive diagnostic methods such as surgical biopsies and cystoscopic procedures.
Earlier this month, OncoCyte reported successful completion of a critical step in the development of its lung cancer liquid biopsy diagnostic test. In the press release, OncoCyte stated that the data from the study exceeded what the firm believed was necessary for the commercialization of the test and that it is moving forward towards launching the lung cancer diagnostic test during the second half of 2017.
OncoCyte’s algorithm confirmed the results of an earlier study by its collaborator, or supporter the Wistar Institute of Anatomy and Biology. At the CHEST 2016 Annual Meeting in October 2016 the Wistar Institute had reported that in its study, the Area Under the Curve (AUC) was 0.82 with a sensitivity of 90% and specificity of 62%. OncoCyte's study results were consistent with Wistar's results.
About the AUC: The AUC of a test is a measure that combines sensitivity and specificity to express its total accuracy, with 1.0 being perfect accuracy and 0.50 being a random result. Sensitivity and specificity are statistical measures of test performance, with sensitivity measuring the percentage of malignant nodules that are identified correctly by the test and specificity measuring the percentage of benign nodules correctly identified.
The OncoCyte’s study results are scheduled for presentation at the American Thoracic Society conference at the Hospital of the University of Pennsylvania, Philadelphia, PA.
OncoCyte’s study utilized a biomarker panel it has exclusively licensed from the Wistar Institute. It tested its algorithm on about 300 samples with variable lung nodules at 26 United States sites.
According to the press release, tiny nodules when diagnosed are challenge to clinicians who weigh the risk of cancer against the risks posed by the costly invasive biopsies, which are performed to confirm whether the nodules are malignant or benign.
A simple liquid biopsy is regarded as the answer for the physicians’ concerns.
Following the accomplishment of the CLIA certification, which is the next step, OncoCyte plans to conduct a small CLIA lab validation study. The firm will then begin a clinical validation study, using the finalized algorithm and operational procedures on at least 300 blinded prospectively collected samples to confirm whether the sensitivity and specificity of the test remain within commercial parameters in a CLIA operational setting.
In case everything goes well, OncoCyte believes it can launch the liquid biopsy test in the second half of 2017.
Important Internal & Collaboration Discoveries
Are Piloting the Creation of the Non-Invasive Liquid Biopsy Test.
Extensive Collaboration Research with the Wistar Institute, led to the discovery of the lung biomarkers.
The firm’s internal research revealed that many genes associated with normal growth during embryonic stem cell development were found to be abnormally reactivated by cancer cells. These genes seem to control cell proliferation, cell migration, and blood vessel formation. Many of these genes have never been previously associated with cancer. Expression of a large subset of these genes is observed in various cancer types (e.g., cancers of the breast, colon, ovaries, etc.).
This observation suggested that these genes may control fundamental processes during cancer growth and progression.
Understanding the pattern of expression of these genes may also enable the development of powerful new cancer immunotherapies that target rapidly proliferating cancer cells.
By using OncoCyte’s proprietary mathematical algorithm called Gene Expression Classifier, the data is compared with gene expression patterns exhibited by cancer tissues that get picked up in blood or urine. The result is the discovery of a set of key biomarkers that can be used to detect the early presence or absence of cancer. The end result of OncoCyte development work will be to develop diagnostics that report out on the probability of the patient having the specific type of cancer.
In its press release, the Company estimates that around 1.4 million patients annually in the U.S. could benefit from the liquid biopsy cancer diagnostic test. Based on the firm’s planned pricing for such a test, the total addressable market could potentially exceed $4 billion. OncoCyte believes that its blood based lung cancer test can provide Medicare and private insurance companies with significant savings if the price of its product is about 20 to 25 percent of the cost of an invasive lung biopsy, which averages approximately $15,000.
OncoCyte’s management expressed its conviction that it is positioned to be the first company to provide a highly accurate non-invasive confirmatory blood test for lung cancer. Being the first to market a lung liquid biopsy test is imperative as OncoCyte is not the only developing liquid biopsy test, but many other firms including large pharmaceuticals and biotech firms are also pursuing the the same goal.
OncoCyte estimates that around 1.4 million patients annually in the U.S. could benefit from the liquid biopsy diagnostic test. Based on the firm’s planned pricing for such a test, the total addressable market could potentially exceed $4 billion. OncoCyte believes that its blood based lung cancer test can provide Medicare and private insurance companies with significant savings if the price of its product is about 20 to 25 percent of the cost of an invasive lung biopsy, which averages approximately $15,000.
OncoCyte’s believes it is positioned to be the first company to provide a highly accurate non-invasive confirmatory blood test for lung cancer. Being the first to market a lung liquid biopsy test is imperative as OncoCyte is not the only developing liquid biopsy test, but many other firms including large pharmaceuticals and biotech firms are also pursuing the the same goal.
Investor Reaction to OncoCyte News
Following the announcement of OncoCyte’s encouraging news, enthusiastic investors rushed to buy the stock, boosting its price early in the day up from $5.75 to $6.00. The stock’s bullish momentum, however, failed to carry on, as the early gains evaporated with the stock price dropping to $5.30, losing $025. The trading volume during the early buying was half its normal daily trading volume, but exploded during the stock selling. It looked as if someone might have scared shareholders with negative analysis, or that something in the press release or the conference call has disrupted their excitement.
Since that day, the enthusiasm towards the news seems to be slowly gaining mild momentum with the stock trading today at around $5.80, gaining around $0.50 in nine days following the announcement of the encouraging results.
What could be the reason for the little enthusiasm?
It could be the normal pattern of sell good news, but this would be inappropriate in this case as the stock had not rallied before the news like what usually happens before the announcement of good news.
One can always find various reasons for a stock decline, or lack of enthusiasm. Some sell side investors said that the good news is not final and more testing are required to validate the announced results. Others question the capability of the small firm to complete the testing, the validation and the filing, let alone the marketing of the test with the very little cash it has in hand, which is less than $15 million. They believe the firm will need to finance through public offering, which triggers automatic selloff of stocks, regardless of how wisely the collected money will be used. Other concerns include the fierce competition expected by large firms developing simple biopsy tests, including liquid biopsy.
Based on our knowledge, though, those firms are developing simple liquid that do not aim at differentiating between benign and malignant, but rather, enabling oncologists to pick the best targeted treatment after the diagnosis has already been confirmed.
The strongest competitor, if any, would be Illumina’s (ILMN) subsidiary firm, Grail, which was created to change the way cancers are diagnosed and, thus, treated. Grailtest, however, is expected to reach the market in 2019.
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