Deal with Abbott Labs gives Neogenomics access to proprietary probes

Diagnostic testing for melanoma generates a substantial number of tests annually, making it a lucrative target for any clinical laboratory or biotech company that can develop an assay that utilizes state-of-the-art molecular technologies and offers improved detection and accuracy.

Once company working to develop such a new diagnostic test for melanoma is Neogenomics, Inc. (OTC:NGNM.OB).  It announced an agreement with Abbott Laboratories, Inc. (NYSE:ABT). on July 24, 2009. Abbott Laboratories will supply Neogenomics with proprietary probes to develop and commercialize its own FISH-based (Fluorescence in situ hyrbridization) test for melanoma.

Notably, Abbott Laboratories’ interest Neogenomics went beyond simply granting it access to proprietary FISH probes. Abbott Labs became an investor in Neogenomics. In a separate transaction, Abbott Laboratories purchased 3.5 million shares for a price of $4.8 million, giving it a 9.6% ownership share in Neogenomics.

During a recent conference call with analysts, executives from Neogenomics laid out the reasons why the company wants to develop a FISH-based test for diagnosing melanoma. President and Chief Scientific Officer Robert P. Gasparini, M.S., CLSp(CG), CLDir, observed that skin cancer is the most common cancer in the United States and melanoma is the deadliest type of skin cancer. The American Cancer Society (ACS) estimates that 121,000 new cases of melanoma are diagnosed annually. Of this total, 68,000 cases represent the most invasive types, while 58,000 cases will be localized melanoma.

Gasparini estimates that 1.5 million to 2.0 million biopsies are performed annually to detect those cases of skin cancer. He told analysts that between 25% and 40% of skin cancer cases “involve a condition that is very difficult to diagnose.” This is one reason why litigation involving the accurate diagnosis of melanoma represents a major malpractice exposure for the pathology profession.

Neogenomics is telling the investor community that it will need about six months to develop its laboratory-developed test (LDT) for melanoma. It wants to introduce the new test during 2010. Gasparini discussed the published findings about the use of FISH methodology for melanoma testing. He noted that researchers in the United States and Europe are reporting sensitivity in the range of 87% to 90% and specificity of about 95%. These levels are consistent with other cancer tests that use FISH, such as bladder cancer and breast cancer.

In taking steps to develop and bring to market a FISH-based test for melanoma, Neogenomics is hoping to tap a significant market segment. The company estimates that the market for melanoma testing is worth between $50 million and $100 million per year.

Utilization of dermatology services continues to grow every year by a significant amount. Thus, not only is the existing market size attractive for molecular testing companies like Neogenomics, but the incidence of skin cancer is expected to increase in the coming years, particularly as the baby boomers enter their sixth and seventh decades. This will further increase demand for melanoma testing in coming years.

Related Information:

NeoGenomics Enters into Strategic Supply Agreement with Abbott for Development of a Melanoma Cancer Test

NGNM: Q2 2009 Update: Major New Initiative to Develop Melanoma FISH Test