Personalized Medicine Trend Spurs Investments in Diagnostics

14 Mar

By Danielle Silva, Director of Research, LSN

There has been a great deal of buzz surrounding the topic of personalized medicine in the life science sector recently. Personalized medicine attempts to forecast a patient’s likelihood of being afflicted with certain diseases through genetic testing, and offers cures that are tailored to their specific needs. Thus, diagnostics and therapeutics are moving towards personalization based on an individual’s phenotypic and genetic makeup.

As a result of the Human Genome Project (HGP), which was completed in 2003, DNA sequencing has become much more accurate, and the cost of sequencing a single genome is dramatically lower than it was in the past due to advances made in the area of sequencing instrumentation (it’s estimated that the price is getting down to around $1,000 per genome)[1]. One of the uses for this lower-cost DNA sequencing technology is the development of individualized biomarkers. The development of these biomarkers, however, is just the beginning of the story; to truly develop a well-rounded therapy involves the use of a diagnostic as well, which is why investors have been drawn to investing in firms developing diagnostics as of late.

Overexpressed proteins (or genetic markers) are unique traits that are often associated with a specific disease. These are known as biomarkers. Creating a therapeutic that targets an individual biomarker can create a favorable result in terms of patient outcome. The biomarker, however, needs to first be located in order for the therapeutic to truly fall under the umbrella of a personalized medicine. The agent that locates the specific biomarker is therefore known as a companion diagnostic. The advantage of using such an agent is that it is easy to identify whether or not a given patient can benefit from the use of a certain therapeutic.

Because of the importance of companion diagnostics in the personalized medicine space, interest from investors in firms developing diagnostics has surged accordingly. From 2011 to 2012, the number of reported financing rounds in the Life Science Nation Financing Rounds database increased from 11 to 31. This represents an increase of nearly 182%. In January of this year, Cambridge, Massachusetts-based Foundation Medicine received $13.5 million in Series B expansion equity, adding to the $42.5 million they had received just four months prior in their initial Series B round. The firm focuses specifically on conducting cancer genomic analysis to match patients with a targeted therapy and clinical trial. In the area of cancer, the development of companion diagnostics is arguably the most advanced. This is a large reason why cancer diagnostics have been a particularly attractive area for life science investors.

In a recent conversation with a large corporate venture capital fund that typically invests in 5-10 firms per year, the firm expressed a particular interest in therapeutics with companion diagnostics. Advances in genome sequencing are predicted to continue, and if the cost of sequencing a single genome falls below $1,000 it is possible that insurance companies may even begin to start to cover some of the costs of this service. Consequently, LSN predicts that investor interest in the area of personalized medicine and diagnostics will continue to gain steam.

[1] http://articles.philly.com/2013-03-06/news/37503360_1_genetic-tests-caplan-expectant-parents

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