By Brian Marckx, CFA
This morning (7/24/2012) Transgenomic Inc. (OTC BB:TBIO) announced that their Clopidogrel Genetic Absorption Activation Panel or C-GAAP (i.e. - Plavix response test) will be covered by Medicare. Transgenomic's test identifies variations in the ABCB1 and CYP2C19 genes, the presence of which indicate a significant probability that a patient will not respond appropriately to Plavix. While C-GAAP will compete against several other CYP2C19 gene Plavix response tests also on the market, Transgenomic's test is unique as it is the only one which also tests for variations in the ABCB1 gene.
Plavix (generic name, clopidogrel) is anti-blood clotting drug sold by Bristol-Myers and Sanofi-Aventis. Prescribed to patients to reduce the risk of heart attack, stroke or cardiovascular death, it was the second biggest selling drug, with worldwide sales over $9 billion in 2010.
The FDA added a warning to the Plavix label in May 2009 but "upgraded" it to black-box in March 2010. The warning notes that Plavix may be less effective in certain people (those with reduced functioning of their CYP2C19 liver enzyme) and therefore these "poor metabolizers" may remain at risk of suffering from heart attack, stroke or death. Roughly 2% to 14% of the U.S. population is estimated to fit into this "poor metabolizer" category. The FDA recommended testing to determine which individuals are susceptible to less response to Plavix.
Plavix lost patent exclusivity in May 2012, allowing generic versions to enter the U.S. market. This is expected to increase uptake of the drug even more and result in even greater demand for Plavix/clopidogrel response testing.
Transgenomic acquired the C-GAAP test through their December 2010 acquisition of Clinical Data's genetics business, which included their FAMILION line of genetic tests (the test was then known as PGxPREDICT:Clopidogrel). Transgenomic launched the test in November 2011. Management has been very excited about the potential opportunity for C-GAAP and has been busy trying to drive awareness about the importance of Plavix response testing. To that end they recently began dedicating more sales and marketing resources to promote the product. Recently published studies, including one from Vanderbilt University published in Clinical Pharmacology in February 2012, have shown the importance of testing for both CYP2C19 and ABCB1 genes which has also helped drive awareness of C-GAAP.
This morning's news that Medicare will cover the use of C-GAAP will likely greatly facilitate Transgenomic's awareness-driving efforts and will certainly increase the likelihood that physicians will use it. As we noted in our last update on TBIO, depending on the ultimate interest in and success of the (C-GAAP) test, our modeled clinical lab revenue estimates could end up low (possibly substantially so, especially in 2013 and beyond). We think that Medicare coverage now potentially increases that possibility.
We cover TBIO with an Outperform rating and $2.50 price target.
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