Cancer is one of the leading causes of death worldwide and the number of
people affected by the disease is growing rapidly. In 2012, more than
14.1 million people around the world were newly diagnosed with some form
of the disease. By 2035, the World Cancer Research Foundation expects
these figures to increase to about 24 million new cases. These dynamics
have attracted record numbers of researchers developing new
therapeutics, diagnostics, and other tools designed to better treat
Oncologists now have access to more than 500 new therapies in clinical
development, 10,000 cancer-related clinical trials, and 100,000+
research papers published over the past year alone. With these figures
rising each month, the problem has transformed from a lack of options to
too many options. So-called "analysis paralysis" or "information
overload" is now emerging as a bottleneck.
In this article, we'll take a look at how CollabRx Inc. (NASDAQ: CLRX)
aims to solve the "information overload" problem using a combination of
genomics, big data, and industry experts, as well as the potential
financial opportunity for investors.
Bringing Personalized Medicine to Cancer
Personalized medicine employs diagnostic testing in order to select the
most appropriate therapies for individual patients. For instance, Roche
Holding Ltd.’s (OTC: RHHBY) Herceptin has a strong track record for
cancer treatment, but only in patients that have an overexpression of
HER2/neu receptors. By testing patients for the HER2 abnormalities, more
effective treatment options become available.
These types of tests are relatively rare in oncology, especially since
an estimated 85% of patients are treated in the community setting rather
than academic medical centers. While genetic screening is widely
available through companies like Quest Diagnostics Inc. (NYSE: DGX),
there’s no automated way to search through the 500+ therapies or
100,000+ research papers to match them with treatment options.
Foundation Medicine Inc. (NASDAQ: FMI) and CollabRx Inc. (NASDAQ: CLRX)
were both created to address these problems. By leveraging
genomics-based precision medicine and big data analytics, the two
companies provide oncologists with the ability to take a patient’s
genome and match it up with potential therapies based on over or under
expressed targets or other abnormalities.
David & Goliath Compete in the Space
Foundation Medicine had a spectacular initial public offering where its
stock rose nearly 100% on its first day. Currently, the company is
valued at around $930 million with about $30 million in revenue and a
$43 million net loss over the past 12-month period. By comparison,
CollabRx trades with a modest $7 million market capitalization with
$821,000 in revenue and a $3.3 million net loss over the period.
While the two companies are targeting the same market – personalized
cancer treatments - they are taking two very different approaches in the
process. Foundation Medicine has spent hundreds of millions of dollars
developing an end-to-end solution that handles everything from genomic
sequencing for patients to the provision of potential therapies based on
the genetic profile.
CollabRx has instead focused its efforts exclusively on the high-margin
big data component of the business model. In partnership with companies
like Quest Diagnostics, the company takes third-party genomic profiles
and matches them up with potential treatment options using its unique
platform powered by both big data analytics and a team of oncology
experts that sort through research papers.
CollabRx's Two Unique Business Models
CollabRx is focused on two unique target markets: laboratory customers
like Quest Diagnostics, and clinical customers like oncologists.
Multiple revenue models provide the company with diversified and
recurring income from laboratories, advertising revenue, fee-for-service
revenue, and other sources.
For laboratories, the company provides genetic variant annotation apps
and services to interpret sequence-based cancer mutation panels and
identify the best available therapeutic options using a
software-as-a-service or fee-for-service business model. For example,
Quest Diagnostics will receive and sequence a patient's DNA and then
send it to the company to interpret the data and present the results.
For physicians, the company has developed its TherapyFinder(TM) to identify
optimal therapeutic options for lung, melanoma and colorectal cancers
by having doctors input patient information. Surveys have shown that 70%
of oncologists have an "extremely positive" view of the service and
would definitely use TherapyFinder(TM) again while 72% found the tool "extremely useful" and would tell others about the technology.
Potential Opportunity for Investors
Many investors have embraced Foundation Medicine as a premier player in
the personalized cancer space, but CollabRx could offer an equally
compelling opportunity that works with third parties instead of doing
everything in-house. With an extensive database covering over 400 genes,
1,600 variants, 3,300 drugs, and 3,800 clinical trials, the service is
invaluable to both labs and oncologists.
Currently, Foundation Medicine trades with a lofty price-to-sales ratio
of about 7.3x and a compelling valuation. If CollabRx succeeds in
capturing even a fraction of the personalized cancer therapy market, its
valuation could greatly exceed its current $6.3 million market
capitalization. Management's early successes in attracting large
customers and positive feedback have made these outcomes increasingly
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presented herein, matters discussed in this release contain
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uncertainties that could cause actual results to differ materially from
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