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The US Food and Drug Administration (FDA) announced on Friday that it will begin monitoring and investigating the services offered by consumer-focused, personal genomic testing companies. In warning letters to five companies, the agency notified company executives that their tests are considered medical devices and therefore must be federally approved as safe and effective. None of the companies have submitted their products for approval, according to the FDA. Further, the agency contends that personal genomic tests as medical devices must be “analytically and clinically accurate so that individuals are not misled by incorrect test results or unsupported clinical interpretations." Previously, the agency hadn’t definitively classified the tests as medical devices. However, the agency has become increasingly concerned that results from the tests may ultimately be used for diagnostics and prognostic purposes by various entities including insurance companies and employers.

The companies that received letters on Friday included California-based 23 and Me (backed by Google Health), Navigenics and Illumina and Knome of Cambridge, Mass.; and deCode Genetics of Lake Barrington, Ill. The FDA sent a similar letter in May to Pathway Genomics of San Diego, after Pathway announced it intended to sell its tests through Walgreens drugstores. Many industry insiders believe that the proposed Pathway Genomic-Walgreens was the proverbial “straw that broke the camel’s back” which prematurely forced the agency to take regulatory action.

The letters deal with specific tests marketed by: 23andMe Inc., deCODE Genetics, Illumina, Navigenics and Knome Inc. FDA asks each of the companies to contact the agency to make arrangements for submitting their tests for review. 23andMe and Navigenics and DeCode Genetics, sell tests that scan a person’s DNA, looking at genetic variations that can suggest whether a person is at a higher or lower risk of getting certain diseases like cancer or diabetes. Illumina sells DNA chips that are used by some companies to do the DNA scans whereas Knome offers consumers a complete sequence of their DNA, which can be used to glean disease risk information. While 23 and Me is pushing back, deCode Genetics CEO stated that the company will work with the agency to legitimize its tests as part of “standard medical care.” Knome, whose whole genomic sequencing platform will ultimately supplant the services offered by 23 and Me, Navigenics and Pathway Genomics, has also expressed a willingness to work with the agency.

Despite the existence of theGenetic Information Nondiscrimination Act (GINA) enacted in May 2008—which ostensibly would shield patients from potential “genetic discrimination”—many privacy and medical information advocates fear that loopholes will allow insurance companies and prospective employers to abuse the results from personal genomic analyses. To that end, GINA does not cover life, individual disability insurance, or long-term care insurance, and the potential for genetic discrimination still exists in these areas. For example, a person at genetic risk for developing Alzheimer’s could be denied long-term healthcare insurance because Alzheimer’s patients have been known to live for long periods of time, and their care is costly.

Another legitimate concern raised by some people is ownership of the results of personal genomic analyses. Surprisingly, at present, it isn’t clear who owns or ultimately controls a person’s genetic information data after it is generated. For example, it is likely (but not certain) that a consumer who purchases whole genome sequencing services from a personal genomics company owns and controls his/her sequence data. Ownership and control of the information isn’t likely to be straightforward or easily defined until rules and regulations are crafted to clarify how genomic information is owned, stored, and accessed by individuals and third parties.

While companies like 23 and Me and their ilk aren’t pleased that FDA has finally classified their tests as medical devices, they had to know that regulatory oversight of the personal genomic testing business was inevitable. This is because the results from personal genomic tests have been and will continue to be used by various and sundry entities a diagnostic and prognostic tools.

It is obvious to almost everyone in the life sciences industry that there are huge sums of money to be made in the personal genomic testing space. Consequently, the last thing that personal genomics company executives wanted was regulatory oversight by FDA (it tends to interfere with business and profit margins). However, we all have experienced first hand what happens when companies are allowed to operate in the absence regulatory oversight.

Hat tip to FDA for finally taking a stand on this important issue!

Until next time...

Good Luck and Good Job Hunting!!!!!!!!

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There was an article in today’s NY Times biz section which suggests that the recent financial crisis is starting to have an effect on the growth of the biotechnology industry, once thought to be a recession-proof sector. The article contends that the lack of available institutional cash and venture money is causing extant biotechnology companies to “tighten their belts.” And, if the trend continues, this lack of capital will stifle innovation, which in turn, will threaten and undermine the stability and future of the entire biotechnology sector. While times are certainly tough, the biotechnology industry, in my opinion, is alive and well and will continue to expand well into the 21^st century.

It is important to note that many biotechnology companies that are struggling today are publicly-traded companies not privately held ones. Unlike publicly-traded companies, privately-held ones don’t have to answer to millions of shareholders or worry about their price per share on a daily basis.  Further, the expectations for privately held companies are much less than those for publicly traded entities. Based on recent discussions with venture capitalist friends and institutional investment bankers (those that still have jobs) there is still substantial funding out there for start-ups and companies that are trying to advance their products from development into clinical testing. Many of the financially-troubled public companies mentioned in the Times article were struggling (and on the verge of failing) before the recent financial meltdown. The recent financial crisis is simply hastening their demise. The reason why many of these companies are on the brink is that they went public in the late 1990s—a time when writing a business plan on the back of a napkin was sufficient for investment bankers to underwrite a company’s IPO. Unfortunately, many of these companies were little more than research or tool box driven companies whose founders failed to understand that products not technology would make their companies successful. Put simply, these companies should have never gone public in the first place!

Not surprisingly, almost all of the companies cited in the Times article fit the ‘product-less biotechnology company’ profile. For example, Maxygen, a company originally founded as a “molecular evolution” company (that went public in 1999) didn’t identify a lead product until a couple of years ago. Unfortunately, after spending millions of dollars on preclinical development, the company no longer has sufficient funds to move the product into human clinical testing. Late last week, Maxygen announced that it would layoff 30% of its workforce and consider selling itself.

Another example cited in the article is Iceland’s DeCode Genetics, once a high flying genomics and bioinformatics company that regularly made headlines for discovering new genes for cancer, cardiovascular and hereditary diseases. While DeCode has a great genomic and bioinformatics platform (and “did outstanding science”—largely because of the genetic purity of the Icelandic population) it was never able to use its technology to identify a lead therapeutic product. DeCode’s stock price has fallen more than 90% in the last year to 29 cents per share and will likely fail given the horrendous state of Iceland’s banking industry and economy.

The impending failure of many financially-strapped biotechnology companies in the current financial environment should come as no surprise to biologists—is very consistent with Darwin’s theory of natural selection which says “only the strongest and the fittest will survive. To survive in the biotechnology industry, companies must be single-mindedly product-driven. Companies that lack a product focus, in this or future economies will be able to survive for a short while but ultimately they are doomed to fail. That said, while there may be fewer companies as the biotechnology industry continues to evolve, the companies that do survive will undoubtedly be extremely robust and fiercely competitive.

Until next time….

Good Luck and Good Job Hunting!!!!!!!!!!

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