Centogene: Genetic Testing for Rare Diseases
You probably don’t know much about rare diseases unless you’re one of the unfortunate few who are afflicted by one. Not everyone agrees upon how we ought to define a rare disease, but in the United States, that’s considered one that affects less than 200,000 people or about 1 in 1,636 people. While some diseases might be considered rare in the United States, they may not be so rare in other countries. We may not be able to reach a consensus on the definition, but we can all concede it’s a global problem with more than 7,000 currently identified rare diseases that affect over 350 million people globally. There are more people living with a rare disease than U.S. citizens alive today.
On average, it takes five to seven years for a patient with a rare disease to be diagnosed. Of the 7,000 identified rare diseases, it is estimated that 80%, or 5,600, have a genetic origin yet only approximately 230 rare hereditary diseases, or 4%, have an FDA approved treatment. This isn’t those big bad corporations screwing the working class, it’s a function of economics that happens to make sense. Pharmaceutical companies dedicate resources where they can get the most bang for the buck. There’s also the problem of an information gap which comes along with conditions that are rare:
The introduction of new treatments and development of cost-effective drugs are constrained by a number of factors including: a lack of high-quality information regarding the clinical heterogeneity of medical symptoms, lack of comprehensive and curated medical data, difficulties in the early identification of patients, lack of biomarkers and difficulties in understanding market size and epidemiology.
The above statement was taken from a company that happens to be in the business of providing genetic tests that can help diagnose rare diseases – Centogene. And they’ve recently filed for an IPO.
Founded in 2006, German company Centogene took in a single disclosed round of funding in the form of a $27.83 million Series A that closed in June of 2017. Over the years they’ve assembled what they believe is “the world’s largest repository for genetic information on rare hereditary diseases in the world.” All that big data is being used to provide services in two business segments: diagnostics and pharmaceutical.
The diagnostics solution typically starts with physicians requesting diagnostic information to identify or confirm a rare disease by sending patients’ blood samples on a dried blood spot collection kit called the CentoCard. Centogene then uses their real-world data repository with over 2.0 billion weighted data points from over 450,000 patients representing 115 countries as of August 31, 2019, or an average of over 500 data points per patient. All that data has led to the broadest diagnostic testing portfolio for rare diseases on offer today, covering over 6,500 genes using over 10,000 different tests.
The diagnostics segment is all about growing their rare disease database which is increasing in size by roughly 25 terabytes a month. When looking at segment profitability, most of their earnings come from the pharmaceutical segment.
As of August 31, 2019, Centogene was collaborating with over 35 pharmaceutical partners for over 30 different rare diseases with just under 43% of 2018 revenues derived from the pharmaceutical segment. The services being offered to pharmaceutical companies by Centogene span all phases of the drug development process “including early patient recruitment and identification, epidemiological insights, biomarker discovery and patient monitoring.”
The discovery of “biomarkers” allows pharmaceutical companies to more easily identify patients who are afflicted by a particular rare disease. (Not surprisingly, they’re using artificial intelligence to facilitate the biomarker development process by allowing for “fully automated pattern recognition on multidimensional data obtained from mass spectrometry.”) Centogene has now commercialized ten biomarkers covering eight rare diseases, including Aromatic l-amino acid decarboxylase (“AADC”) deficiency, Cystic Fibrosis, Fabry disease, Faber disease, Gaucher disease, Hereditary Angioedema (“HAE”), Niemann-Pick Type A/B, and Niemann-Pick Type C.
As with cancer, early detection is critical to effectively treat many rare diseases. For example, patients suffering from Gaucher disease and Cystic Fibrosis can have average life expectancies of only eleven years and one year, respectively, if no treatments are available. Not only are biomarkers used to identify rare disease patients, but they’re also used to “demonstrate the efficacy of the drugs, perform longitudinal monitoring and titrate the dosage needed of individual rare disease patients.”
A few things stand out when looking at the financials for Centogene. Firstly, they’re seeing consistent revenue growth year over year for the past three years. (All the below numbers are in Euros, so our American readers can just multiply everything by 1.1)
Secondly, they’re losing money at an increasing rate having lost as much in the first half of 2019 as they did in all of 2018.
Revenues are quite diversified geographically. In 2018, the United States accounted for nearly 40% of revenues with Europe and the Middle East commanding 19% and 32%, respectively. Surprisingly, the country of Saudi Arabia accounted for 17.5% of revenues that year.
Continuing to build their database and increase pharmaceutical partners is a priority for Centogene with the proceeds from their IPO – a planned $50.8 million – being used for research and development “including the development and clinical validation of biomarkers,” and “the development of our knowledge-driven information platform, including investments in new information technology, artificial intelligence and other software solutions.”
Every time you turn around it seems like someone’s “raising awareness” about some condition that few really care about – unless of course we or someone we know is affected by it. Rare diseases are no exception, and Rare Disease Day takes place on the last day of February each year for the purpose of – wait for it – “raising awareness amongst the general public and decision-makers about rare diseases and their impact on patients’ lives.” Now, you should be sufficiently aware about rare diseases and can put your money where your mouth is and invest in a company that’s generating meaningful revenues while combating those dreadful rare diseases that will inflict 1 in 20 people at some point during their lives. Should the IPO take place as planned, shares will trade under the symbol “CNTG.”