ArcherDX Promises Precision Oncology For All

Trying to monitor what’s happening in the disruptive technology space is a difficult task. We try to keep tabs on any IPO which dabbles in any of the 60 disruptive technology themes we research here at Nanalyze. Usually, we’ll have come across a company prior to their IPO announcement. Last May, we saw that ArcherDX took some funding, and we added them to our long list of topics to write about. Yesterday, they filed for an IPO, which means they now move to the front of the queue. ArcherDX hopes to apply personalized medicine to cancer treatment and make it available for all.

What does ArcherDX Do?

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Founded in 2013, Boulder, Colorado startup ArcherDX has taken in a total of $150 million in funding so far to develop “a leading genomics company democratizing precision oncology.” In other words, they want to make personalized cancer testing available to everyone. As we’ve talked about before, the mythical “cure for cancer” doesn’t actually exist because each person’s cancer is unique. (The real cure for cancer is early detection, something we elaborated upon in our article on how Early Detection of Breast Cancer Cures Breast Cancer.) Personalized oncology promises a future where every cancer patient has their cancer genetically sequenced so they can create a personalized treatment plan. In the company’s own words:

We refer to the democratization of precision oncology as allowing genomic testing in the community and regional settings, where 85% of cancer patients are treated, and where testing is currently limited or non-existent due to the lack of infrastructure and expertise to implement genomic analysis.

Credit: ArcherDX

Why ArcherDX and why now? Says the company about their personalized oncology product offerings:

  • Accuracy – Complex mutation identification typically causes a high rate of false negatives and positives. ArcherDX diagnostic tests excel at genetic mutation identification with extreme accuracy.
  • Utility – Their products are not limited to blood and tissue. They enable testing across a multitude of sample types, targeting DNA, RNA, and ctDNA.
  • Turnaround time – Results from centralized genomic tests can take well over 20 days to be returned. ArcherDX local testing can run the test in a matter of days.
  • Economics – Clinicians can retain possession of patients’ tumor biopsies and control the data, which can be matched with clinical data to generate revenue from collaborators, such as biopharmaceutical companies

The core technology used by ArcherDX is AMP which stands for Anchored Multiplex PCR. Our goal here is to explain this simply, and it may come at the cost of accuracy. (That’s also due to the fact that we’re MBAs, not doctors.) We’ll start at the beginning, with the below taken from academic papers and Wikipedia.

Next generation sequencing (NGS) is a DNA sequencing technology which has revolutionized genomic research allowing researchers to sequence the entire human genome in a single day. The machines we use to perform NGS are behind the Illumina success story. Polymerase chain reaction (PCR) is a widely used method to rapidly make millions to billions of copies of a specific DNA sample. This enables scientists to take a very small sample of DNA and amplify it to a large enough amount to study in detail. Anchored Multiplex PCR (AMP) is effective in detecting gene rearrangements (without prior knowledge of the fusion partners), single nucleotide variants, insertions, deletions, and copy number changes. These are called “mutation classes” as seen below.

Four mutation classes – Credit: Roche

In other words, when you’re trying to figure out what genetic mutations are responsible for someone’s unique cancer, AMP can do that with extreme levels of accuracy for solid tumors or hematological malignancies (blood cancers).

Credit: ArcherDX IPO filing

Now that we have a vague understanding of ArcherDX technology, let’s talk about the products they’re building around it.

ArcherDX Products

We’ll start with another definition. From the FDA, “In vitro diagnostics (IVD) are tests done on samples such as blood or tissue that have been taken from the human body.” For example, you may have heard the word “biopsy” used before in the context of a cancer patient. This primitive diagnostic method involves cutting open the patient and snipping off a piece of the tumor. Taking tumor samples over time can monitor the progression of cancer cells and help shape cancer care. It’s a topic we talked about at length in an article titled “The Biggest Liquid Biopsy Company Files for IPO.”

When we can examine cancer using IVD, we can then determine the best therapies to use to eradicate it. The first category of products from ArcherDX are for “therapy optimization,” which is what it says on the tin. Examine the cancer, then optimize the therapy.

ArcherDX Product Pipeline – Credit: ArcherDX

The first product listed is STRATAFIDE, a universal IVD that utilizes AMP to measure clinically relevant genomic mutations for tumor profiling and companion diagnostic markers from both tissue and blood. In December 2018, the FDA granted Breakthrough Device designation to STRATAFIDE.

The Breakthrough Devices Program is a voluntary program for certain medical devices and device-led combination products that provide for more effective treatment or diagnosis of life-threatening or irreversibly debilitating diseases or conditions.

Credit: Food and Drug Administration (FDA)

ArcherDX expects to launch STRATAFIDE as a regulated device in 2021 after FDA approval. Hopefully, it could become the first-line tumor profiling test for any patient with a late-stage solid tumor.

The next four products listed under the “therapy optimization” category are VariantPlex, FusionPlex, LiquidPlex, and Immunoverse, all of which are research use only (RUO) products which are being used by over 300 academic research institutions and 50-plus biopharma companies.

The second category is Personalized Cancer Monitoring (PCM) which also has FDA Breakthrough Device Designation. It’s a liquid biopsy product that monitors patients through routine blood draws to measure cancer progression. In the United States alone, the company estimates 5.5 million non-metastatic cancer patients are eligible for personalized cancer monitoring, an estimated $15 billion market domestically ($40 billion globally).

Lastly, we have the “services to design custom products” category which includes Assay Designer which enables companies to configure biomarker targets within the VariantPlex, FusionPlex, and LiquidPlex product lines. (A biomarker – short for biological marker – is an objective measure that captures what is happening in a cell or an organism at a given moment.) Even more customization is offered by Designer Pro, another service for designing custom products. Also under this umbrella would be Archer Clinical Services which provides sequencing services for clients (unless you’re from New Yawk).

ArcherDX Partnerships

In looking through the S-1 filing, we see that ArcherDX is mixed up with many other large companies. They have a license with Becton, Dickinson and Company (BDX) for the use of molecular barcodes which are a key component of their AMP technology. One of their investors is QIAGEN (QGEN), a company that also provides the enzymes they use in their products, and an entity they’re currently trying to sue for patent infringement, among other things. (On the defensive side, ArcherDX is being sued by Natera (NTRA), a company that provides preconception and prenatal genetic testing services, for alleged patent infringement.) Perhaps most exciting is their partnership with Illumina (ILMN).

ArcherDX announced a collaboration with Illumina in 2016, and this year they announced “a multi-year, non-exclusive co-marketing partnership with Illumina to increase awareness and sales of their planned IVD products, including for therapy selection and personalized cancer monitoring.” Upon regulatory clearances and approvals, Illumina’s global commercial team will co-promote their IVD products for use on Illumina’s NextSeq™ 550Dx and MiSeq™ Dx systems. Illumina salespeople have their paws in just about everyone’s pockets, so this bodes well for accelerating adoption and democratizing personalized oncology.

Other names listed in the S-1 filing include Merck (MRK) – their largest customer accounting for 32% of revenues last quarter – and AstraZeneca (AZN:LN). Speaking of revenues, they break these down into two segments as seen below.

Notice the massive increase in R&D spend last year – Credit: ArcherDX IPO Filing

Earlier in this article, we talked about how ArcherDX enables clinicians to retain control over test samples, and that these samples might be monetized for biopharma research. ArcherDX is in the perfect position to help facilitate these transactions given all the connections they have with researchers in the field and the relationships they’ve established with large pharma companies.

What Would an MBA Do?

If you had to analyze ArcherDX like a business school case study, you might whip out some Porter’s Five Forces to better understand their competitive position.

Credit: Business-to-you.com

Then you’d realize that this isn’t business school anymore, and you don’t have to subject yourself to this painful exercise anymore.

What Porter’s framework does is expose some things to think about. Under “bargaining power of suppliers,” QIAGEN provides key enzymes to ArcherDX and they’re suing them. Do they have substitute suppliers? Under “threat of new entrants,” we need to be concerned about how strong their IP portfolio is (both the Natera and QIAGEN lawsuit outcomes will provide some color here). Under “bargaining power of buyers,” ArcherDX is in a good position to be in bed with Illumina, a company that all but dominates next generation sequencing. Anyone doing work in genomics uses Illumina equipment.

We don’t dabble in the companies we cover very often because tech is such a volatile space, and we utilize more risk-averse investment strategies like dividend growth investing. The biotech space is far too complex, which means you’re getting hit with new information constantly, which increases volatility sharply. In volatile times, we prefer to stick with more boring investments. We’re also long-time shareholders in Illumina, and feel that they’re in a great position to capitalize on themes like precision oncology.

If successful, ArcherDX shares will trade under the ticker “RCHR.”

Conclusion

In the not-so-distant future, your smart toilet will detect cancer in your urine stream and then tell your smart fridge to create a morning smoothie with some personalized genomic medicine that will sort you right out. Until then, we can use targeted therapy to treat tumors instead of a spray-and-pray dose of radiation. Everyone will have access to a precision cancer oncology program which will also improve access to leading-edge clinical trials.

Here at Nanalyze, we hold the lion's share of our investing dollars in a portfolio of 30 dividend growth stocks. Find out which ones in the Quantigence Dividend Growth Investing report freely available to Nanalyze Premium subscribers.

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