US Genetics Diagnostics Markets March 2006 2006 MaRS Emerging Technologies Briefings Extracted from Frost and Sullivan Market Engineering, October 2005 SUPPLEMENTAL INDUSTRY RESEARCH

Genetic Diagnostic Applications Genetic Diagnostic tests fall under 3 applications: Pharmacogenomic testing Prenatal Newborn testing Predisposition and Diagnostic testing This report defines the genetic testing market as the sales of test kits, reagent and home brew test revenues. Revenue numbers do not include the instrumentation used to perform the tests and reference laboratory testing revenues Tests classified for infectious diseases are considered a separate segment of the vitro diagnostic market and are not discussed in this report. Extracted from Frost and Sullivan Market Engineering, October 2005

Genetic Diagnostic tests fall under 3 applications:

Pharmacogenomic testing

Prenatal Newborn testing

Predisposition and Diagnostic testing

This report defines the genetic testing market as the sales of test kits, reagent and home brew test revenues. Revenue numbers do not include the instrumentation used to perform the tests and reference laboratory testing revenues

Tests classified for infectious diseases are considered a separate segment of the vitro diagnostic market and are not discussed in this report.

Pharmacogenomic testing Pharmocogenomic tests are preformed on human DNA to assess the efficacy, safety and therapeutic concentration of a therapeutic treatment. They are performed wto determine the clinical course of therapeutic treatment and clinical drug trials. Revenues do not include drugs or therapies prescribed because of testing results Market Size - $95 million (US) Forecast (2011) - $468 million (US) CAGR (2004-2011) - 26% Barriers Rapidly evolving science hinders establishment of clear regulatory rules Limiting potential drug’s market size discourages Pharma industry adoption High cost and uncertainty about reimbursement Drivers FDA encouraging incorporation of pharmacogenomic testing in clinical development Adverse and ineffective drug reaction drives clinician acceptance Pharma industry’s desire to gain FDA approval for rejected or dangerous drugs drives market adoption Competition Major players : Abbot Diagnostics and Roche Diagnostics Others: smaller companies involved through alliances such as Celera and Gentris Extracted from Frost and Sullivan Market Engineering, October 2005

Pharmocogenomic tests are preformed on human DNA to assess the efficacy, safety and therapeutic concentration of a therapeutic treatment. They are performed wto determine the clinical course of therapeutic treatment and clinical drug trials. Revenues do not include drugs or therapies prescribed because of testing results

Market Size - $95 million (US)

Forecast (2011) - $468 million (US)

CAGR (2004-2011) - 26%

Barriers

Rapidly evolving science hinders establishment of clear regulatory rules

Limiting potential drug’s market size discourages Pharma industry adoption

High cost and uncertainty about reimbursement

Drivers

FDA encouraging incorporation of pharmacogenomic testing in clinical development

Adverse and ineffective drug reaction drives clinician acceptance

Pharma industry’s desire to gain FDA approval for rejected or dangerous drugs drives market adoption

Competition

Major players : Abbot Diagnostics and Roche Diagnostics

Others: smaller companies involved through alliances such as Celera and Gentris

Prenatal and Newborn Testing Inherited disease screening is the largest segment of the genetic testing market. Current serum protein tests to assess the risk of a disease are not as reliable or sensitive, often giving false positives or negatives. Early detection significantly improves the ability to effectively manage or treatment various genetic diseases Market Value - $335 million (US) Forecast (2011) - $796 million (US) CAGR (2004-2011) - 13% Barriers High Cost and uncertain reimbursement deters patients and clinicians Ethical concerns and Invasive nature of fetal tissue collection Drivers CDC and American college of Obstetricians and Gynecologists recommends testing to all couples planning pregnancy Expiry of Roche’s patents on PCR will decrease cost and increase competition Increasing superiority of genetic screening for accuracy and number of targets Currently Cystic Fibrosis test is the strongest driver of applications total market growth Competition Major Players: Abbot Diagnostics and Bayer Diagnostics Others: medium companies with few key products such as TM Bioscience Extracted from Frost and Sullivan Market Engineering, October 2005

Inherited disease screening is the largest segment of the genetic testing market. Current serum protein tests to assess the risk of a disease are not as reliable or sensitive, often giving false positives or negatives. Early detection significantly improves the ability to effectively manage or treatment various genetic diseases

Market Value - $335 million (US)

Forecast (2011) - $796 million (US)

CAGR (2004-2011) - 13%

Barriers

High Cost and uncertain reimbursement deters patients and clinicians

Ethical concerns and Invasive nature of fetal tissue collection

Drivers

CDC and American college of Obstetricians and Gynecologists recommends testing to all couples planning pregnancy

Expiry of Roche’s patents on PCR will decrease cost and increase competition

Increasing superiority of genetic screening for accuracy and number of targets

Currently Cystic Fibrosis test is the strongest driver of applications total market growth

Competition

Major Players: Abbot Diagnostics and Bayer Diagnostics

Others: medium companies with few key products such as TM Bioscience

Predisposition and Diagnostic Genotyping assays have permitted the association of genetic variation with disease incidence. Various platforms are being developed to prognose and diagnose a variety of diseases. Early detection and profiling can significantly improve patient outcomes Market Value - $100 million (US) Forecast (2011) - $268 million (US) CAGR (2004-2011) - 15%, with cancer testing predominating Barriers Uncertainty and privacy issues regarding insurance Ethical issues pose significant restraint Biomarker detection becomes difficult with more complex diseases Drivers Early detection is a primary factor affecting cancer survival rates Intellectual property patents allow companies to develop niches Competition Major Players: Abbot Diagnostics, Roche Diagnostics and Johnson&Johnson Others: medium companies with few key products like Myriad Genetics and Third Wave Technologies Extracted from Frost and Sullivan Market Engineering, October 2005

Genotyping assays have permitted the association of genetic variation with disease incidence. Various platforms are being developed to prognose and diagnose a variety of diseases. Early detection and profiling can significantly improve patient outcomes

Market Value - $100 million (US)

Forecast (2011) - $268 million (US)

CAGR (2004-2011) - 15%, with cancer testing predominating

Barriers

Uncertainty and privacy issues regarding insurance

Ethical issues pose significant restraint

Biomarker detection becomes difficult with more complex diseases

Drivers

Early detection is a primary factor affecting cancer survival rates

Intellectual property patents allow companies to develop niches

Competition

Major Players: Abbot Diagnostics, Roche Diagnostics and Johnson&Johnson

Others: medium companies with few key products like Myriad Genetics and Third Wave Technologies

Top industry Challenges for US genetic markers market from 2005-2011 Extracted from Frost and Sullivan Market Engineering, October 2005 Low Medium Medium Hospital Laboratories are reluctant to adopt new molecular procedures Low Medium Medium Divers population mandates the need for ethnically comprehensive genetic panels Low Medium Medium Large volumes of testing by home-brew techniques continue to limit the sales of kits Low Medium Medium Obtaining FDA approval for pharmacogenomic testing poses significant challenges for companies Medium Medium Medium Absence of precedent restrains pharmaceutical industry to use pharmacogenomics tests for drug development Low Medium High Healthcare conservatism impedes testing uptake High High High Lack of Healthcare providers education hinders test uptake 5-7 years 3-4 years 1-2 years Challenge

Strategic Solutions to Challenges Implement Clinician education at all levels Invest in direct to consumer advertising Address the issue of cost Develop Prenatal tests that allows to use of fetal DNA from maternal Circulation Market Genetic tests as superior to protein prescreening Meet end user needs by offering tests on automated platforms Offer panels that provide high detection rates for all ethnic groups Obtain FDA approval for genetic tests Promote the passage of anti-discriminatory legislation. Extracted from Frost and Sullivan Market Engineering, October 2005

Implement Clinician education at all levels

Invest in direct to consumer advertising

Address the issue of cost

Develop Prenatal tests that allows to use of fetal DNA from maternal Circulation

Market Genetic tests as superior to protein prescreening

Meet end user needs by offering tests on automated platforms

Offer panels that provide high detection rates for all ethnic groups

Obtain FDA approval for genetic tests

Promote the passage of anti-discriminatory legislation.

Key End Users of Genetic testing Over 1400 molecular pathology labs in the US, with bulk of genetic testing being provided by a few big labs. Creating partnership with any of these large labs secures significant market share Large Labs: Quest Diagnostics LabCorp Genzyme Medium Labs: Mayo ARUP ( Associated Regional and University Laboratories Pathologist) MD Anderson Regional clinics and hospital Laboratories Key End User product feature requirements: Clinical Practicality of test Strong client portfolio and relationship with laboratories Result turnaround time Extracted from Frost and Sullivan Market Engineering, October 2005

Over 1400 molecular pathology labs in the US, with bulk of genetic testing being provided by a few big labs. Creating partnership with any of these large labs secures significant market share

Large Labs:

Quest Diagnostics

LabCorp

Genzyme

Medium Labs:

Mayo

ARUP ( Associated Regional and University Laboratories Pathologist)

MD Anderson

Regional clinics and hospital Laboratories

Key End User product feature requirements:

Clinical Practicality of test

Strong client portfolio and relationship with laboratories

Result turnaround time

Platform Comparisons Important issue in genetic testing market is deciding which testing platform or technology will have highest adoption rates in Clinical labs Technology issues are throughput, sample concentration, procedure sensitivity and specificity Economic issues are costs of instrument and reagents, current platforms available in the lab, and ease of use of the procedures Genetic testing looks for genetic marker such as Single Nucleotide Polymorphism (SNP) , Restriction Fragment length Polymorphism (RFLP) or short tandem repeat (STR) Theoretically any marker can be identified through any of the platforms Real- Time Polymerase Chain Reaction ( RTPC) Capillary Electrophoresis Micro-array Multiplexing Instruments Extracted from Frost and Sullivan Market Engineering, October 2005

Important issue in genetic testing market is deciding which testing platform or technology will have highest adoption rates in Clinical labs

Technology issues are throughput, sample concentration, procedure sensitivity and specificity

Economic issues are costs of instrument and reagents, current platforms available in the lab, and ease of use of the procedures

Genetic testing looks for genetic marker such as Single Nucleotide Polymorphism (SNP) , Restriction Fragment length Polymorphism (RFLP) or short tandem repeat (STR)

Theoretically any marker can be identified through any of the platforms

Real- Time Polymerase Chain Reaction ( RTPC)

Capillary Electrophoresis

Micro-array

Multiplexing Instruments

Platform Comparisons: Capillary Electrophoresis Electrophoresis Platform: A method of detection for specific gene sequences using gel electrophoresis Currently high availability of electrophoresis instrumentation in labs means that kits designed for this platform should have the most rapid uptake. Least expensive- $15K US for state of the art equipment Electrophoresis also offers low costs per tests - kit cost $80/patient Versatile in number of different application Important platform for low margin test like Cytochrome P450, where US labs do not expect high customer demand, so don’t want to invest in higher costing platforms Major disadvantage is labor intensity Extracted from Frost and Sullivan Market Engineering, October 2005

Electrophoresis Platform:

A method of detection for specific gene sequences using gel electrophoresis

Currently high availability of electrophoresis instrumentation in labs means that kits designed for this platform should have the most rapid uptake.

Least expensive- $15K US for state of the art equipment

Electrophoresis also offers low costs per tests - kit cost $80/patient

Versatile in number of different application

Important platform for low margin test like Cytochrome P450, where US labs do not expect high customer demand, so don’t want to invest in higher costing platforms

Major disadvantage is labor intensity

Platform Comparisons: RT-PCR RT-PCR Platform: A method for rapid and simultaneous amplification, detection and quantification of gene fragments or gene expression Slower adoption than electrophoresis due to the cost of machinery - $30K Expected to have significant uptake because of prevalence in SNP testing Currently many specialty labs like Quest Diagnostics have high RT-PCR usage Cost expected to drop as Roche loses patent protection on many of RT-PCR components, opening the field to competition Extracted from Frost and Sullivan Market Engineering, October 2005

RT-PCR Platform:

A method for rapid and simultaneous amplification, detection and quantification of gene fragments or gene expression

Slower adoption than electrophoresis due to the cost of machinery - $30K

Expected to have significant uptake because of prevalence in SNP testing

Currently many specialty labs like Quest Diagnostics have high RT-PCR usage

Cost expected to drop as Roche loses patent protection on many of RT-PCR components, opening the field to competition

Platform Comparisons: Microarrays (Gene Chips) Microarray Platform: A method for rapid detection of multiple simultaneous gene fragments or gene expression. Probes that react to patient’s genetic material are arranged in grid pattern on glass or plastic platform. Resulting matches constitute a positive test, which are readily identifiable. Most Expensive $150K-$180K + $500 per test Reaction indicate particular genetic sequences, such as those related to diseases, or how people will respond to certain medications. Microarrays also can enable researchers to see which genes are being switched on and off under different medical conditions. Currently does not have many clinical applications, so drawback for laboratories to invest in platform Roche’s AmpliChip is only FDA approved microarray test for diagnostic use Extracted from Frost and Sullivan Market Engineering, October 2005

Microarray Platform:

A method for rapid detection of multiple simultaneous gene fragments or gene expression. Probes that react to patient’s genetic material are arranged in grid pattern on glass or plastic platform. Resulting matches constitute a positive test, which are readily identifiable.

Most Expensive $150K-$180K + $500 per test

Reaction indicate particular genetic sequences, such as those related to diseases, or how people will respond to certain medications. Microarrays also can enable researchers to see which genes are being switched on and off under different medical conditions.

Currently does not have many clinical applications, so drawback for laboratories to invest in platform

Roche’s AmpliChip is only FDA approved microarray test for diagnostic use

Platform Comparisons: Multiplexing Multiplexing Platform: A method for simultaneous detection of specific gene fragments, gene expression, immune response proteins and enzymes. Multifunction beads are manipulated to bind and signal the specific presence of a a variety of substrates More versatile than microarray Allows more variation with regards to type of test - up to 100 assays to be preformed simultaneously on one sample. Slower than competing technologies however Multiplexing technology are expected to gain market share. Example is Luminex’ xAMP technology which is currently is partnership agreements with Abbot Laboratories, EreGen, TM Bioscience. FDA awarded its first approval for a CF diagnostic test to TM Bioscience’s multi-plexing platform based test. Extracted from Frost and Sullivan Market Engineering, October 2005

Multiplexing Platform:

A method for simultaneous detection of specific gene fragments, gene expression, immune response proteins and enzymes. Multifunction beads are manipulated to bind and signal the specific presence of a a variety of substrates

More versatile than microarray

Allows more variation with regards to type of test - up to 100 assays to be preformed simultaneously on one sample.

Slower than competing technologies however

Multiplexing technology are expected to gain market share. Example is Luminex’ xAMP technology which is currently is partnership agreements with Abbot Laboratories, EreGen, TM Bioscience.

FDA awarded its first approval for a CF diagnostic test to TM Bioscience’s multi-plexing platform based test.

Regulatory Issues FDA regulates reagents, kits and instruments sold to and performed by clinical labs. Diagnostic tests can be sold as Analyte Specific Reagents (ASR) to highly sophisticated CLIA-certified labs. FDA exercised restrain in regulating home- brew tests performed by these labs. No specific clinical, validity or performance claims are allowed for unregulated ASRs. Potential liabilities if a lab chooses to provide an ASR rather than a 510(k)-cleared alternative. Receiving a 510(k) FDA approval is a significant market barrier: Four FDA approved genetic diagnostic tests: Roche AmpliChip, used to individualize dosage of antidepressants, antipsychotics, beta-blockers, and some chemotherapy drugs TM Bioscience (Toronto, Canada) TAG-IT assay for detecting cystic fibrosis Visual Genetics (Toronto, Canada acquired by Bayer in ‘02) TRUGENE HIV-1 Genotyping Kit, used to detect variations in the genome of the human immunodeficiency virus that make the virus resistant to some anti-retroviral drugs. Third Wave’s Invader assay detects variations in a gene that produces the enzyme UDP-glucuronosyltransferase, and predicts adverse events. http://www.fda.gov/cdrh/oivd/index.html http://www.fda.gov/cder/genomics/default.htm

FDA regulates reagents, kits and instruments sold to and performed by clinical labs.

Diagnostic tests can be sold as Analyte Specific Reagents (ASR) to highly sophisticated CLIA-certified labs. FDA exercised restrain in regulating home- brew tests performed by these labs. No specific clinical, validity or performance claims are allowed for unregulated ASRs. Potential liabilities if a lab chooses to provide an ASR rather than a 510(k)-cleared alternative.

Receiving a 510(k) FDA approval is a significant market barrier:

Four FDA approved genetic diagnostic tests:

Roche AmpliChip, used to individualize dosage of antidepressants, antipsychotics, beta-blockers, and some chemotherapy drugs

TM Bioscience (Toronto, Canada) TAG-IT assay for detecting cystic fibrosis

Visual Genetics (Toronto, Canada acquired by Bayer in ‘02) TRUGENE HIV-1 Genotyping Kit, used to detect variations in the genome of the human immunodeficiency virus that make the virus resistant to some anti-retroviral drugs.

Third Wave’s Invader assay detects variations in a gene that produces the enzyme UDP-glucuronosyltransferase, and predicts adverse events.

Regulatory Issues March 2005 - Final Guidance for Industry Pharmacogenomic Data Submissions, facilitate the use of pharmacogenomic data in drug development April 2005 - Drug-Diagnostic Co-Development — Preliminary Draft Concept Paper Development of in-vitro diagnostics for mandatory use in decision making for drug selection for patients in clinical practice: Identify patients most likely to respond to the drug or exhibit adverse events Optional tests in drug development for understanding mechanism or selecting patients for clinical trials February 9, 2006 - New Guidance draft document on Pharmacogenetic Tests and Genetic Tests for Heritable Markers to shorten development and review timelines, facilitate rapid transfer of new technology from the research bench to the clinical diagnostic laboratory, and encourage informed use of pharmacogenomic and genetic diagnostic devices. http://www.fda.gov/cdrh/oivd/index.html http://www.fda.gov/cder/genomics/default.htm

March 2005 - Final Guidance for Industry Pharmacogenomic Data Submissions, facilitate the use of pharmacogenomic data in drug development

April 2005 - Drug-Diagnostic Co-Development — Preliminary Draft Concept Paper

Development of in-vitro diagnostics for mandatory use in decision making for drug selection for patients in clinical practice:

Identify patients most likely to respond to the drug or exhibit adverse events

Optional tests in drug development for understanding mechanism or selecting patients for clinical trials

February 9, 2006 - New Guidance draft document on Pharmacogenetic Tests and Genetic Tests for Heritable Markers to shorten development and review timelines, facilitate rapid transfer of new technology from the research bench to the clinical diagnostic laboratory, and encourage informed use of pharmacogenomic and genetic diagnostic devices.

Addenum from OGI Ontario Companies in Genetic Diagnostic field Thanks to Rhonda Tannenbaum of the Ontario Genomics Institute (OGI) for information Health Gene offers an extensive menu of state-of-the-art molecular diagnostic tests. HealthGene Epocal biochips combine features lab-on-a-chip microfluidics and microarrays (DNA arrays, protein arrays, cell arrays) into a single technology. Epocal Tm Bioscience is developing Genetic testing on a multi-plex platform for genetic mutations related to hematology, toxicology, and other debilitating genetic disorders. Companies CF test is the first such test to receive FDA approval and their technology has been adopted by leading reference laboratory such as Mayo Clinic and Specialty Labs. TM Biosciences GDI’s Genexus Analyzer platform and Triplex Assay are new platform technology for conducting DNA diagnostic tests. GDI's platform has an unprecedented ability to effectively and efficiently detect Single Nucleotide Polymorphisms (SNP's). Genetic Diagnostics Inc. Genesis Genomics implements mitochondrial DNA (mtDNA) sequencing technology and bioinformatics to exploit specific mtDNA data for commercial applications in medical diagnostics. Genesis Genomics Chondrogene uses functional genomics to enable early diagnosis and personalized therapeutic intervention based on disease-specific biomarkers. The applications of this technology is in the discovery and development of diagnostic and therapeutic products across 4 disease areas: Cancer, Central Nervous System Disorders, Cardiovascular Disease and Arthritis. Chondrogene Gene Focus has developed state-of-the-art readers for genetic and tissue arrays and biochips based on patented confocal laser imaging technology as well as imaging system for non-standard microarrays and liquid biochips. Biomedical Photometrics Inc. & GeneFocus Description Company Name

Addenum from OGI OGI award recipient in Genetic Diagnostic Thanks to Rhonda Tannenbaum of the Ontario Genomics Institute (OGI) for information OGI Competition III Award – Quantum Dot Diagnostics: simultaneous genomic and proteomic profiling of multiple pathogens at point-of-care Dr. Kevin Kain OGI Competition II Award - Nucleic acid diagnostic systems Drs. Ulli Krull/Alex MacKenzie/Paul Piunno OGI Applied Health Award – Development and Application of Functional Genomics Technologies Dr.John Dick OGI Applied Health Award – Protein expression profiling platform for Heart Disease Biomarker Discovery Dr.s Peter Liu/Andrew Emilli OGI Applied Health Award – assessment for risk of colorectal tumours in Canada Dr. Brent Zanke Description Researcher