SQI Diagnostics nears big diagnostic contract
SQI Diagnostics (TSX-V:SQD), a maker of in vitro diagnostic (IVD) tests and automated analyzers to process the tests, expects to announce a major diagnostic tools and services customer during the first half of this year to drive near-term revenue.
“By successfully achieving our operational milestones, we expect to exit the fourth quarter of 2013 on a cash flow positive basis,” CFO Andrew Morris says in an exclusive interview with BioTuesdays.com.
“We believe there are significant opportunities to create revenue streams from customers who have existing single-plex diagnostic tests and who are seeking to multiplex this content using our multiplexed product development, commercial diagnostic production and SQiDworks and SQiDlite automated analyzers,” Mr. Morris says, referring to SQI’s ability to analyze multiple biomarkers simultaneously from a single patient sample.
“We have successfully overcome the technical challenges associated with microarray, multiplexed protein diagnostics and achieved our initial commercial objectives,” he adds.
Last fall, SQI realigned its business plan to focus on the following three key areas: IVD products in production; completing regulatory filings for later-stage quantitative multiplexed products in development; and converting prospects for its diagnostic tools and services segment in order to generate near-term revenues.
The expansion into diagnostic tools is intended to enable SQI’s lab and diagnostic customers to expand their use of the company’s platforms by converting their content to microarrays. Applying SQI’s in-house processes and systems to develop microarray formatted tests incorporating customers’ content will allow customers to reduce their assay costs with less development risk and effort by purchasing their microarrays and development services directly from SQI.
“For example, our customers will be able to add requested target biomarkers to an existing panel of biomarkers, or they may request an entire panel of protein-based or antibody-based biomarkers to be developed into a research-use only microarray that they may use as a lab-developed test,” Mr. Morris says.
SQI’s claim to fame is high-throughput analyzers that are capable of measuring multiple protein, antigen and antibody biomarkers in a single test array to aid in the diagnosis of autoimmune, allergen and infectious diseases. “To our knowledge, no fully automated high-throughput microarray systems exist that are capable of addressing the combined multiplex testing needs of these markets,” Mr. Morris says.
According to Mr. Morris, the company’s core IVD technology gives laboratories the ability to analyze simultaneously multiple biomarkers in 96-well microarray plates, deliver accurate and quantitative patient results in less time, significantly reducing labor costs, and increasing profits. In a 96-well consumable plate, SQI’s technology can analyze 74 patients with up to 12 biomarkers tested quantitatively and 24 biomarkers for screening.
“Our goal is to be the single source for non-molecular, microarray diagnostics products, contract manufacturing and development services,” he says.
“We differentiate ourselves from our competition in the IVD markets by taking away the need for many lab technicians spending many hours to run these tests,” Mr. Morris contends. “By multiplexing, we also can reduce the number of vendors that a customer has to deal with, because we aggregate all of the biomarkers on one test.”
Regarding the diagnostics tools and services market, he adds, “we also provide assay development, development software, print optimization and our automated analyzers on an OEM basis, compared with other microarray services providers who only print content.”
SQI, which began its R&D in 2003, already has received regulatory clearance to market qualitative rheumatoid arthritis and celiac assays in the U.S., qualitative and quantitative rheumatoid arthritis and celiac assays in Canada and quantitative rheumatoid arthritis and celiac assays in the European Union.
Mr. Morris explains that a qualitative test refers to the presence or absence of a biomarker, while a quantitative result is the measurement of the concentration of a particular antibody. “In the past, the market was all about qualitative testing, but now every one of our IVD products in development is a quantitative test,” he adds.
“One of our key operational goals is to continue to develop, and seek regulatory approval for, additional tests, as we believe that expanding our test menu will drive adoption of our analyzer platform and products,” he adds.
SQI plans to file in the first half of this year for regulatory approval of its celiac 6-plex (the number of biomarkers tested for each patient) quantitative panel in the U.S., Canada and Europe and to follow that up in the second half of the year with filings for its vasculitis quantitative panel in the U.S., Canada and Europe and a lupus 12-plex quantitative panel in Canada and Europe.
“A 12-plex panel for lupus is the killer app in our space,” Mr Morris says, noting that there is high demand from customers. While there are not a lot of patients with lupus, the wrong treatment can make a patient very ill. “So labs try to rule out lupus, which results in a lot of testing for lupus even though there aren’t a lot of patients that actually have the disease,” he adds.
SQI has signed partnerships for each of its disease targets with leading research institutes around the world, including Cleveland Clinic, Beth Israel Deaconess Medical Center, Barcelona University Hospital, the University of North Carolina at Chapel Hill and Maastricht University Hospital.
Mr. Morris explains that partnering has given SQI access to blood samples and qualified concentrations of biomarkers from patients with autoimmune diseases. “These samples would otherwise be expensive and hard to get,” he notes. He adds, “The other key thing is that our partners can help us qualify the panels we’re developing, and we encourage them to publish the results from using our systems and assays.”
He figures SQI’s IVD segment represents a $4.5 billion a year market opportunity in autoimmune, allergen and infectious diseases, of which about 65%, or $3 billion, is in North America and Europe. The market potential of SQI’s diagnostic tools business is $2 billion a year in the U.S. and Europe, according to Mr. Morris.
Also during 2012, the company plans to launch its SQiDlite analyzer in non-IVD markets in North America and to ink its first non-North American diagnostic deal for its SQiDworks machine and IVD products.
SQiDworks, which is the only fully automated, microarray processing system with regulatory clearances in the U.S., Canada and Europe, can generate 888-plus billable assay results an hour.
SQiDlite, the company’s second generation diagnostic platform, uses the same technology as SQiDworks but is intended to be a bench-top system. A prototype of SQiDlite, which can generate 300-plus billable assay results an hour, was previewed at the American Association for Clinical Chemistry Annual Conference last summer.
Mr. Morris says SQI initially is targeting the top 300 autoimmune testing reference labs in North America and top 50 in Europe for its IVD diagnostic products. For diagnostic tools and services, the initial target is the top 30 non-IVD testing reference labs in Europe and the top 50 CLIA labs in the U.S. “The addition of diagnostic tools and services meaningfully broadens our addressable customer base,” he adds.
A technician’s hands-on time to perform a four-plex SQI biomarker test is about 7.5 seconds, compared to the four minutes required to perform the comparable traditional ELISA biomarker test. The cost of a four-plex test panel is about $23, compared to the $40 cost of the comparable traditional ELISA biomarker test, thus resulting in a savings to the lab of $17 per patient.” The savings estimate increases with the number of biomarkers analyzed per panel, he says, adding that the $17 per patient potential savings jumps to more than $53 with a 12-plex test, for example.
“Our solutions can impact more than 80% of lab spending,” Mr. Morris contends, explaining that lab spending is comprised of the costs of labor and benefits, supplies and, if the lab can’t complete all of the testing, the cost of having the testing completed at another lab.