(Corrects company name in penultimate paragraph.)
Dec. 9 (Bloomberg) -- In 2003, Matthew Rabinowitz’s sister, then 32, gave birth to a baby boy with Down syndrome, who died six days later. While pregnant, she had routine tests for possible problems -- blood screening and an ultrasound -- but they failed to detect the extra chromosome that causes the condition.
Even when combined, these tests can have a 15 percent false negative rate, according to California’s Department of Public Health and data from Quest Diagnostics and LabCorp. “In other words, one in six pregnant women carrying a baby with Down syndrome will test negative and not know it,” says Rabinowitz.
The tragedy prompted the Stanford University electrical engineering PhD to harness his computing expertise to improve genetic diagnostics. He launched Gene Security Network the next year, with money from the sale of his first software startup, which was acquired for $107 million. Today his 60-employee Redwood City, Calif., venture is competing with a small but growing cluster of technology companies that screen pregnant women for chromosomal abnormalities and inherited genetic defects that may be present in their unborn babies.
GSN now sells a test for babies being conceived through in vitro fertilization (IVF). It’s in the process of developing a new test for unassisted pregnancies that it says will rival Sequenom’s (SQNM) recent arrival on the market. GSN’s IVF test -- which is conducted on a single cell the third day after fertilization, before the embryo is implanted -- has an accuracy rate averaging above 98.5 percent, and low false positive and false negative rates.
The need for better screening and diagnostic testing is glaring. There are roughly 4 million annual births in the U.S. but only about 1 percent of expectant mothers have tests that definitively indicate whether their babies will have a genetic disorder, data from the National Center for Health Statistics suggest.
The traditional tests that have the best chances of detecting problems, amniocentesis and chorionic villus sampling (CVS), are expensive, invasive, and, according to the Centers for Disease Control and Prevention, can increase the risk of miscarriage to as much as 1 percent. And traditional noninvasive tests like blood screening and ultrasound are less reliable. Rabinowitz says the test GSN is working on, based on being able to analyze some 300,000 unique pieces of fetal DNA and compare them with parental DNA, is just as accurate as CVS, and approaches amniocentesis’s accuracy. It’s also not invasive, requiring a small draw of the pregnant mother’s blood. The GSN test examines the minute amount of fetal DNA that leaks into a pregnant mother’s blood and analyzes it to detect any sequence changes, or mutations.
The critical advantage is that GSN’s test can be administered earlier than amniocentesis and CVS -- in the first trimester, when terminating a pregnancy is less traumatic, physically and emotionally, instead of in the second trimester. “GSN’s approach ... holds immense promise to achieve clinically useful results,” says Dr. Ronald Wapner, research vice chairman at Columbia University Medical Center. Wapner is chief investigator of a clinical trial, jointly funded by the National Institutes of Health and the company, to evaluate the diagnostic test GSN is developing for unassisted pregnancies.
GSN is also helping expectant mothers with other questions. Another iteration of its basic technology is rebooting the paternity testing industry, which conducts more than 400,000 tests yearly, mostly after birth in child support cases. Roughly 25 percent of paternity tests indicate that the men tested are not the biological fathers, according to AABB, the successor organization to the American Association of Blood Banks.
GSN’s paternity test can be administered in the ninth week of pregnancy instead of after birth, with comparable accuracy. “I characterize [GSN’s test] as the most significant advance in paternity testing in the last decade,” says Dr. Michael Baird, the chief science officer for DNA Diagnostics Center, the industry’s largest tester, which holds the exclusive U.S. license for GSN’s technology since it became commercially available in August. “I would call this the holy grail of prenatal testing.”
GSN, which has $42 million in venture capital backing, doesn’t sell its screening tests directly to consumers. Its test for babies being conceived in vitro has been available since 2008 in nearly half of the 441 fertility clinics in the U.S., to help doctors and specialists choose which embryos have the best chance of leading to successful pregnancies. That’s critical because by age 35 at least half a woman’s eggs have abnormal chromosomes that can result in miscarriages or babies with Down syndrome.
So far, GSN has derived most of its revenue -- $4 million last year, according to Rabinowitz -- from the IVF testing market, which is worth about $50 million in the U.S. Rabinowitz projects $12 million in revenue this year and $36 million in 2012, and says demand for IVF-related testing services is rising as American women delay motherhood until later years.
The far bigger market, of course, is genetic screening for unassisted pregnancies. That’s why Sequenom’s October launch of its noninvasive test for Down syndrome shook up the medical diagnostics field. Other serious competitors entering the noninvasive prenatal testing market include Verinata Health, also in Redwood City, and BGI in Shenzhen, China, which is already performing a version of its test for Down syndrome and bills itself as the “world’s largest genome center.”
Rabinowitz says GSN will be able to compete by detecting much more than Down syndrome. At least a year away from its commercial release, GSN’s new test is designed to detect a range of inherited genetic diseases, such as cystic fibrosis or Tay-Sachs. To gain widespread traction, any of these new tests will need to be embraced by insurance companies, says Dr. Peter Benn, a University of Connecticut genetics professor and expert in prenatal diagnosis. “There are some big bets here and the competition is bound to be heated.”
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