By Randall Osborne

With a genetic test for susceptibility to periodontal disease on the market and three more tests nearly ready for launch, Medical Science Systems Inc. (MSSI) is hoping to take the lead in a potentially lucrative field, unconstrained by the complex FDA regulations that beset drug approvals.

MSSI, of Newport Beach, Calif., has tests under development for osteoporosis, coronary artery disease (CAD) and diabetic retinopathy.

"We're very much focused on diseases where you can do something about them," said Paul White, president and CEO of MSSI. "We're not saying they're curable, but we have kept away from the more life-threatening diseases where there are no treatments or the treatments are very drastic."

The next test — either for osteoporosis or CAD — will be launched in 12 to 18 months, White said.

Founded in 1986, MSSI, which now employs 42, went public at the end of November 1997, raising $16.2 million in its initial public offering (IPO). Its periodontal disease susceptibility test, called PST, was launched in October 1997.

The tests stem from an agreement made in 1994 with the University of Sheffield, in the U.K., where researchers were exploring the connection of cytokines —particularly interleukin-1 and tumor necrosis factor — with disease severity.

In return for exclusive marketing rights to genetic markers identified by the Sheffield laboratory, MSSI agreed to share a percentage of profits from the genetic tests. This collaboration is the basis of all genetic markers on which the first four tests are based.

MSSI holds the only two patents ever issued on the method of using genes for detecting predispositions to gene variations related to periodontal disease and osteoporosis.

Patent protection helps, White said, but a big part of staying ahead of competition is reaching the market first. For the most part, MSSI has done that.

"Myriad [Genetics Inc.] has the BRACAnalysis and now the hypertension test, but it doesn't look like there's anyone else out there, in the common disease area," he told BioWorld Today.

Myriad, of Salt Lake City, introduced its BRACAnalysis set of related breast-cancer diagnostics in October 1996. The company launched CardiaRisk, which identifies a mutation in the AGT gene, in January of this year. CardiaRisk identifies patients significantly at risk of developing heart disease. (See BioWorld Today, Nov. 17, 1997, p. 1.)

Myriad, MSSI Tests Called Complementary

The latter test, because it focuses specifically on hypertension, probably will not compete with MSSI's coronary artery disease test, White said. Data to be published shortly on the MSSI test "are going to be very different from [Myriad's] data," White said.

William Hockett, spokesman for Myriad, said the two tests might even be used together.

"I doubt they are competing, but I think they could be complementary," Hockett said.

White said the tests may fit well with emerging treatments, too.

"There's a lot of synergy in what we're doing and the drugs that biotech companies are developing," he said. The tests can also help companies select candidates for clinical trials, White added.

Patents did not keep Myriad out of a legal skirmish with OncorMed, of Gaithersburg, Md., which offers tests for BRCA1 and BRCA2 genes on the market. Myriad sued OncorMed for infringement. (See BioWorld Today, Jan. 21, 1998, p. 1.)

Still, the lack of tight FDA rules on genetic testing makes it an attractive realm. Genetic testing is regulated by the federal Clinical Laboratory Improvement Act (CLIA) of 1988, which requires that certain criteria be met.

"We're not sitting there as a normal biotech company, 10 years away from approval," White said. "We have a pipeline of announced products."

Hockett said the approval process under CLIA is "fairly stringent" — and some states add requirements of their own — but not as complicated as FDA procedures.

Kenneth Pounds, an analyst with Nutmeg Securities Ltd., of Westport, Conn., rated MSSI a "strong buy." Nutmeg was one of two underwriters for the company's IPO.

"I've been trying to transition more toward 'product' companies," Pounds said. "I'm so sick of these [other] guys blowing up in front of the FDA, and they're always undercapitalized. Many of them are doomed."

Strength In Near-Term Products

Pounds predicted the osteoporosis test will be launched in the fourth quarter of this year. If 2 percent of affected Americans — or 500,000 — are tested at $200 each, the market equates to $100 million, he said.

The coronary artery disease test, for which clinical utility trials are under way, will be launched by the second quarter of 1999, he predicted, to a potential $26 million in revenues for the year 2003.

In the fourth quarter of 1999 or the first quarter of 2000, MSSI will begin selling its test for susceptibility to diabetic retinopathy, which can cause blindness, Pounds said, and the ultimate market for this test is between $25 million and $50 million.

"It doesn't matter that they are not addressing a $9 billion market," Pounds said. "They've got a product, and they're going to sell it. They can make money with $15 million in revenues."

Sales of the PST test will reach $2 million this year, $5 million in 1999, $10 million in 2000 and $20 million in 2001, Pounds estimated.

"The whole key here is preventable and treatable," Pounds said. "Above that, it's convincing various types of doctors that these tests are something they can build their practices with."

Direct competition for any of the tests does not exist, Pounds added. Genome Therapeutics Inc., of Waltham, Mass., and the former Sequana Therapeutics Inc., of La Jolla, Calif. (now AxyS Pharmaceuticals Inc., of South San Francisco), have said they are seeking genetic markers for osteoporosis, but have not announced finding any, he added.

As of Sept. 30, 1997 — before its $16.2 million IPO — MSSI had $870,000 cash, with a net loss of $3.04 million for the first nine months of the year. The company's stock (NASDAQ:MSSI) closed Monday at $4.375, down $0.25. *

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