Q&A: Behind Ignyta’s New Strategy on Cancer Drugs and Diagnostics

Xconomy San Diego — 

Not many biotech startups can reinvent themselves, but San Diego’s Ignyta has executed a series of strategic changes over the past eight months that have set the company on a new course.

Ignyta, founded in August 2011 by Jonathan Lim and Gary Firestein, set out to develop new diagnostic tests for rheumatoid arthritis and other autoimmune diseases, based on epigenetic discoveries from Firestein’s lab at UC San Diego. Firestein is a prominent rheumatologist and the dean of translational medicine at UCSD, and Lim, who is Ignyta’s principal investor, chairman, and CEO, was enthusiastic about the promise of using DNA methylation to develop an early and reliable diagnostic for rheumatoid arthritis when we talked just a year ago.

But the company took its first step in a new direction less than six months later, when Ignyta acquired Actagene Oncology, a San Diego company founded in February. Actagene CEO Patrick O’Connor joined Ignyta as chief scientific officer, along with several other prominent drug hunters.

In a statement at the time, Lim said, “This transaction reshapes us into a seamless Rx/Dx company pursuing a significant growth area of patient stratification and targeted drug discovery and development for cancer patients.” In other words, Ignyta became a cancer company.

Since then, Ignyta has announced that it has licensed exclusive global development and marketing rights for a pair of anti-cancer drug candidates from Nerviano Medical Sciences, a former Pfizer/Pharmacia cancer drug R&D center in Italy. The company also completed a reverse merger with a dormant public company, and raised $54 million through two private placements.

In a recent e-mail exchange, I asked Zach Hornby, Ignyta’s chief financial officer and vice president of corporate development, to explain the company’s new strategy. Following is our exchange, which has been lightly condensed and edited.

Xconomy: Why did Ignyta shift its strategic focus to cancer?

Zach Hornby: We felt that the unmet needs for patients were higher in precision cancer Rx [drugs] than in autoimmune Dx [diagnostics]. We believed that the potential returns for our investors would also be higher in an Rx/Dx model in oncology, rather than a pure Dx model in autoimmunity.

We had the opportunity to add a world class oncology discovery and development team to the Ignyta team through our acquisition of Actagene Oncology in May 2013; the CEO of Actagene, Patrick O’Connor, was a superstar scientist (former worldwide head of oncology discovery at Pfizer). Jonathan and I had worked with Patrick at Halozyme and knew that we wanted to work with him again. While Ignyta was previously a precision medicine company applying an epigenomic platform for Dx discovery, Actagene was a precision medicine company applying a genomic platform for Rx discovery. We thought the two companies and sets of capabilities were very complementary and synergistic. By bringing them together, we were able to combine genomic and epigenomic capabilities and Rx and Dx discovery and development capabilities. We decided that oncology was the best application of these combined capabilities.

X: Jonathan Lim told me last year he decided to invest in the company partly because he was so impressed with Firestein’s initial data for rheumatoid arthritis. Was there some new challenge at the beginning of 2013 that led the company to pivot to oncology and away from RA?

ZH: There were several macro challenges in 2013 that made molecular diagnostics less attractive as an overall business model: 1) IP concerns relating to [Supreme Court rulings that struck down patent claims of] Prometheus Laboratories and Myriad Genetics. 2) Regulatory concerns about whether FDA would exercise oversight into regulating molecular diagnostics. 3) Perhaps most concerning, downward reimbursement pressures that have been harming margins across the molecular diagnostics industry.

When combining those factors together, the risk benefit profile for a pure diagnostics company became much less attractive. In wanting to bring on strong drug discovery capabilities, we had a unique opportunity with the Actagene team, whose strength was in oncology, and hence the pivot from autoimmune to oncology.

X: What is the status of Ignyta’s original diagnostics technology for rheumatoid arthritis?

ZH: We have some intriguing diagnostic data for rheumatoid arthritis using purely epigenetic (DNA methylation) analysis. We have even more compelling, market-leading diagnostic data for systemic lupus erythematosus (SLE) using this same epigenetic approach, and our SLE diagnostic panel has been validated across more than 400 prospectively collected, blinded patient samples. Because of Ignyta’s [new] focus in oncology, we will not be taking these autoimmune Dx assets forward ourselves, but they are available for partnership with a company who wants to apply an innovative new modality (epigenetics) to high-value autoimmune diagnostics.

X: Will Ignyta stock continue to trade on the over-the-counter market? If not, what is the plan?

ZH: The company plans to move to the NASDAQ in [the first half of 2014] by meeting the Nasdaq qualification criteria. We are already taking the necessary steps to meet these criteria.

X: How far do you expect to get with the capital you’ve just raised?

ZH: The capital raised most recently is sufficient to take RXDX-101 [one of the anti-cancer drug candidates licensed from Nerviano] through the completion of its ongoing Phase I/II study and into its first randomized Phase IIb or Phase III study (depending on the indication) as well as take RXDX-102 [the other Nerviano compound] into the clinic.

X: What are the Spark discovery programs?

ZH: The Spark-1, Spark-2, and Spark-3 discovery programs are three novel undisclosed [cancer] targets, which Ignyta has identified through mining its proprietary Oncolome database…We have initiated target validation and/or small molecule discovery efforts against multiple targets. Our goal is to have an IND candidate against one or more of these targets by end of 2015, and the drugs that we develop against these targets will be paired with companion diagnostics.

X: How many employees does Ignyta have now?

ZH: As of our most recent public disclosure (11/14/13), we had seven part-time and two full-time employees.