Welcome to the conference call. As a reminder, this conference call is being recorded today, October 10, 2019. I would now like to turn the conference over to Tammy Chen, Lead Counsel. Please go ahead.
Thanks, operator. Good afternoon. Thank you for joining our conference call. Also on the line is Steve Chapman, CEO Mike Brophy, CFO Solomon Moschkovich, General Manager of Oncology and Transplant Diagnostics and Doctor. Alex Alashin, Senior Medical Director for Oncology.
Today's conference call is being broadcast live via webcast. We will be referring to a slide presentation that has been posted to investor. Natera.com. A replay of the call will also be available at investor. Natera.com.
During the course of this conference call, we will make forward looking statements regarding future events like market sizes, partnerships, clinical studies, opportunities and strategies and expectations for various current and future products. We caution you that such statements reflect our best judgment based on factors currently known to us and that actual events or results could differ materially. Please refer to the documents we file from time to time with the SEC. Those documents identify important risks and other factors that may cause our actual results to differ from those contained in or suggested by the forward looking statements. Forward looking statements made during the call are being made as of today.
If this call is replayed or reviewed after today, the information presented during the call may not contain current or accurate information. Natera disclaims any obligation to update or revise any forward looking statements. And now, I'd like to turn the call over to Steve.
Thanks, Tammy. Good afternoon, everyone, and thank you for joining us. As Tammy mentioned, we will be referring to slides that were just posted at investor. Natera.com. 2019 has been a breakout year for Natera's oncology franchise.
We published Signatera validation data in premier journals across colorectal, breast and muscle invasive bladder cancers, augmenting the previously published lung cancer validation data that was featured on the cover of Nature. In addition, we've completed 2 new studies, 1 in pan cancer immunotherapy monitoring and the other in neoadjuvant breast cancer monitoring. We have now partnered with roughly 25 biopharma partners across a variety of indications. Earlier this year, we received breakthrough status from the FDA and announced a greater than $50,000,000 partnership with BGI Genomics. And since our last earnings call, we've made significant progress with the draft local coverage decision we've received from Medicare in colorectal cancer as well as the partnership with Foundation Medicine we just announced.
Given the significant progress we've made in a relatively short period of time, we wanted to dive deeper on each of these topics than we can typically do on our quarterly calls. In today's call, we want to summarize how Signatera works, the data we generated to date in our key commercial channels. First, it's worth a reminder on where Signatera is positioned. We're not focused on asymptomatic screening seen here on the left of the slide. Moving over to the right of the slide to therapy selection, this is typically what people talk about when referring to liquid biopsy and where many of the commercial tests are today positioned.
Therapy selection tests look at the specific genotype of the tumor and then match the patient to an appropriate therapy based on their genotype. Signatera's main focus is in the middle of the slide, cancer monitoring and MRD assessment, which we estimate to be a roughly $15,000,000,000 market. We think our core technology is well suited to this indication and Signatera's personalized tumor informed approach is uniquely positioned to win because it maximizes accuracy and efficiency, which is critical in this setting. There are 3 key intended uses within this segment. First, patient stratification where MRD status can determine the risk of recurrence and support better treatment decisions in the adjuvant and neoadjuvant setting.
2nd, serial testing after definitive therapy is completed to detect recurrence earlier than current diagnostic tools. And third, therapy effectiveness monitoring, how well is my immunotherapy working, for example. We are making meaningful progress in each of these areas. The next slide covers our core technology. We often get asked why we are targeting monitoring and MRD assessment and what advantages we have relative to any other company in the space.
The short answer is that technical capabilities required to serve these patients are an excellent fit with the core technology we've developed and honed since the founding of our company. Keep in mind that many of these patients have just gone through surgery of adjuvant treatment and their doctors have done everything they can do to eradicate the tumor. So positive patients have an extremely small quantity of tumor DNA remaining in their plasma and are very difficult to detect. For example, one single molecule in a tube of blood. For the past 10 years, we've been honing a very robust, sensitive and low cost technology for detecting cell free DNA variance in the blood, which now allows us to detect extremely small quantities of tumor DNA in a patient's blood.
Our set of proprietary molecular techniques combine a proprietary in house extraction chemistry and library preparation, which gives us the highest yield of cell free DNA prior to amplification and sequencing with our proprietary multiplex PCR capability we initially developed in our reproductive health business. Multiplex PCR, our specialty, is a key part of the Signatera assay and enables the targeting and amplification of just the important variants prior to ultra deep sequencing. With a suite of sophisticated proprietary bioinformatics, enabling the detection of genetic variations from tiny amounts in DNA. We have evolved this technology as we performed over 2,000,000 commercial cell free DNA tests from our lab and improved the performance while continuing to reduce the cost of goods sold to a few $100 So how does Signatera work? We start by sequencing the patient's tumor DNA in normal DNA across approximately 20,000 genes from a whole X cell.
This allows us to identify the unique set of mutations associated with that tumor, which are not present in the normal cells of the body. Then we use a proprietary algorithm to select up to 16 mutations that we believe to be clonal, which means they are likely to be present in every single cell of the tumor regardless of how the tumor evolves over time. Then we custom design and custom build a personalized test for each patient to amplify and sequence only the tumor derived targets in the patient's cell free DNA. We chose 16 mutations to optimize sensitivity and specificity, although we can do many more in a single reaction. And one patient's top 16 can be very different from another's.
Because we only track the relevant mutation for the patient, we're very efficient with our sequencing reads and we can afford to sequence each mutation at greater than 100000x next generation sequencing coverage, a very high depth of read without generating high costs. This is important, especially at the extremely low levels of tumor DNA we're dealing with in the adjuvant setting. 100000x sequencing coverage is an order of magnitude greater than what others are doing. This whole process is very streamlined. The tumor sequencing is only required for the first time point.
The tumor data goes immediately into the cloud where our algorithm selects the clonal variance and then automatically designs personalized primers for each patient. Each patient's primers only need to be designed once, which takes about 48 hours and then repeat testing does not require additional solid tumor sequencing. We call this entire process a personalized tumor informed approach, which is best suited to MRD and monitoring and different from the static panel tumor naive approaches that have been initially designed for therapy selection. Interestingly, as Signatera gains adoption, we will build a de identified patient database with whole exome sequencing tumor data from thousands of patients with early stage disease. Today, most tumor sequencing is done in the setting of an advanced cancer with almost nobody doing tumor sequencing in the early stage.
So we see this future data trove as a major advantage that can pay significant dividends from the discovery of new clinical genomic insights that can fuel drug development and new predictive biomarkers. So what are the biggest differences between the personalized tumor informed approach and the static tumor naive approach? For this, it's important to understand the goals of monitoring an MRD assessment. 1st, you want to detect small traces of tumor DNA with extremely high sensitivity. 2nd, you want to achieve an accurate measurement of the disease burden.
And third, you want to be cost efficient for repeat testing. There are 3 major advantages to the tumor informed personalized approach for MRD and monitoring that match nicely with the goals in this setting. One, by starting with the somatic tumor sequence, you can identify enough variance to reliably distinguish circulating tumor DNA in the blood, a limitation of other approaches. And by sequencing at 100000x coverage, you achieve significant performance advantages. 2, you can ensure the tumor burden measurement is reflective overall disease by tracking only clonal variants, avoiding issues that result from tumor heterogeneity.
And 3, testing can be performed in a very cost effective manner because you're only sequencing the tumor derived variance. So there's no wasted sequencing. With this approach, we have generated very strong data across the range of cancer types. I'll now hand the call over to Solomon Moskovich to describe the data we've previously published and brand new data that we recently presented at ESMO. Solomon?
Thanks, Steve. On this slide, you see the results we've presented before in colorectal, breast, lung and bladder cancers. These studies represent some of the largest clinical validation data sets published to date using ctDNA monitoring and MRD assessment, and they've been published in the top medical journals. The way to read these Kaplan Meier charts is that the x axis represents time since surgery, the y axis represents relapse free survival and the lines represent whether a patient tested positive or negative with Signatera. There are 3 key takeaways from the slide.
First, a positive test result without further treatment was followed by relapse over 98% of the time on average across the studies. 2nd, negative test results carried a very good prognosis with approximately 1 in 10 patients or less relapsing. Finally, the lead time of molecular relapse versus clinical or radiologic relapse ranged up to 2 years with an average of roughly 9 months in colon and breast cancers. I'd also like to describe new data that we presented last week at ESMO, the European Society of Medical Oncology, which validates the use of Signatera for therapy monitoring in advanced cancers and will be published shortly. This data was generated from collaboration with the Princess Margaret Cancer Centre in Toronto based on 94 patients treated with Merck's immunotherapy drug, KEYTRUDA.
Immunotherapy has been an amazing game changer in the past few years, providing a real chance for cure across many tumor types. Market research suggests there were about 200,000 patients treated with immunotherapy drugs in 2018. However, the rate of adverse events is high. So determining which patients are responding to treatment and which are not is important. Earlier and more accurate determination of response is critical to help patients switch to a different, more effective therapy if one is available.
The problem today is that tracking tumor volume with CT imaging used approximately every 6 to 12 weeks during treatment is not ideal for determining response because of a phenomenon called pseudo progression. Pseudoprogression happens when the tumor initially looks bigger on the scan before getting smaller. This happens in a subgroup of responders up to 1 in 10 patients depending on the cancer type because immune infiltration into the tumor can cause inflammation, making it look bigger. Because of this phenomenon, doctors will often see a tumor get bigger, but they will continue the treatment because they're not sure if it's real disease progression, which would be a bad sign or if it's pseudo progression. This creates a real need for better diagnostic tools to assess response early in the treatment cycle.
As you can see from the graph on the right, Signatera can provide that solution because ct DNA levels are a better reflection of the true disease burden. Our data also showed that patients whose ctDNA levels decreased after just 6 weeks of treatment had approximately 2 times greater long term survival than those whose ctDNA levels at that 6 week point. Remarkably, this is more predictive than any other known markers. In the future, we believe patients who are not generating a molecular response may be eligible to move to another therapy. Another finding was for patients who completely clear their MRD at any time point during treatment, represented by the blue line on the right, for these patients we saw exceptional outcomes with 100% of those patients surviving through the end of the follow-up period, which could indicate a cohort of patients that may be able to safely stop treatment at some point.
This study shows the potential utility of our pan cancer personalized and tumor informed approach for therapy monitoring in the clinical setting or in the case of pharma trials to be used as a surrogate endpoint. In addition to these previously published studies, we've also completed our work with the I Spy 2 Consortium, looking at the use of Signatera to track neoadjuvant therapy effectiveness in breast cancer. We look forward to publishing that data in the near future. The next slide summarizes the key commercial channels we are pursuing. In our direct pharma channel, we are offering Signatera to biopharmaceutical companies as a tool for use in clinical trials as we've discussed previously.
We've got a targeted business development team working with top pharma companies and we have set a goal to generate between $40,000,000 to $50,000,000 in total cumulative contracted business by the end of the year. When we talked about the oncology business even just 6 months ago, sales to pharma was the primary path for us to generate near term oncology revenue. Since then, we've opened up 3 additional channels, each of which we believe represent a significant opportunity. I'll summarize those 3 channels here and then spend more time on each. First is the direct clinical effort.
We received a critical draft coverage decision in colorectal cancer from Medicare just a couple of weeks ago. We believe this application addresses 2 serious unmet needs for a very large population of colorectal cancer patients. And we are now building out the commercial team and designing a registry study to support the clinical adoption of Signatera at scale in colorectal cancer. Next is the clinical opportunity for Signatera in China and for competing in global clinical trials with our partner BGI Genomics. BGI already has a very large genetic testing business in China, which did more than 1,000,000 cell free DNA tests last year and has experience with Chinese FDA approval.
We expect BGI to launch Signatera for the Chinese market in 2020, where BGI will handle all the sales and marketing effort and pay Natera royalty on sales. Finally, last month, we were very pleased to announce a partnership with Foundation Medicine. In this partnership, we will co develop personalized ctDNA monitoring products using tissue analyzed by FoundationOne CDx as the baseline assay. We think partnering with Foundation Medicine, a leader in comprehensive genomic profiling of tumor tissue and the resulting ease in offering this additional monitoring information to their existing patients and existing biopharma partners gives this product a chance to rapidly become the standard for monitoring in this setting. Okay.
Now let me spend a minute on our direct pharma effort. We've seen a lot of interest from pharma to use Signatera in a few key ways, like adjuvant study enrichment to bring immuno oncology therapies earlier into the care paradigm, treatments on molecular recurrence rather than imaging, tracking personalized neoantigens or therapy effectiveness monitoring. Pharma companies can enrich their clinical trial populations by testing patients using Signatera and enrolling those who are likely to relapse into clinical trials, thus reducing the cost of the trial and increasing the likelihood of success. They can also more precisely show the benefit of the drug by monitoring the patient during treatment or potentially use Signatera as a target endpoint in clinical trials, thus shortening the time to completion or prospectively demonstrate a survival benefit when the drug is given on earlier molecular relapse defined by Signatera rather than waiting to give the drug when relapse is more significant and confirmed clinically using conventional tools. We have signed partnerships to look at several of these indications, some in Phase II trials and we are in active development to support larger Phase III trials.
As part of that effort, we were very pleased to receive a breakthrough device designation from the FDA. The designation enables expedited development and review with the agency. It's important to note that we do not need FDA approval to pursue the clinical in colorectal cancer. We will run that test through our CLIA lab as a lab developed test or an LVT. But the breakthrough designation is very relevant for our pharma confirms that we are charting a path for a personalized assay like Signatera to receive FDA approval potentially as a companion test alongside of therapy.
We received this designation for a specific indication for use in conjunction with the therapy being developed by a large pharma partner. We'll provide more information here in the future when the clinical trial details are made public. Now on BGI, this partnership with BGI is intended to leverage their extensive reach and operations to bring Signatera to the Chinese market. We believe China represents a very large opportunity. We estimate that there are roughly 4,300,000 new cancer cases and 2,800,000 cancer deaths in China every year with lung and breast cancer being most prevalent.
Many of these cancer survivors do not get consistent access to high quality imaging. So a blood based molecular monitoring and recurrent monitoring tool that is relatively simple to distribute can address a crucial unmet need. BGI already enjoys a significant leadership position in genetic testing in China. We expect BGI to launch the Signatera test in China during 2020 and Atara would receive certain milestone payments and a sizable ongoing royalty from the clinical sales that take place in China. You've already seen a significant impact of this partnership in our 2019 financials and this impact is a testament to the strength and performance of our technology.
In addition to having broad distribution with the top sequencing company in China, we expect this partnership to support of Signatera into pharma sponsored global clinical trials. For most global trials, pharma companies want to have access to China. And since exporting blood samples or genetic information from China is severely restricted, practically you've got to have a lab partner on the ground in country. We see this as a major advantage for Natera and we've already seen this as a core component for some of our deals with existing global pharma customers. These trials are also expected to support the path Chinese FDA approval, similar to our strategy in the U.
S. Finally, let me spend some time on our new draft LCD and our plans to commercialize with the direct oncology channel. We described this opportunity at a high level on our last earnings call and said we had submitted an application for coverage to Medicare in July. At the time, we said we'd hope to get a draft coverage decision by the end of 2019. We received the draft LCD for Medicare in late August, which was earlier than expected.
The draft LCD covers the use of Signatera in patients with Stage 2 and Stage 3 colorectal cancer, supporting testing with the same frequency as CEA, which is roughly 4 times per year in the 1st 2 years and 2 times per year thereafter, with occasional short interval testing indicated for certain higher risk patients. Overall, we think the indications described could represent a testing pool of up to 1,000,000 tests annually, making this, we believe, the largest specialty oncology diagnostic to ever receive a draft coverage policy from Medicare. Based on these developments, we are now designing a registry trial with multiple NCCN centers and will begin enrolling patients in the near future. We are also building out a meaningful direct sales channel targeting oncologists and GI surgeons who treat colorectal cancer. We'll be ramping that effort over time and we expect to have a sizable team hired by mid-twenty 20, which is about the time we expect to have a final coverage decision in place.
While this effort will be focused on driving volumes in the colorectal indication for which Medicare has already proposed coverage, we do anticipate this commercial channel will support additional indications across solid tumors. Ideally, we'd like to have a steady stream of coverage decisions that opens up the use of Signatera broadly in the clinical space. The reason we prioritize the colorectal indication is because Signatera addresses 2 significant unmet needs there. I'd like to turn it over to our Senior Medical Director, Doctor. Aleksey Alishin to discuss the unmet clinical needs in greater detail in colorectal cancer.
Just by way of introduction, Alex is a Board Certified Clinical Oncologist who completed his training at Stanford University and has been involved in a circulating tumor DNA field for the past 5 years. He's an expert in cancer genetics, having been intimately involved in Stanford's Molecular Tumor Board and ctDNA program. He also holds an MBA from UCLA a bachelor's degree in statistics from UC Berkeley. Alex?
Thanks, Solomon. The first unmet need we're trying to address is the early detection of cancer recurrence. Approximately 25% to 30% of patients with local originally advanced colorectal cancer will relapse And colorectal cancer is a cancer type where early relapse detection is known to improve outcomes by allowing some patients to become eligible for curative surgery if recurrence is detected early enough. For this reason, patients today are monitored closely using a combination of CT imaging and the serum biomarker CEA for at least 5 years. Unfortunately, the vast majority of recurrences today over 85% are caught too late for curative surgery with most cases being diagnosed only after clinical symptoms have already appeared.
In our JAMA oncology paper, among the 16 relapsed patients who had serial ctDNA testing Signatera detected a relapse up to 16.5 months earlier than standard tools and 8.7 months earlier on average. This is a significant lead time that can result in more patients having a chance at curative treatment. For a patient who tests positive with Signatera, the physician could reflex to a higher resolution imaging modality such as PET scan or MRI to locate deletion as soon as possible. Furthermore, the direct head to head comparison of testing serially with Signatera versus testing with CEA showed significant improvement in both sensitivity and specificity with Signatera. Signatera sensitivity was 88% compared to 69% for CA and a patient level specificity was calculated in 98% compared to 64% with CA.
On a per test level Signatera's specificity was even higher at 99.7%, implying over 97% positive predictive value per test. This is why Medicare proposed coverage for Signatera testing with a timing and frequency that matches NCCN guidelines for surveillance with CA. In this regard, Signatera could significantly reduce unnecessary clinical and diagnostic workups and the anxiety associated with false positive results. This extraordinary accuracy is made possible because of our personalized and tumor informed approach. The second major unmet need is the triaging of patients for adjuvant chemotherapy after surgery.
Most local and regionally advanced patients are cured with surgery alone. So the objective of chemotherapy after surgery is to eradicate any micrometastatic disease that may remain in the micrometostatic disease that may remain in the body. The problem is that physicians until now could not know who has micrometostatic disease. So the guidelines recommend stratifying treating patients based on high risk factors like tumor stage as well as lymph node status. However, these risk factors are just proxies and can be inaccurate.
As a result, many patients today are significantly over treated with up to 6 months of platinum based doublet chemotherapy. This leads to treatment related mortality and up to 1% of patients and Grade 3 to 4 toxicity in another 10% to 31 percent of patients. In the status quo, we estimate that up to 11 patients are treated just to BENEFIT 1. Using Signatera to stratify patients after surgery can lead to more patients getting treatment who really need it and a significant reduction in unnecessary treatment as well as adverse events for patients who test negative and are clinical candidates for treatment de escalation. This potentially improves treatment efficacy to treating only 3 patients to benefit 1.
We are getting positive feedback from our initial physician interactions on these 2 key use cases, recurrence monitoring and MRD assessment surgery. And we do expect to expand Signatera's coverage in the future to new indications. I'll now hand it over to Steve to describe our exciting new partnership with Foundation Medicine.
Foundation Medicine is a pioneer in somatic tissue sequencing and is the only FDA approved tissue comprehensive genomic profiling test. Co developing a personalized monitoring test with Foundation Medicine will allow us to leverage the data already generated from their 324 gene Foundation 1 CDx assay as the baseline to design personalized assays instead of having to re sequence the tumor tissue. Foundation more than 50 active biopharma partners and over 100,000 new patients per year may potentially access this personalized monitoring without additional tumor sequencing. We are also very excited about this collaboration because this opens up a complementary market for circulating tumor DNA monitoring in this set of patients that have previously run a foundation tissue based panel in either pharma or in the clinical setting, enabling the design of personalized monitoring assays without any additional tumor sequencing in those patients. We're now hard at work in the development phase of this new product and our near term goal is to launch this product to biopharma companies next year.
Foundation Medicine has a very large global biopharma and clinical sales footprint, so Foundation Medicine will be responsible for all sales and marketing activities in the partnership, while Natera will perform the personalized assays on the back end in our CLIA lab. Foundation will ultimately offer the co developed monitoring test in the advanced cancer setting for patients who receive their Foundation 1 CDx assay, focused on establishing the value of cancer monitoring and aligned with where the majority of their tumor profiling is performed today. In addition, we and Foundation Medicine may, at Foundation's option, later co develop a personalized circulating tumor DNA monitoring assay from their Foundation 1 liquid or FoundationOne heme tests. We've been asked about the difference between the Signatera test and the test we're co developing with Foundation Medicine. Signatera is a custom designed assay based on a whole exome sequence of the tumor tissue, which covers about 20,000 genes.
It tracks up to 16 variants and is being adopted initially in the early stage setting for recurrence monitoring and MRD assessment. In addition, Medicare has issued a draft local coverage determination in colorectal cancer for Signatera. The Foundation Medicine product will be custom designed based on the tumor sequencing using FoundationOne CDx, which comprehensively analyzes 324 genes that are known oncogenic drivers. Again, it will track up to 16 variants and we expect the latter to be adopted in the advanced cancer setting. Overall, we see these efforts as very complementary.
Financially, the agreement with Foundation Medicine provides for approximately $13,000,000 in upfront licensing fees and prepaid revenues payable to Natera and up to approximately $32,000,000 dollars in payments tied to Natera's achievement of certain developmental regulatory and commercial milestones as well as minimum annual payments. The agreement also provides for additional option fees and contract extension fees payable to Natera at Foundation Medicine's discretion. So with that, let me turn it over to the operator for questions. Operator?
Thank Our first question comes from Tycho Peterson with JPMorgan. Your line is now open.
Hey, thanks. Steve, on your point on it being complementary to Foundation, I guess if you're getting the same answer via 300 gene panel, why do the exome? Can you also just talk a little bit about price points here for upfront exome and how the economics compare versus Yes. So as thanks Tycho. Appreciate the question.
As we mentioned, the initial focus for the exome will be on the early stage patients. So we've submitted and now received this draft coverage decision for MRD and monitoring of Stage II and III colorectal patients. We think that's a very strong indication. We think there's greater than 1,000,000 tests per year that could be developed out of that indication. So we feel very positive about that.
When you're looking at the foundation co developed assay, their initial focus is going to be in the advanced cancer setting. So they're designing the tumor informed personalized monitoring test from the FoundationOne CDx, where today they're doing greater than 100,000 patients per year routinely and they have greater than 50 active biopharma partners. So we see them in very complementary ways And we really look forward to having a very positive collaboration. From a price point standpoint, we haven't released pricing at this point on the co developed assay with Foundation Medicine. They will be responsible for doing that, in the future.
We are having discussions on our Signatera assay with MolDX, where we'll be negotiating the rate directly. And we feel very positive about some of the precedent pricing that's out there today. So if you look at other cell free DNA assays in the oncology space that are in the $3,000 range or if you look at other monitoring tests, like for example AlloSure, which is for donor derived kidney DNA testing, but that's used roughly with the same frequency as our colorectal test. It's priced at $2,800 by Medicare. So we think there's some very positive price points that we can use as precedent transactions to get a good price point when we negotiate the colorectal price.
And then for a follow-up, can you just talk about when we could see concordance data between liquid whole exome and tissue and just talk on your liquid exome plans? Yes. So, let me just make a couple of comments there and then Solomon or Alex, you guys can feel free to jump in. So what we said is we're going to be launching in the future a Signatera plasma whole exome capability. And that's initially going to be available, in the RUO setting to support pharma partners.
And then in the future it will be available in the CLIA setting. And so the idea is really twofold. I think one is, if there's a time that you don't have the tissue available, and you want to design a personalized monitoring assay, we can do that from the whole exome sequencing from the plasma. Now with our early stage colorectal indication and many early stage cancers, you always, generally speaking, have enough tissue. So this will be more important as we move our assay into the advanced cancer setting where there's not always enough tissue to go around or the doctor may not be able to get additional tissue just because of where the cancer has metastasized.
The second opportunity we think would be for pharma companies who want to use Signatera as a monitoring tool because it's so sensitive and it's so efficient. But then if they see something, they want to go double down or double click and characterize a broader portion of the genotype in the cell free DNA. And so we think that the plasma exome can also be used in that setting to deliver more information back to the pharma companies. Solomon or Alex, would you guys like to add anything?
Yes. Thanks, Steve. This is Solomon. I'll just add in terms of validation data, we have published some proof of concept data in multiple different cancer types showing the fidelity of the plasma whole exome sequencing approach. And we expect to be publishing and presenting broader validation data and concordance data in 2020.
Okay. Thank you.
Thank you. And our next question comes from Bill Quirk with Piper Jaffray. Your line is now open.
Great. Thanks. Good afternoon, everybody. So a couple of questions. First off, how should we be thinking about the turnaround time, both for, I guess, the initial yes or no to adjuvant chemotherapy, I.
E, sequencing the exome? And then with respect to the ongoing monitoring, I guess, how should we think about those 2? And then additionally, just help us think a little bit about the pace of your sales adds, both at present as well as how you're thinking about that following the positive LCD? Thanks.
Yes. Thanks, Phil. So we've got a very significant and very streamlined process in our laboratory. I mean, as many folks know, we're doing more than 2,000 samples a day. So we're really running a very high scale cell free DNA operation.
I'll let Solomon comment directly on the exact turnaround times. I'll comment on the pace of the sales. So as we've mentioned earlier, we've clear validated the Signatera product at this point and we're largely making that available today to biopharma partners who want to use the test either in a retrospective way or to use it prospectively within their clinical trials. We're seeing nice progress there. On the clinical side, we have a relatively small group of individuals right now that are interacting with key opinion leaders and starting to get some of the initial samples in the door.
Our plan is to build up the sales force so that it winds up nicely with when the final LCD will come in. So we expect that final LCD to come in roughly toward the end of I would say roughly in the summer of 2020. So we're hiring more team members right now and we plan on doing a second expansion in roughly kind of beginning of Q2 next year, so that we have a really full scale operation from a sales and commercial standpoint, when we hit the ground running in next summer when the LCD is made final. Solomon, do you want to comment on the turnaround time?
Yes. Thanks, Steve. The right way to think about the turnaround time is that results should come 1 week after we receive the plasma sample, assuming that the whole exome sequencing of the tissue is done.
Okay. Got it. And then, Solomon, any comment with respect to what the turnaround looks like when you get the initial tissue?
Yes. So the way we've structured this, we want to be able to support adjuvant decision making, which generally a decision is made in the 1st 60 days post surgery. So what we expect to receive is we would get the tumor tissue quickly after surgery. That would probably take us between 10 to 14 days to get a sequencing result from that. By that point, we will have received or we'll soon receive a plasma sample, and then we should have a turnaround time of 1 week for all plasma samples once the tumor sequencing is done.
So we fit really nicely within the adjuvant window and really well for monitoring context afterwards.
Okay. Got it. And then if I can just sneak 2 quick ones in. And I recognize you're still negotiating with CMS, but is there any way to help us think kind of big picture about you're going to have potentially 6 months of reimbursed revenue in 'twenty? How should we be thinking about that?
And then secondly, and it's somewhat related, but any update, Steve, on your partnership with QIAGEN given their news announcement earlier this week? Thanks.
Yes. Thanks, Bill. So, I'll just mention, with respect to CMS, I mean, we are having very consistent discussions with them at this stage. I can see if this was made clear in the script, but we've also completed a pre submission meeting for the second indication that we're going to be taking through, and launching clinically in the future. So we haven't necessarily disclosed exactly what that indication is going to be, but we are in the process of going through that now and we've already completed the 2nd pre submission meeting, which is very positive.
Mike, do you want to comment on the revenue for the second half of twenty twenty and then maybe on QIAGEN?
Yes, sure. So on the revenue, I mean, I think, Bill, we'll just handle like the overall guide and kind of our normal timeline on the Q4 call. I mean, we do expect to have this LCD in place mid next year, but it matters kind of the details do matter on is it June, is it August, that type of thing. So we'll need to see that play out to kind of give you a more granular feel for that. And also, I think the commercial kind of buildup between now and then will give us a good sense for what a launch trajectory can really look like once it's kind of fully going.
On the Kaizen piece, I think the summary is that it's not at all material to any of the financial metrics or forecasts that we've talked about with you all previously, essentially because we've never explicitly included any kind of QIAGEN royalty revenue from those guys because that was still in development. So short answer is not material to us. And in terms of what's next for the partnership, we obviously, they just made the announcement. They made a leadership change. And so we need to just sync with them and see what their feedback is.
And we can give you more details on that probably on the Q3 call, I'd be guessing though.
Okay. That's great. Thanks, guys. Appreciate it.
Thank you, Bill. Thank you.
And our next question comes from Doug Schenkel with Cowen. Your line is now open.
Okay. Hey, good afternoon, guys. Thanks for taking the questions. Does the FMI relationship have any limitations or differences in terms by country or geographic region?
Yes. Hey, Doug, thanks. So we haven't disclosed the exact locations other than to say it's a global partnership. And we think that Foundation has a very strong presence really broadly all around the world and in the United States. So we thought they were an ideal partner.
We haven't gone into the exact details, but it's a very broad global relationship.
Okay. And then your comments on the thought that down the line you could run your bespoke assay on the back of data generated by Foundation Liquid or Foundation Heme. Just to make sure I may have just missed this, but that suggests
to me
that your partnership with them is likely to preclude you maybe deciding to work with somebody else who has liquid somatic assays already on the market. I guess a long winded way of saying for all these applications, the thinking that Foundation is going to be the partner or could you potentially work with somebody else as well?
Yes. So we really felt like Foundation Medicine was an ideal partner. I mean, if you look at the infrastructure that they have in place, broadly around the world, their strength with biopharma, their strength with clinical, and really also their focus on quality, having the only FDA approved comprehensive genomic panel test on the market. We felt like they really were the premier partner for us to work with. And we've made some decisions as we've entered this partnership, where we plan on working with them and focusing on making that relationship strong rather than working with others.
They do have some opportunities to develop the assay in the future at their discretion on their heme panel or on their liquid panel. And we think those will be very successful products should they choose to go that route. It will work very similarly to what we've described as the current co developed assay that will be designed from the Foundation 1 CDx. So their heme test or their liquid test would serve as the baseline. And then there would be, personalized tumor informed monitoring test that would be designed from those initial baselines.
So overall, we feel Foundation is a very strong partner. There are certain ways where there are certain areas where we really want to be hand in hand with them and it made a lot of sense for us to select them as our premier partner.
Okay. But to be clear, and all that makes sense, perfect sense, Steve. But if for some reason down the line, things weren't progressing on the timeline that you would like, do you have the right to go with an alternative partner, say, in Heme or on the backs of a liquid biopsy assay for someone else?
Yes. I mean, look, there's always trade offs that are made in these types of partnerships. And I would say for now, we feel very solid with our relationship with Foundation Medicine. Of course, we've planned on whenever you enter into one of these partnerships, you always plan on certain aspects being successful. And if they're not successful, it wouldn't make sense for us to remain engaged in the partnership long term.
And I think that they feel the same way. So that's probably all I can say on the topic. But I think the most important thing is we feel very confident about our partnership with Foundation and about their ability and our ability to execute because we really are in this together.
Totally. That makes sense. One of the things you've talked about a bit and it makes a lot of sense as well as just your ability to leverage the existing infrastructure of Foundation Medicine. You also talked in your prepared remarks about plans to build out your oncology commercial reach next year. How does the foundation agreement recognizing that all you told us was pharma as an assay launches next year, we're not sure when clinical launches.
So does the foundation commercial infrastructure that's in place today allow you to potentially not have to spend as much when it comes to commercial reach for clinical purposes or based on timelines that you got to kind of go all in there?
Yes. Thanks, Doug. So we absolutely are excited about Foundation's very large footprint in the United States, where we think they're very successful and the leader today in comprehensive genomic profiling. As we've described earlier, the tests are very complementary. When you look at the exon based Signatera or the Foundation 1 CDx co developed assay, one is focused more in the earlier stage setting, while the other is initially focused more in the advanced setting.
So I think that there's an opportunity for us to build out a very dominant sales force that will be focusing on the indications that we want to focus on and that we're going to take through coverage. And for that sales force to coexist and work hand in hand with the foundation force, that's going to be focused on designing personalized tumor informed monitoring assays from their Foundation 1 CDx. I mean, this is a very large market, a $15,000,000,000 MRD and monitoring is larger than the therapy selection market. And there's going to be a lot of sales that need to take place and a lot of market development. So just to put it into perspective, as I think Solomon said in the prepared remarks, this colorectal indication that we've gotten a draft coverage for, we think is about 8 times bigger than the Oncotype DX market, for example, which is one of the largest, most successful oncology tests of all time.
So they have about 150,000, 125,000 patients per year in the United States that could be eligible, whereas with this colorectal draft coverage decision, there's over a 1000000 patients per year that could be eligible to get the test. So if we focus just only on this colorectal indication, this would be one of the most successful oncology franchises of all time. So there's a lot to do and there's plenty of room for us to be working very closely and hand in hand with the foundation team.
Okay. One last one, and thanks for all the airtime here. We've had some discussions with others about the Chinese government putting in place a regulation on July 1, regarding the processing of clinical and clinical trial patient samples to labs based in China that are not domiciled in China as well as some limitations on labs that are actually locally domiciled, but with significant non Chinese ownership. So we'll see how this gets implemented, but I'm wondering if this is something you've heard about and how you're thinking about it or how you would tell us we should think about it in the context of your VGI agreement? Thank you.
Yes. Thanks, Doug. So what you've just described, we don't believe would impact us. Although, of course, it's something we want to look into further. But just as a reminder, we've licensed our technology to BGI, where they paid us roughly $50,000,000 in upfront payments and milestones and a very nice ongoing royalty to launch the Signatera assay from their laboratory in China.
So they will be running the test under their BGI owned and operated Chinese facility. So I'm not sure if we would be restricted in any way for what you described. In fact, I would actually say that would be a significant advantage for Deterra, because as we've said before, all the global pharma companies want to run trials in China as part of any large global clinical trial. And so getting a lab up and running and operating that's owned by a Chinese company in China is a very significant advantage. And we have the premier laboratory in China, BGI, who last year did more than 1,000,000 cell free DNA tests in the prenatal setting and has a very dominant footprint and we believe will be very successful in the oncology sector.
Got it. That's super helpful. Thank you.
Thank you. And our next question comes from Catherine Schulte with Baird. Your line is now open.
Yes. Hey, guys. Thanks for the questions. First, just how should we think about the commercialization path for the clinical side of the Foundation partnership? Is Foundation driving the reimbursement process there?
Are you going to have to go cancer by cancer or could you get approval for all solid tumors? And then what should we be thinking about for potential reimbursement timing?
Yes. Thanks, Catherine. So Foundation's approach is really pan cancer. And we're working closely with them on evidence development plans and on the strategy for reimbursement in the clinical setting. The good news is that the path to get reimbursement is fairly clear and they're super experienced there, obviously having successfully completed the joint FDA CMS parallel review pathway.
And we're very experienced there having now gotten coverage from or draft coverage for multiple different indications with MolDX. So we're working with them. We do think the clinical side of the business is very important. The initial product that we'll be launching will be in biopharma and that will be followed by launches in the clinical side as data and coverage comes into place. From a pricing standpoint, we just can't release that at this point.
But when you look at some of the precedent prices out there, there's some very good precedent price points from other liquid biopsy tests or other monitoring tests that are based on cell free DNA.
Okay. And then you've talked about Foundation doing over 100,000 tests per year. For how many of those do you think a Signatera monitoring application would be applicable? And is Foundation going to be incentivizing their sales force to be pushing that Signatera
test? Yes. So as I said, I do believe in the future that the monitoring assay can be a very core part of cancer care, particularly for patients in the advanced cancer setting. Now as it becomes offered in a pan cancer methodology, there will be an opportunity to access a very significant portion of those patients. And when you're looking at the frequency of ongoing monitoring, this can deliver very large amounts of revenue, which we're excited about.
And that was part of the reason why we partnered with them. I mean, not having to go back and resequence the tissue and having an installed base of customers and a very large successful team, and the only FDA approved, comprehensive genomic profiling test, we think this is a very significant advantage. The whether or not they're incentivized to go out and push the test, I mean, of course, all of these types of terms are thought through and debated in various ways whenever you're entering a partnership like this. So I can't give exact terms, but we plan on working very closely together with them and we're both very highly motivated to make this very successful because we think it's the right thing for patients and because we think it's an opportunity to really grow both of our businesses. Talked about over a 1,000,000
tests per year in terms of potential TAM. Talked about over a 1000000 tests per year in terms of potential TAM. How does that split between monitoring and then MRD status assessment? And then can you just walk us through the assumptions on how you get to that number?
Yes. Let me just briefly comment on that and then Alex or Solomon, feel free to jump in. So there's about 150,000 new Stage 2 and 3 colorectal patients that are diagnosed every year. So the schedule for CEA under the NCCN guidelines is 4 tests the 1st year, 4 tests the 2nd year and then 2 tests in the 3rd, 4th and 5th year. So in that 5 year window, a patient would be getting 14 tests.
So if you take the 150,000 patients per year and you multiply it by 14 and then you adjust for the portion of that 150,000 that Stage 2 and 3 that would get you this number of greater than 1,000,000. Dollars I'm sorry, earlier I said the $150,000 was just Stage 2 and 3. I'm sorry, that's all the colorectal diagnoses per year. About 54% of those roughly are Stage 2 and 3. So when you adjust for the 54%, you multiply it by 14 tests per year, you get that greater than a 1000000 tests.
As far as how that breaks out from monitoring in MRD, obviously, the monitoring is a larger indication of it. Solomon or Alex, do you want to call out any specifics there?
No, Steve. I think that was
a full answer. We were going to I was going
to say that the vast majority of the tests in that 1,000,000 addressable testing market would be the monitoring tests.
All right, great. Thank you.
Thank you. And our next question comes from Alex Nowak with Craig Hallum. Your line is now open.
Great. Good afternoon and good morning. Congrats on the progress here with cancer to date. Solomon or Alex, just a question around the utility of Signatera CRC. If the tumor isn't detected here by imaging, but it's detected through Signatera, what is the next course of option here in therapy the patient?
Do you basically get the patient in for a CT or PET scan every week till you essentially find a resectable tumor? And when you looked at the JAMA paper for CRC, how many of the recurrences caught earlier via Signatera were actually eligible here for a curative resection at the time of the blood draw? Thanks for the question. This is Alex. So the way to think about is just what happens today in the oncologist's office with CA.
Frequently, we do pick up recurrence biochemically with CEA much earlier than we would with imaging. What we typically do there is, again, intensify imaging to try to detect the patient at an asymptomatic stage. And we know from prior studies that asymptomatic recurrence typically does better because more of those patients can get to curative surgery usually for an olebomentistatic recurrence. So we really see Signatera being used very, very similarly into already established practice patterns that are ongoing today. In terms of your second question about
Can you repeat the second question again, Steve?
No, I can repeat it here. It's just in the JAMA paper that you guys published on CRC, how many of the recurrences were actually caught earlier here via Signatera were actually eligible for recertib or section? Okay. Yes. So in the JAMA oncology paper, the study was prospectively collected, but retrospectively analyzed study.
So we did not actually look at if Signatera could be used to get patients earlier to surgery. And that's actually a big component of the registry study we're launching right now to actually see in real world practice can Signatera get more patients to surgery as we expect it would. Okay. Understood. That makes sense.
And then, Solomon, if you could just provide a bit more details on how FMI is ultimately going to use Signatera here for their pharma partnership offerings. I get the clinical sense able to offer recurrence test here after successful treatment. But how is pharma going to get access to your test through FMI? And does this at all cannibalize some of your own direct pharma business?
Yes. Let me comment on that. And then, Solomon, I think feel free to come over the top. I think, as we said, we feel like there's some very complementary aspects to the exome based Signatera product and the FoundationOne co developed product. So with the Foundation 1 co developed product, they're designing up to 16 mutations from the Foundation 1 CDX baseline of 324 genes.
And then they're monitoring the patient in an ongoing fashion. With that product, they're also providing back data from the initial sequence on comprehensive genomic profiling and certain gene mutations that are relevant for the biopharma partner, which we're not doing in the exome based product. In the exome test, we're profiling 20,000 genes. We're selecting 16 mutations and then we're designing tumor informed personalized assays for those patients. So we think both of the tests are going to work very well.
I think there's plenty of room in the marketplace for multiple different tests. When we've spoken with pharma, we're working in many different indications like adjuvant setting, for example, earlier stage in the adjuvant setting to look at trial enrichment. We'll look at designing assays to track neoantigens. We are doing cancer monitoring and therapy monitoring as well. But we also think that Foundation will do extremely well in cancer monitoring and advanced cancer patients and with pharma companies.
I mean, they have 50 plus active biopharma partners and they're in a very good position to work with pharma both prospectively for new studies, but also uniquely in a retrospective manner for studies that have already been completed where there's already been tumor sequencing done. And we just don't have access to that today on the exome product. And from that standpoint, we think it's very complementary. It's unlocking something that we just simply wouldn't be able to do ourselves, which we think is extremely valuable. As far as how where they're going to be focused with pharma, they've described today, to date that they'll be focused in a pan cancer manner, largely in the advanced cancer setting, where many of their Foundation 1 CDx tests are being done today.
But of course, I think looking at earlier stages is something that is a potential and it's a possibility that they might expand that over time as well.
Saul, do you want to add anything? No, I think that was great. If there's any other questions, I'm happy to take them.
No, yes. I think that clarifies it for me. And then just last question here, Mike. I know you're not talking about guidance on this call, but with the Foundation Medicine deal coming in, it's adding about $13,000,000 upfront cash. Just remind us how and when will that convert to revenue in 2019 or 2020?
And then just remind us how much is the does the current guide assume for BGI fees converting the revenue? Thanks.
Yes. Thanks, Alex. So, yes, so that cash we received will turn into revenue over time as the development work with Foundation progresses and or we meet the specified milestones in the deal. So that and the teams are working right now to finalize and update the development timelines right now for the product. In terms of like 2019, what we said is that for BGI is that we expect to have some revenue recognition in 2019 from the BGI development work, which kind of flows along the same pathway that I just described for repimibe.
It's kind of subject to progress with the joint R and D teams working together and clearing technical hurdles. And so we do expect some contribution there in 2019 from BGI and also likely some in 2020.
Okay, understood. Thank you very much.
Thank you. And our next question comes from Mark Massaro with Canaccord Genuity. Your line is now open.
Hi, this is Max Massucci on for Mark. So I guess what sort of time and resources do you think is necessary to generate data that proves both the healthcare economics and how Signatera and earlier detection of recurrence can lead to better patient outcomes in the clinical setting? Thanks. Yes. I'll comment on that and then Alex, you can feel free to comment further, Solomon.
I think one of the things that really attracted us to the colorectal indication is that there's already guidelines in place today that allows the physician to use their judgment to determine whether or not the patient gets adjuvant chemotherapy, for example. And there's already proven clinical utility that detecting recurrence early, particularly in the oligometastatic setting or before, can have a significant improved outcome the patient and that there's an intervention, which is the doctor can do surgery to remove the tumor. So 85% of patients today that have recurrent colorectal cancer are caught too late to do surgery with curative intent. So we think that the bar for clinical utility evidence here is fairly low. And we look forward to getting the final coverage decision for Medicare.
Now with that said, we are doing a very large registry trial where we're already going to be engaged with many of the top NCCN centers and top key opinion leaders. And the doctors that we're speaking with and enrolling now are very excited about this test and about the impact that it can have on patient care. So we expect to have many centers enrolled in the trial early next year and to be really operating at full steam in that registry study as we turn the corner into next summer and we get the final LCD in place.
Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.