NextCODE CEO predicts rapid Dx growth with licensed deCODE sequencing tech

Fresh out of the gate and armed with a $15 million Series A financing, NextCODE Health predicts quick growth through its use of gene sequencing for routine diagnosis of disease initially developed by deCODE genetics. CEO Hannes Smarason said in an interview that the approach is much more viable today due to rapid, recent changes in the industry.

"The state of the world is rapidly coming to the use of whole exome/whole genome sequencing analysis for the purpose of diagnostics," Smarason told FierceDiagnostics during an Oct. 24 telephone interview from the American Society of Human Genetics conference in Boston, where NextCODE set up a booth to market its launch. "That offers many attractive opportunities currently not being met by targeted genetic testing, which seems to be what most people are focused on, or a panel-based approach."

NextCODE made its formal debut Oct. 23; Polaris Venture Partners and Arch Venture partners are the company's primary backers. NextCODE is basing its business plan on genetic sequencing technology developed by deCODE, a once-promising Islandic company that went bankrupt in 2010, after which Polaris and Arch bought deCODE out of bankruptcy for a song. They sold it two years later to Amgen ($AMGN) FOR $415 million. Smarason is a deCODE veteran and served for some time as that company's CFO and its executive vice president of business and finance. Jeff Gulcher, deCODE's co-founder, joined the Cambridge, MA-based NextCODE as its president and CSO. The company employs about 10 people right now, Smarason told us, but that number should grow to between 40 and 50 employees within the next several months.

NextCODE is already generating revenue, thanks to service agreements with clinical centers including Boston Children's Hospital, Newcastle University in the U.K., Saitama University in Japan and Queensland University in Australia. Smarason said he expects revenue to reach the "mid-to-high-seven-figures" range over the next year.

Initially, NextCODE will target clients with a software/service model, where they can provide a few samples and then let NextCODE handle the details. Over time, the company hopes to work with more institutions, targeting clients that "are trying to do more high thru-put diagnostics where they need a more dedicated system running," Smarason said. Within a few years, NextCODE aims to have products and interfaces clinicians and physicians can access on their desktops.

Smarason said he sees NextCODE's service pitch as something that insurers will reimburse, once they see how genetic sequencing used to help diagnose and treat patients can improve healthcare.

"Ultimately insurance companies and payers will realize that you can save an awful lot of money by reimbursing sequence-based clinical diagnostics because you can get a lot more information cheaper," he said. "It is a lot more economical approach going forward as the cost of sequencing will continue to drop."

The idea for NextCODE has percolated for a long time. Smarason noted that deCODE "didn't really have any special dedicated team or business focusing on sequence-based clinical diagnostics, the way we are focusing," and the idea had subsequently been bandied about for a while. Then Amgen bought deCODE, with a focus on using the technology to aid in its discovery efforts for new therapeutics. Smarason said he and colleagues persuaded Amgen to allow the spinout.

"We were able to convince them to allow us to get the license to the technology and the platform for the purpose of turning this more into a diagnostics focus," he said. "The cost of sequencing has been falling, and we believe it will continue to fall, and this will make the interest greater as to having a wealth of information" for diagnostic use.

Smarason added he and his colleagues are very happy to finally be getting NextCODE up and running.

"We're just excited about our little company here, and we think it is going to be a very interesting journey before us to help make molecular medicine a reality," he said. "That is what NextCODE is all about."

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