Diagnostics creating "niche buster" drugs When US regulators this month authorised a genetic test that determines whether or not patients will benefit from a cancer drug, they heralded an important acceleration in "personalised medicine" that could turn the pharmaceutical industry's business model on its head. The Food and Drug Administration approved a test from Qiagen that will be used in combination with Bristol-Myers Squibb and Eli Lilly's Erbitux, a drug for a particular type of colorectal cancer. The test allows doctors to identify the 60 per cent of patients who will benefit from the medicine. The move underlines the growing number of "companion diagnostics" that are helping provide more effective and efficient treatments in smaller numbers of patients, while forcing the drug and diagnostics industries to rethink their commercial models. Peer Schatz, chief executive of Qiagen, which makes 30 companion tests, says: "A whole era in personalised medicine has started. Where other diagnostics affect a few thousand patients a year, this suddenly has much larger potential. Qiagen's Therascreen, already approved in Europe and Japan, will now be available to the 110,000 US patients diagnosed with metastatic colorectal cancer each year. The test works out whether a patient will benefit from Erbitux by determining whether they have a mutation in the so-called KRAS gene. Three-fifths of people do not, and for them the drug is likely to be effective. Traditionally, medicines have been given to large numbers of patients with an apparently common disease, all the while accepting that they will be a failure for many and cause significant side effects. Genetic testing identifies the smaller numbers of sufferers in whom the drugs work, reducing costly and ineffective treatment in others. Gbola Amusa, pharmaceuticals analyst at UBS in London, says: "Twenty years ago the paradigm was that for every 100 cancer patients treated, 10 benefited. If you could instead only treat those 10 patients, you get the same result without putting through 90 who don't benefit and society gains. In 10 years from now, this will be standard. The shift from mass market "blockbuster" drugs to "niche-busters" has been slow as scientific understanding has gradually progressed. Over the past two decades, the US has approved a handful of drugs with companion diagnostics, none better known than Herceptin, Roche's drug given to treat breast cancer in the quarter of women identified to have over-expression of the Her2 gene. When AstraZeneca first launched its lung cancer drug Iressa in 2002 without a diagnostic, the high failure rate meant it had little success. Only seven years later, once Qiagen had developed a companion test, did sales begin to grow as it was authorised for use more successfully in the 10 per cent of patients with advanced non-small cell lung cancer who have a EGFR mutation. Franz-Robert Klingan, a partner with Bain, the consultancy firm, says: "The pharma industry players these days look at their pipelines and ask if they have a test in development. They absolutely do not want to fall into the Iressa trap again. "The science is really starting to explode," agrees Daniel O'Day, chief operating officer of Roche's diagnostics division, who says 60 per cent of the Swiss pharmaceutical group's pipeline of experimental drugs are now linked to a companion diagnostic. While cancer is its core focus, he says Roche is also studying tests for its experimental treatments for Alzheimer's and asthma. But pharmaceutical companies are nervous about whether those who buy drugs, such as the NHS in the UK, will pay much higher prices for those medicines that come with a diagnostic test, helping compensate drugmakers for far lower sales volumes. Nor is everyone so bullish. A study last year by Tufts Center for the Study of Drug Development in Boston concluded that there was still scepticism over the clinical usefulness of many tests. As understanding of diseases grow, for instance, the value of identifying a particular genetic mutation may prove less valuable than originally thought. But Loic Kubitza, a director with PwC who has tracked a surge in partnerships between diagnostics and drug companies since 2009, says: "In the past, there was a lot of hype and not much happening. Recent years have really confirmed an upswing. There is no way back. This trend is going to continue.