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A NanoString analysis system
A NanoString analysis system

NanoString Technologies, a Seattle-based company that researches how genetic and immune markers can be used to predict patient response to different cancer therapies, announced today that it will join pharmaceutical giant Merck to develop and commercialize a test to predict how patients will respond to Merck’s immunotherapeutic anti-cancer drug, Keytruda, in multiple types of tumors.

The job of NanoString is to get regulatory approval for their diagnostic test, which relies on a selected gene expression signature to predict patient response to Keytruda, and then to commercialize that test. For its efforts, NanoString will be eligible to receive up to $24 million for access to its technology and to cover certain short-term development milestones. In addition, NanoString is eligible for development funding and other potential regulatory milestone payments.

Furthermore, under its agreement with Merck, NanoString retains the flexibility to independently develop and commercialize any other uses for the diagnostic test it develops for Merck’s Keytruda. NanoString believes that the genetic signature they have identified as a predictor of patient response to Keytruda could form the basis for a comprehensive immuno-oncology diagnostic test that could help inform doctors about which of many therapeutic approaches to take with each individual cancer patient.

The current collaboration between NanoString and Merck is an expansion of a previous partnership between the two. Originally, their deal was for NanoString to determine whether it could create a diagnostic tool that would predict the benefits of Keytruda. NanoString discovered this could be done using its nCounter Dx Analysis System. This discovery formed the basis of the agreement announced today for NanoString to develop and commercialize their test that will predict responses to Keytruda in multiple tumor types.

“We are excited to expand our collaboration with Merck to develop this novel assay for predicting response to anti-PD-1 therapies such as Keytruda,”said Brad Gray, President and Chief Executive Officer of NanoString Technologies in a press release. “We believe this gene signature has the potential to become the basis for a universally available assay that serves as the ‘gold standard‘ for informing treatment with immuno-oncology therapies.”

The Merck deal was announced alongside NanoString’s fourth quarter financial results in which the company posted revenue of $22.3 million, a 43 percent gain year-over-year. For the full 2015 calendar year, NanoString posted total revenue of $62.7 million, up 32 percent. It finished the year with $49 million of cash, short-term investments and cash equivalents in the bank.

“We had a successful year in 2015 achieving virtually all of our strategic objectives, and closing the year with an expanded product line-up, substantially larger addressable markets, increased momentum in diagnostic commercialization, and multiple biopharma collaborations. Simultaneously, our business model delivered another year of strong and consistent revenue growth,” said Gray in a press release.

The company said it expects an operating loss of $40 million to $43 million in 2016, with revenues in the range of $86 million to $90 million.

NanoString stock is down over 3 percent in after hours trading. The company is currently valued at $244.3 million.

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