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Interview with David Esposito of Armune BioScience
October 20, 2016
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This is the first post in an interview series with CEOs of small- to mid-cap companies, in which we ask them about products in development. Here we talk with David Esposito, President and Chief Executive Officer at Armune BioScience, Ann Arbor, Michigan.

DAVID ESPOSITO: Armune BioScience is an early stage, medical diagnostics company started in 2008 when we signed a licensing agreement with the University of Michigan.

We licensed technology discovered by researchers at the University, which identifies the immune system’s response to certain cancers. We licensed a library of protein biomarkers, and over the course of a few years, developed and validated a test for the risk assessment of prostate cancer called APIFINY. APIFINY measures eight of those biomarkers, and APIFINY is the only cancer-specific, non-PSA-based blood test available to aid in the risk assessment of prostate cancer.

We launched APIFINY as a lab-developed test from our laboratory in Ann Arbor, Michigan in April of last year. We’ve done about 8000 tests after about 15 months on the market. APIFINY is designed as a risk assessment for the detection of prostate cancer. We also have blood-based tests coming to market as prognostic tools to help differentiate indolent versus aggressive disease, and companion diagnostics to support patient selection and treatment monitoring for immune-oncology products. We also have a library of biomarkers for lung and breast cancer that we are beginning to develop to address major areas of unmet need in those cancers.

That summarizes our major product lines and we have been in the US market for about 15 months with our first product (APIFINY). From a growth and reimbursement standpoint, we just closed out a Series A Round of financing for $5 million. We are looking to land a series B Round of financing at $25 million as soon as possible, so we can scale both our research and development opportunities and our commercial opportunities.

KLARA CZOBOR: Thank you so much for that overview. We now have some more specific questions regarding APIFINY. Our first question is how sensitive is APIFINY compared with a PSA test?

DAVID ESPOSITO: Well, it depends on the populations you’re looking at etc, but we have a (Receiver Operator Characteristic) ROC score of .69 on our general validation study. Single-digit PSA levels are usually not very predictive of prostate cancer. Some papers regarding sensitivity are included on our website. Single-digit PSA levels, eg, from two to ten, are not predictive, and that’s where APIFINY is highly predictive.

We report results of APIFINY as a single cut point. The test measures the presence of those eight biomarkers, reports them on a score from zero to 100, and we have a single cut point at the value of 59 with a negative predictive value of roughly 90%. We show that scores of less than 59 occur in roughly nine out of ten men who were cancer-free in our validation study.

KLARA CZOBOR: My next question is what are the challenges for your company regarding the adoption of this test? Are there any challenges that you’re facing right now, and how do you foresee these challenges being overcome?

DAVID ESPOSITO: We’re an early stage company, and the importance of key opinion leader (KOL) influence on product uptake cannot be underestimated. And so we, with minimal resources, are doing as much as we can to gain KOL influence in the marketplace. There is always more we can do, but at this time we have a number of national and regional key opinion leaders supporting the use of APIFINY and our technology.

A KOL strategy is critical for us. We currently have limited data available from a few published studies on our technology, so doing additional studies with KOLs is very important. It’s a challenge right now in terms of execution given our limited resources, but we are pleased with the group of KOLs we have now and with our B Round of investment, we hope to execute on a grander scale.

Another challenge for us is around logistics on testing. While a diagnostic test may be the greatest performing test in the marketplace, you need to get the logistics right, and that can be very challenging. And so, we provide clinicians with a blood collection kit very similar to some of the other products in the market.

Typically, once the business begins to grow we begin to eliminate the challenge around logistics by partnering with laboratories, where any doctor can order the test on their standard requisition form. We have a number of regional labs that are currently addressing the logistics challenge to access testing.

Those are the two big challenges, and I’d say the third one is around reimbursement. We’re working with a lot of the State Payers, Blue Cross/Blue Shield, United, etc, to get our laboratory recognized as a preferred provider to support improved reimbursement.

KLARA CZOBOR: How are clinicians perceiving this test? What is some of the feedback that you’ve gotten so far from KOLs and also maybe from people in the community?

DAVID ESPOSITO: So we have both urologists and primary care physicians adopting APIFINY, and the feedback has been very positive in terms of the technology. We underestimated the frustration that physicians have with the results of PSA or PSA-based tests. APIFINY is a non-PSA-based blood test, and does not have the limitations of PSA-based technology. And so, APIFINY has been very well-received.

APIFINY is a single cut point test providing low risk and high risk assessment for prostate cancer, and this has been very well-received by the market.

I think feedback from clinicians has revealed some challenges or hindrances to adoption focused around those same logistical issues that I mentioned before regarding a separate blood collection kit-based test and having to draw blood and fill out a unique requisition form, etc. In addition, we have limited datasets, and sometimes clinicians are looking for subset analyses based on variables including race, age or family history. We have very limited data breaking down those different subsets.

KLARA CZOBOR: Do you have any Centers of Excellence that have used APIFINY preferentially over standard PSA testing?

DAVID ESPOSITO: Sure. In terms of Centers of Excellence, the University of Michigan was where this technology was discovered. Arul Chinnaiyan, MD, PhD who’s at the University of Michigan, is an international thought leader in the area of biomarkers for prostate cancer. So we consider that certainly a Center of Excellence for us. In terms of large urology group practices in the US, the Michigan Institute of Urology has been the Center of Excellence that we’ve worked with most closely when launching this product. So I would consider the University of Michigan and the Michigan Institute of Urology as the two main Centers of Excellence that we work with.

As I mentioned earlier, we’re continuing to grow our KOL network, and I would say there are a few other centers who have been adopting our technology.

STEPHEN STRUDWICK: So are you doing any real world studies with these Centers of Excellence? Are you producing data showing the improved diagnostic efficacy?

DAVID ESPOSITO: So we’ve worked with the University of Michigan, Johns-Hopkins, and with a few other groups on studies focusing on that, so yes, we are working with them. Those are a couple centers we’ve partnered with for studies.

We have a protocol in development with the Mayo Clinic that we hope to finalize soon. We also have a protocol in place with the University of Southern California cancer center, and studies are beginning in the upcoming months. We have begun to branch out and conduct studies with a number of different groups.

KLARA CZOBOR: And just out of curiosity, regarding the implementation of this test, is it easier or more difficult compared with the PSA test? And do you see these tests being used together or just separately? So would this be a replacement for the PSA test?

DAVID ESPOSITO: So the PSA test has been around for 30 years, so replacing it is going to take a while.

KLARA CZOBOR: Yes, of course.

DAVID ESPOSITO: Things don’t move that fast, but note that the 2012 recommendation from the U.S. Preventative Services Task Force was that PSA shouldn’t be used as a screening tool. They gave it a letter D grade with regards to screening for prostate cancer. We have been surprised and have maybe underestimated the desire for clinicians to move beyond PSA based testing. This presents a real opportunity for APIFINY as our technology does not rely on PSA.

There are health systems that have completely guided their clinicians away from doing PSA-based screening for prostate cancer. So in those markets, they’re gravitating towards APIFINY, as the first blood-based diagnostic tool after an initial assessment of risk with clinical factors like age, race and family history.

However, in general, we currently see APIFINY as being a second line diagnostic tool after that initial assessment of risk, and typically, that initial assessment of risk is done with a PSA test. And so, based on our studies, we recommend that a patient with a PSA of over 2.5 ng/ml is a good candidate for APIFINY.

The answer to the question of whether is it easier or harder to run both our test and the PSA test, is dependent on logistics. For our laboratory relationships, we will typically have physicians draw a standard 5 mL red top tube of blood and they’ll get enough serum to run a PSA test. If that PSA comes back high or elevated over two-and-a-half, the laboratories can then automatically reflex to the APIFINY test based on a doctor’s order.

And so, from that standpoint, it’s seamless for the clinician or the patient, they’re doing one blood draw, they’re running PSA, if it’s elevated, the sample automatically gets an APIFINY test. There is no need for another blood draw from a patient, and no need for a physician to have a conversation with the patient. It just automatically happens. So I would say in those circumstances, it’s pretty straightforward and as easy as a PSA test. APIFINY is a blood test that is initiated with a simple blood draw like many other lab tests, so from a practical standpoint, it’s not that different.

However, for those laboratories that don’t have those “automatic reflex” processes in place, then a doctor has to choose to order APIFINY, so they’re filling out a requisition form, and they’re sending the blood sample to us overnight via FedEx or UPS. So in those instances, it’s very similar to other lab-developed tests.

KLARA CZOBOR: Right. Okay. And have you had any challenges with access and reimbursement? How are you planning on overcoming these challenges?

DAVID ESPOSITO: So I think anybody in the diagnostics business today is having some challenge with the changing reimbursement patterns.

KLARA CZOBOR: Right.

DAVID ESPOSITO: Everybody, even if you were well-positioned before, you’re struggling to find that position under some recent provisions under the Affordable Care Act in determining long term pricing patterns. I think there are a number of legislative efforts that are going to continue to challenge reimbursement moving forward, and the new delivery models, like the accountable care organizations and value-based pricing, will be the standards in the years to come.

So I would say in general, we are continuing to make progress with the existing reimbursement framework, which means we have and are using established CPT codes, and it’s working in a very traditional sense, where we get paid for the tests that we run.

But as we begin to position the business for more value-based pricing, the demonstration of health economic analyses to show how something like APIFINY can reduce unnecessary referrals from primary care physicians to urologists, and unnecessary procedures like a biopsy in the office of a urologist become important. We are continuing to build the models to show economic value, and part of our strategy is to get that kind of data to reimbursement groups.

So in general, we’re being reimbursed under the current models, and we are quickly positioning ourselves to account for these changes in the system as they emerge in the years to come.

KLARA CZOBOR: And you mentioned that you have other diagnostics in the pipeline. The financing that you’re working on obtaining, is some of that going to be allocated to developing those other tests you mentioned for breast cancer and lung cancer?

DAVID ESPOSITO: Yes. So we have a couple other products in prostate cancer, and we also have a similar antibody technology for lung and breast cancer. We’ve made progress on identifying a handful of lung biomarkers. We’re just beginning to work on breast cancer. But yes, the plan would be that as part of that next round of financing, we will be able to launch products in those other cancer areas.

KLARA CZOBOR: And the next round, you guys will be conducting this Fall?

DAVID ESPOSITO: Well, we’ve been working on it for a handful of months now. The sooner we can get the financing, the better to scale our business and there are a number of groups interested in financing our growth. We have interest in the B Round, and as soon as we land that lead investor for the B round, we’ll be really ramping things up quite a bit!