Clarient: A Play On Personalized Medicine & Molecular Diagnostics
By Mike Havrilla | August 03, 2008 | 5:31 PM | 0 Comments
Clarient (NSDQ: CLRT) provides value-added, lab-based diagnostic services in the detection, monitoring, and treatment of cancer by performing highly specialized oncology molecular testing to improve upon and individualize the treatment outcomes of this complex disease. The future of Clarient lies in its unique ability to monitor circulating cells in the blood for molecular changes that indicate the source of cancer and whether the disease is recurring after treatment. In addition, with the advent of targeted, individualized therapies for cancer, Clarient is poised to benefit by both directing and monitoring these new treatment approaches based on the cellular profiles of each patient's disease.
The Company's future growth strategy includes increased market penetration, expansion of oncology services, and differentiation of its services through the discovery of novel molecular markers in order to achieve commercial success in the form of sustainable operating profits and revenue growth. Key upcoming milestones for 2008 include achieving profitability, delivering on 50% revenue growth for the next two years, commercializing four new molecular markers, initiating clinical validation for its prostate and CTC programs, and engaging in one pharmaceutical trial. Clarient's controlling shareholder with a 60% stake is incubator firm Safeguard Scientific (NYSE: SFE), resulting in careful cash management and cost controls to avoid dilution of the latter's stake. The sale of Clarient's instrument system business last March to Carl Zeiss MicroImaging for net proceeds of $10.3 million (representing a gain of $6.1 million) in order to focus on molecular diagnostics illustrates this fiscal discipline, allowing the Company to focus on its future growth initiatives in a shareholder friendly manner. The sale also includes the likelihood of future business collaborations between the two companies in the area of rare event detection.
While Clarient faces competition from the likes of diagnostic industry giants such as LabCorp (NYSE: LH) and Quest Diagnostics (NYSE: DGX), the shift toward personalized medicine and the Company's niche focus on the molecular testing and characterization of cancer cells should fuel continued top line growth and lead to profitability. Clarient estimates a $900 million pathology testing market opportunity with a 10% annual growth rate. Favorable market trends in the Company's favor include an aging US population that results in a higher incidence of cancer, a paradigm shift toward personalized treatments for cancer, a focus on molecular testing & characterization of cancer at the cellular level, and novel diagnostic tests in development to direct & monitor individualized therapies. The controlling stake by Safeguard mitigates the chances for unfavorable equity financings that would dilute the ownership of existing shareholders while increasing the chances for an eventual sale of Clarient to a larger diagnostic company looking to expand its services to include individualized cancer therapies.
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