(Bloomberg) – The world’s biggest pharmaceutical companies, looking to sell a new type of cancer drug that could transform treatment, are grappling with an unusual challenge: finding patients.

The new medicines aim to shrink tumors by targeting a rare genetic anomaly -- appearing in 1,500 to 5,000 patients’ tumors in the U.S. annually -- that can spur cancer’s growth. Bayer AG is out in front with a drug that could go on sale by the end of the year. Roche Holding AG is pursuing the same target.

Neither potential treatment can turn into a commercial success unless doctors and insurers embrace expensive new tests. Roche on Tuesday agreed to spend $2.4 billion to gain control of a company that makes such products. To identify just one potential candidate, doctors will need to peer into the DNA of as many as 100 patients at a cost of thousands of dollars a person.

“The question of access is really a question of whether a doctor will decide to do the test,” said Fabrice André, a professor in the department of medical oncology at Institut Gustave Roussy near Paris. “What is going to be the uptake of doctors to prescribe a test that detects 1% of the population?”

There’s more at stake than just the success of two competing new drugs: As Bayer and Roche gear up to promote broader testing, they may help transform the way cancer is diagnosed -- and sell lucrative new treatments. Testing for dozens or hundreds of gene fusions and mutations will give doctors the tools to define tumors by their genetic signature rather than just their location in the body -- whether lung, pancreas or breast.

The Roche and Bayer compounds are far from the only experimental therapies to target a specific genetic quirk. Because the rare anomaly they hit could appear in many types of tumors, doctors will be unusually dependent on tests to decide whether to prescribe them. Such advanced analysis is now common only at academic medical centers. Access to genetic profiling is even more circumscribed in developing countries. Even in China, with its massive market for medicines, access to the targeted therapies on the market now is limited -- meaning there’s a lot of room for growth, according to a recent Bloomberg Intelligence report.

Licensing deal

Bayer licensed its therapy, larotrectinib, from Loxo Oncology Inc. in a $1.55 billion deal last November. Loxo has filed for U.S. regulatory approval and the partners should receive an answer by the end of November. About a month after the Bayer deal, Roche agreed to pay $1.7 billion for biotech Ignyta Inc., which has an experimental drug similar to Loxo’s, but a little behind in the development process. Roche is still running studies to show the Ignyta compound works.

Both target a genetic anomaly called TRK fusion, in which two genes join together to spur the production of proteins that make cancers grow. The challenge of finding patients is one of the reasons Loxo elected to partner with Bayer for larotrectinib, said Jacob Van Naarden, the U.S. biotech’s chief business officer. Oncologists usually focus on tumors in one specific area, few have training in molecular testing, and many have never heard of TRK fusion, Van Naarden said.

“You compound all of these things and it creates a challenging dynamic,” he said.

Widely available commercial genetic sequencing panels could cost $1,000 to $3,000 per patient, according to David Hyman, chief of early drug development at Memorial Sloan Kettering Cancer Center in New York, who was also lead researcher on the study that showed the Loxo compound’s effectiveness last year.

‘Best value’

Memorial Sloan Kettering offers its version of the tests to everyone with advanced cancer, regardless of whether it expects their insurance to pay. When the monthly price of cancer drugs can far exceed the price of a test, finding out who is most likely to benefit “seems to me to be the best value in medicine right now,” Hyman said.

Identifying important gene fusions and mutations and giving insurers a reason to pay for the work will benefit every drugmaker working on a medicine targeted to a specific gene, said Robert LaCaze, head of Bayer’s oncology unit. The time is right, he said, because it’s easier to push through such a change if there are drugs available to target deviations unearthed by the tests.

“We all have to play a part in this,” LaCaze said. “It’s actually very exciting.”

Bayer will lobby medical societies such as the U.S.’s National Comprehensive Cancer Network for guidelines saying that doctors should specifically test for the fusions in some patients with rarer types of cancer, such as some childhood forms and sarcomas. And it’s talking to medical centers and diagnostic companies to make sure the necessary variants are included in broader sequencing tests.

“We are raising awareness first at the oncology centers” and then in the broader community, said Dieter Weinand, Bayer’s pharma chief. “It’s a stepwise approach.”

The German company and Roche may wind up helping each other, as both push for testing to carve out a market. While the two seek to introduce competing drugs, tests sold by Foundation Medicine Inc., the company Roche agreed to buy this week, may first help Bayer by unearthing patients for larotrectinib.

Medicare, Medicaid

Foundation Medicine scored a major coup in March, when U.S. public insurers Medicare and Medicaid agreed to pay for its test, which includes the genes involved with TRK fusion. Bayer partner Loxo is also working with Illumina Inc. on a test that will look at 170 different genes from a single tissue sample.

“The overall goal indeed is to make such broad testing available to more patients and to make the results more actionable,” said Sandra Horning, Roche’s chief medical officer.

There’s a precedent for a new type of cancer drug changing the way doctors define tumors. When Roche first introduced its best-selling breast cancer drug Herceptin some two decades ago, few community oncologists knew to check whether patients had the HER2 protein that determines whether the drug will work. Now it’s one of the most important parts of the diagnostic process.

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