Opportunist Magazine Q&A with CEO Panna Sharma
Published on: Wednesday, June 12th, 2013 View all Articles
Panna Sharma, CEO of Rutherford, N.J.-based Cancer Genetics, Inc. (OTCQB: CGIX), talks with the Opportunist’s Managing Editor Leslie Stone about his company’s role in DNA-based cancer diagnostics and its mission to improve the success rate in cancer treatment.
It has been a decade since scientists completed the Human Genome Project and sequenced the entire genetic code of a human being to an accuracy of 99.999%. The discovery accelerated biomedical research and led to brand-new insights in the diagnosis and treatment of diseases such as cancer. By pinpointing common DNA letter codes, physicians could now predict not only if someone would develop a disease but also determine the best treatment for the disease based on the individual’s genetic code.
Companies such as Cancer Genetics, Inc. (CGI), founded in 1999 by Dr. Raju Chaganti, an internationally recognized leader in cancer cytogenetics (a branch of genetics focused on the study of the structure and function of the cell) and molecular genetics, were at the forefront of understanding what all these genomic data points meant in terms of impact on cancer, explains CGI’s CEO, Panna Sharma. “Dr. Chaganti is the chair at the Memorial Sloan-Kettering Cancer Center, where he is on the faculty of the Department of Medicine and Cell Biology Program, so we had a real advantage in the formation of the company. Our focus is on translational oncology rather than simply being another genetic technology company being driven by gene jockeys. When you are translating research insight into something that is clinically meaningful, one of the challenges in the whole endeavor is managing human disease and oncology by better understanding the biomarkers that take you from research insights to the practical day-to-day impact on patients and improved treatment. That is the key to building and scaling the next billion-dollar company in personalized medicine.”
Opportunist: When did you join the company?
Panna Sharma: In the first quarter of 2010, I started as a consultant with CGI when they hired my prior firm, TSG Partners. At the request of one of the company’s largest investors and Board member, John Pappajohn, who had taken 43 companies public—now 44 with CGI—I agreed to analyze and review the company and identify any deficiencies and make recommendations about how to improve those and put the company on a growth plan. After the assignment, John took me aside and asked me to run the company. He went through a whole laundry list of the specs he had in mind for the CEO and said I was ideal for the job. The company did a couple of external interviews, another few months passed, and he said, ‘We really think you should do it.’ Of course I’d already come to realize the interesting opportunity that CGI represented from my earlier analysis of the company. So we went to lunch and talked about what I wanted to do, what the company could be one day, and as they say, the rest is history. [Laughs]
Opportunist: What are your goals as CEO?
Panna Sharma: The general blueprint, ever since I came on board, was to fix the company in terms of structure and management, and start preserving and growing the customer base, rapidly launching the proprietary oncology microarrays and driving the scale through greater access to community hospitals. Strategically, that is where the company is today. We have increased our revenue exposure to community hospitals and centers from 12% in 2010 to nearly 48% today, and we have successfully launched five compelling, next-generation genomic products into the marketplace. Our revenues have grown from roughly $1.5 million in 2010 to over $4.8 million for the last 12 months, and we have more appropriately capitalized the company since the IPO. In April, we took the company public and raised an additional $6.9 million, which we see as the first step in becoming a global player in next-generation cancer diagnosis. In order to prepare for our growth, we have also made strategic additions to our management team and focused increasingly on partnering with other industry leaders that can help us achieve our focus on translational oncology.
Opportunist: Can you define that for us?
Panna Sharma: We are duly focused on cutting-edge research but also on the practical elements of developing diagnostic products and services that have a clinical impact on patients. Clinicians today are faced with so many questions, such as what is the subtype of cancer? Is it aggressive or indolent (i.e., will it sit there for a long time before becoming active)? Will the cancer respond to treatment? For the patient, there is a potentially good outcome or a bad outcome, which is typically measured by five-year death or survival rate. We have to change the success rate of initial cancer treatment, because so much money and healthcare resources are spent today on trying out different treatment plans. Often, these treatment plans have marginal or limited success or they have unwanted toxic effects on the patient. Changing the success rate of treatment through genomically guided diagnosis and theranosis is critical to improving treatment, improving access to proper treatment, and reducing wasteful use of healthcare resources. This is the promise of translational oncology: to translate the genomic insights from leading-edge research into the practical and economically impactful change needed in oncology diagnostics and treatment.
Opportunist: What makes CGI unique in the field of DNA-based cancer diagnostics?
Panna Sharma: Our focus and approach supports the entire cancer care continuum: diagnosis, prognosis and theranosis (selection of therapy). It’s a snapshot that up until now was missing in cancer treatment. In other words, we use genomics to provide an accurate and definitive typing of the cancer. Does the patient have cancer and, if so, what type? Then we assist in patient outcome and disease management and assess their survival prospects. And finally, we develop a personal therapeutic plan that includes recommendations for which drugs to give, how much and when. The result is that patients receive faster and more accurate diagnoses and personalized oncology care. Physicians gain newer, more accurate tools to assess a patient’s cancer and develop an informed treatment plan. Insurance companies save money, because everything can be done with one test.
Opportunist: We understand you recently entered a joint venture with The Mayo Clinic. What are your expectations for this alliance?
Panna Sharma: Our joint venture with The Mayo Clinic allows us to continue our innovations in the frontier of understanding the genomics of cancer and, very importantly, gives us a great partner that will really help move the needle in both the discovery and adoption of the next-generation sequencing based panels. They have a vested interest in the success of the research and in the operational success of the joint venture, OncoSpire Genomics. For our shareholders, it’s great because it allows them to participate in the next, next thing in personalized medicine without all the associated startup costs, since we are leveraging Mayo’s vast infrastructure in sequencing and bioinformatics. This, coupled with their clinical insights and biobank, will help accelerate the work at OncoSpire Genomics.
The joint venture will be based in Rochester, Minnesota, and I believe it will facilitate the focused development of these projects into innovative genomic products that can continue to impact patients and healthcare. Because of this relationship with Mayo, we have a significant advantage over companies like Foundation Medicine and Invitae. This advantage allows us to keep our current company, Cancer Genetics, on an aggressive growth roadmap, one focused on achieving global scale, while still allowing us to access and invest in innovation so that we ensure future growth, which is a great model for building long-term shareholder value.
Opportunist: What is the basis of each of your products?
Panna Sharma: We have validated hundreds of sites on the genome that are associated with very specific blood-borne or urogenital cancers, and our products look for those and provide the information about subtype of cancer, probable patient outcome, and the most appropriate or likely treatment option. We developed the research internally and validated it with our global partners such as Sloan-Kettering, The Mayo Clinic and the University of Iowa.
Opportunist: Who else are you partnering with?
Panna Sharma: We have a partnership with Gilead, the second largest biopharmaceutical company in the world, who chose us to do all their patient stratification and testing for international and national clinical trials for their blood-borne cancer drugs. That’s very important for Gilead, because it helps reduce the costs of their clinical trials. This has also helped us to grow and scale the company, which should propel us for years to come.
We’re also partnered with Roche, one of the premier names in cancer diagnostics globally. They chose us to help them scale their inroads into the emerging Central and Latin American market. They wanted to have a cancer-focused lab to bring in state-of-the-art testing, and they wanted the kind of culture focused on getting answers for every patient sample. We have been instrumental in helping them gain market share and deliver to patients who need these therapeutics. They are now servicing 15 countries in Central Latin America and have impacted patients’ lives and grown their own market share in that category.
Opportunist: What are CGI’s strengths and competitive advantages?
Panna Sharma: We are well positioned with a strong intellectual property portfolio, which we deliver in the form of compelling service. That is the key to our continued success, because many labs, hospitals, and cancer centers can’t really say they have both unique products and services. Our hybrid business model is one of the reasons we have been able to attract some extraordinary partnerships and collaborators and, because of that, I see us being a real global leader in personalized cancer care.
In any M&A strategy, it’s imperative that companies have great products, but if they lack business acumen or the right marketing philosophy, they will lose their value proposition despite having good technology. We have clinically validated genomic products that were built with some of the biggest names in cancer diagnosis and treatment: The Cleveland Clinic, Memorial Sloan-Kettering, the University of Iowa and the National Cancer Institute. We are focused on partnering with healthcare systems to help drive down costs and improve the care focus on very specific disease states, and we focus on delivering these in a very partner-specific way.
Opportunist: Who are your competitors?
Panna Sharma: There are of course new companies such as Foundation Medicine, but I like to think we have a very unique value proposition because of our business model and proprietary technology. That’s not to say there aren’t other companies out there making a lot of noise. Of course, there are the traditional big labs like Quest and LabCorp. Now, too, increasingly some of the bigger players are acquiring successful smaller companies—General Electric acquired Clarient, and Novartis acquired Genoptix—but I still believe there is a lot of opportunity for growth. Approximately $15 billion is spent globally on testing for blood-borne and urogenital cancers, and more and more of this testing is genomically based. That’s a big space to fill, and I believe it offers a potential upside for us to capture a major share. By focusing on execution, we expect to accomplish our milestones and create substantial value for our shareholders as we grow. Compared with others in the industry, I believe we are tremendously undervalued.
Opportunist: What has been your most rewarding experience with CGI?
Panna Sharma: Two things stand out for me. Every spring, we have a Laboratorian of the Year award ceremony that is usually held during Lab Week in April. The award itself is a culmination of an entire week of lunches and activities that we hold to ensure our lab staff feels valued and enthusiastic about their work. It’s always an exciting time, and people look forward to it every year. I usually present the award, and I invite last year’s winner up to give the award to this year’s winner. Another memorable moment for me was when we recently launched an event where everyone in the company met in a large conference room to discuss what they’ve accomplished over the past year and what they expect to accomplish in the next six months—not just clinical milestones but the type of work, the volume of work, and the teamwork they experienced. Knowing the company had such a momentous 2012, in which several of our departments focused on preparing to go public, the clinical lab grew, and our sales department expanded, it’s interesting to see what everyone as a group was doing. The whole first half of the day, people were buzzing about how much we had accomplished as a company, and everyone walked away excited. We have decided to hold these discussions twice a year—once in January and once in July, so we have another one coming up in about a month.
We strive to incent everyone at the company, regardless of their role. In the biotech and life science industry, it is usually the top four or five people who have all the equity.
Everyone has equity and is an owner in CGI, whether they are in an administrative position or a scientist.
Opportunist: How many employees does CGI have?
Panna Sharma: We currently have 57 employees. Everyone is based in Rutherford, except for the salespeople, who are obviously out in the field. One of the local New Jersey trade magazines named us ‘one of the most interesting companies to work for,’ and Scientist Magazine named us one of the Top 20 companies to work for. Those achievements are important in helping us to attract top talent long term.
Opportunist: What are your expectations for the stock?
Panna Sharma: I’m primarily focused on driving value and building a great company that will become a leader in the space. In the long term, as more people become aware of our accomplishments and begin following the stock, I believe the valuation will follow and guide itself upward. That said, I sincerely believe we are tremendously undervalued today.
Opportunist: Where do you see the company in five to six years?
Panna Sharma: Today, several thousand cases come into our lab every quarter. Within five years we will have a national footprint, and we will be able to process several thousand cases every week. I expect our international profile to increase as well. In the last year, 8% of our revenue came from outside the United States. We have strong partnerships with regional cancer facilities, which will be a key ingredient in managing patient costs and patient care. I see our revenues growing from $5 million to $250 million over the next five or six years.
As we grow commercially, we obviously haven’t forgotten the importance of continuing to invest in innovation. One important aspect of our category is the impact that next-generation sequencing will have. We believe it will really impact the understanding and management of disease, specifically cancer. We are several years away from impact—there is still a lot of regulatory and economic review and development to accomplish—but when it does impact, we want our shareholders to participate in that upside.