Genetic testing expert Invitae (NYSE:NVTA) has received the backing of some of the largest pharmaceutical companies in the industry. Bristol Myers Squibb (NYSE:BMY), Johnson & Johnson (NYSE:JNJ), Novartis (NYSE:NVS), and Roche (OTC:RHHBY) have enlisted Invitae to develop a molecular residual disease detection (MRD) test for acute myeloid leukemia (AML).

Traditionally, cures of AML and other blood cancers have been detected by looking for the presence of cancer cells in a sample of blood or bone marrow. But if there are a small number of cells that are still cancerous, they may not be seen using standard detection tests.

MRD tests use molecular tests, such as next-generation sequencing, which are substantially more sensitive, allowing them to detect cells that might result in disease relapse or recurrence. After a positive MRD test, a doctor may recommend additional treatments that wouldn't have occurred if the cells weren't detected with traditional tests.

While MRD tests have started to be adopted in clinical practice, there's no standard, making it hard to compare assessment methods. The lack of standardization also makes it hard for drug companies to incorporate MRD tests into their clinical trials.

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Bristol Myers Squibb, J&J, Novartis, and Roche compete for AML patients, but it's in all of their best interest to team up and develop a standard MRD test that can be used to show their drugs cure patients on a molecular level. The drug companies will also benefit if the MRD data convince doctors to use their drugs for a longer period to achieve a negative MRD test.

Financial terms of the partnership weren't disclosed. Even if Invitae is footing the entire development bill, the project is likely to provide a good return on investment given the opportunity to have the standardized MRD test used in clinical trials. Standardization also means doctors treating patients post-drug approvals are likely to use an MRD test.

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