Genetic Future

The long-awaited public stock offer from third-generation sequencing technology company Pacific Biosciences has finally arrived (here’s the SEC filing, and coverage from Matthew Herper and GenomeWeb).

PacBio has already raised almost US$400 million in venture capital, and aims to increase this by up to US$200 million from its share offering. The sheer scale of these figures gives you a sense of just how much money is being thrown around in the race towards ever cheaper, faster and more accurate DNA sequencing machines. Of course, whether investors will decide to throw more money in PacBio’s direction remains to be seen.

The next few months for the company will be crucial: given the sheer amount of money now sloshing around behind PacBio, it needs to sell a lot of machines to keep its investors happy.

The sequencing arms race has been heating up in other areas too: two weeks ago, sequencing service provider Complete Genomics also filed for a public offering – and was promptly sued by established competitor Illumina for alleged infringement of two patents.

Why did Illumina wait until after Complete’s announcement to launch the law-suit? Obviously we don’t know for sure, but the timing sure looks like a seriously impressive piece of evil genius: unsettled litigation is liable to make investors nervous, but restrictions on the public statements companies can make after announcing a public offering mean Complete is basically unable to defend itself in the media.

Interesting times indeed…

Comments

  1. #1 Michael T.
    August 18, 2010

    Dan,
    As a skeptic of this field, I am still hazy on the business model here. “..sell a lot of machines..”?? Really? To whom? As a student of genetics, I feel that DeCode Genetics has been the world leader in generating the type of human data that you find so compelling. If we are ready for DTC, would you care to comment on why you feel DCGNQ is now selling for $0.01 per share? Why don’t you buy the company for a buck twenty five and prove everyone wrong?

    The title of your post hits one of my pet peeves. I have an issue with the use of the world “the” for marketing purposes where is does not belong scientifically. What is “the genome” exactly?

  2. #2 Daniel MacArthur
    August 19, 2010

    Dan,

    Hi Mike (you don’t mind if I call you Mike, right?). It’s been a while since you’ve last graced these pages! Hope you’re well.

    “..sell a lot of machines..”?? Really? To whom?

    The same people that have funded Illumina’s consistent rise in share price: research labs, diagnostic labs, genome facilities, sequencing service providers, biotech companies, big pharma and whoever else wants to sequence lots of stuff quickly.

    If we are ready for DTC, would you care to comment on why you feel DCGNQ is now selling for $0.01 per share?

    DCGN based its business model on converting sole access to a unique population isolate into marketable pharmaceuticals. That business model failed. Its DTC arm was a tiny fraction of the overall company, so it’s a bit strange to use the collapse of DCGN as an indictment of the DTC business model.

    However, there are two interesting (and distinct) questions here: (1) is society ready for DTC genetics, and (2) is there a valid business model for DTC genetics?

    My answers would be: (1) absolutely, so long as it’s done responsibly, and (2) maybe, if we don’t descend too far into regulatory paternalism.

    Why don’t you buy the company for a buck twenty five and prove everyone wrong?

    Because I wouldn’t agree to own a company run by Kari Stefansson if you paid me a million dollars. Not that I don’t admire the guy – I just couldn’t work with him.

    However, I will note that a group of venture capitalists gambled somewhere between $3M and $11M dollars on deCODE eventually becoming solvent.

    I have an issue with the use of the world “the” for marketing purposes where is does not belong scientifically. What is “the genome” exactly?

    It refers to an abstract generality; you know, like doctors say “the heart is a muscle that pumps blood”. In this case, the battle is over which technology will be capable of capturing all of the variation in human genomes as quickly, cheaply and accurately as possible.

  3. #3 Michael T.
    August 20, 2010

    Mike’s fine.
    OK, fair enough. But,
    a) a business model (Pac Bio’s) that depends on capturing the entire market, especially with a clear leader currently (Illumina), is a tad unrealistic. At least in the 1-5 year time frame. If their burn rate is low enough, maybe they can last, but somehow I doubt it.
    b) as you know, DCGN had two prongs to their business model, one that included DTC, and neither prong panned out–despite being the source that provided much of the scientific foundation for other DTC companies. I’m just saying.

    c) Fundamentally, I agree with you, (ie society is ready…), but my point is that while society may be ready for the genetics, it is the genetics that are not ready for society! No question we have the tools now. But we don’t know what the hell any of it means. The DTC model is more accurately: pay us $3000, and we’ll tell you important health information–just call back in 20 years for it. Great.

    d) Yes, yes, the genome is a generality, like the heart. My point is that while the important bits of the heart are the same from person to person, the important bits of “the genome” are different between each person. So in this case, the generality is misleading. Every genome is different. Important for our discussion because if DTC promises to tell me what MY genome means, how exactly do they know, since they’ve never seen my genome before? Let me say that I think the science is showing us that the common variants are close to useless, if not completely useless.

    PS Did you read the NTY piece on Scienceblogs? ;)

  4. #4 Karyn S.
    August 20, 2010

    Michael,

    “My point is that while the important bits of the heart are the same from person to person, the important bits of “the genome” are different between each person.”

    Are you serious? There is great value in understanding “bits” of the genome that are the same between individuals. Read up on population genetics.

    “Let me say that I think the science is showing us that the common variants are close to useless, if not completely useless.”

    Again, are you serious? Have you read any of the recent papers on common variation (i.e. Teslovich et al, Nature, 2010, Aug 5)? Common variants were able to explain a significant percentage of the genetic variation contributing to a complex trait. I agree that rare variation is probably going to explain a greater percentage of the variance, but common variation is not useless by any means.

  5. #5 Keith Robison
    August 20, 2010

    I find it a bit odd to see the intellectual battle over the relevance of common variants being reopened in a thread about PacBio. The sequencers are the best tools to hunt the rare variants that may be important from our inherited genome, and certainly important when acquired somatically in cancer. Remember also that PacBio also can read out methylation (a major class of epigenomic marks) simultaneously, and it is potentially interesting.

    That said, it is hard to see how they will hope to displace other players for many market niches given the expense of the machine and the fact that it cannot compete with Illumina or SOLiD for mass data generation. I think it will put serious pressure on 454 for the long read, fast-turnaround market — but 454′s Jr instrument will help defend that given the difference in upfront cost.

    That’s at least in the short term; long term if they can get the density up & truly get one human genome per run, they might have something — but will they survive independently that long? Good question. Most biotech business models seem to rely on a bit of investor irrational optimism.

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