Next-Gen Sequencing Update: Sequencing for Thousands, Suing for Millions

It is shaping up to be an eventful fourth quarter for genomic sequencing companies. Investors welcomed sequencing newcomer Pacific Biosciences (PacBio) to the public stage with a strong initial public offering (IPO). According to The Wall Street Journal, the company managed “the first U.S. life-sciences [IPO] this year to price well and trade higher” (although the stock has since traded down somewhat). Up next: another next-gen sequencing IPO with Complete Genomics (CGI) expected to follow PacBio into the public market as early as tomorrow.1

The past few weeks have also seen strong third quarter earnings reports from market leaders Illumina (earnings recap) and Life Technologies (earnings recap), with both companies touting double-digit growth in their next-generation sequencing businesses. Illumina and Life Technologies (Life) are also hard at work on their next generation of products which are intended to compete more directly with the offerings from PacBio and CGI (Oxford Nanopore for Illumina, Ion Torrent and Starlight for Life). Meanwhile, China’s own sequencing entrant, BGI, continues to buy up sequencers (first from Illumina, more recently from Life), and what will soon become the world’s largest provider of genomic sequencing has its own ambitious plans.

These recent positive commercial developments reflect increasing demand for next-gen sequencing, for both platforms and services. While today’s New York Times puts the cost of a complete human genome at $20,000, the retail price is actually much lower in many instances. For instance, Illumina recently announced price cuts to $14,500 for groups of five or more genomes and to $9,500 for sequencing with “potential direct clinical value,” and several companies are offering genomes in the $5,000 to $10,000 range, particularly for new, large orders.2 As the next-gen sequencing market continues to expand (pdf) from traditional research applications to encompass more pharmaceutical R&D and, ultimately, clinical diagnostic applications, prices will continue to fall. A “$1,000 genome” by the end of 2011 or early 2012 remains a strong possibility, although keep in mind that what matters is “not how much a genome sequence costs, but what you can (or cannot) do with that sequence.”

As Prices Fall and Profits Rise, Lawsuits Abound. In addition to strong earnings and successful IPOs, another recent trend in the sequencing space has been an uptick in litigation. One of the movement’s most enthusiastic adopters has been Helicos Biosciences, one of the first companies to attempt to commercialize a next-gen sequencing platform.

First, Helicos Biosciences (Helicos) announced this past spring that it was “repositioning” itself from a (largely unsuccessful) provider of sequencing tools to a (hopefully more successful) developer of molecular diagnostics tests utilizing its HeliScope technology. Then in August, shortly after PacBio filed for its IPO, Helicos responded with a lawsuit alleging PacBio’s infringement of four patents protecting its single-molecule sequencing technology. Most recently, Helicos amended its complaint to bring in most of the rest of the sequencing industry – in the form of Illumina and Life – as additional defendants.

According to Helicos’ new CEO, Ivan Trifunovich, the company’s litigation activities:

…further support our recently announced strategic initiative to maximize the return to our shareholders on the technology investments that we have made by vigorously protecting our seminal next-generation sequencing intellectual property rights.

PacBio has already denied Helicos’ infringement claims and we can expect both Illumina and Life to follow suit. In the meantime, Helicos will continue its efforts to avoid a NASDAQ delisting.

In case you were concerned that CGI might be left out of the patent infringement litigation fun, fear not. CGI is currently engaged in its own legal wrangling with Illumina (and Illumina’s predecessor, Solexa). Following a familiar narrative, Illumina filed a patent infringement lawsuit against the company in August, shortly after CGI filed for its IPOCGI then countersued, denying infringement, alleging Illumina’s patents are themselves invalid or unenforceable and including a Sherman Act (antitrust) claim against Illumina for good measure. Those patents, by the way, are themselves the subject of protracted litigation between Illumina, Life and one of Life’s predecessors, Applied Biosystems.

And it is not just patents that have the sequencing companies squabbling. The most recent piece of litigation comes courtesy of microarray manufacturer Affymetrix, a company that does not appear to have embraced whole-genome sequencing in its business model but is nevertheless suing PacBio for allegedly pilfering both employees and trade secrets.

What’s Next for Next-Gen Sequencing. It is not surprising to see commercial success beget corporate litigation. Litigation, particularly patent infringement litigation, is generally time-consuming, expensive and risky. But as the sequencing space continues to expand, those companies that succeed commercially will become increasingly attractive litigation targets. Mo’ money, mo’ problems, as the saying goes.

In the coming months, genomic sequencing is likely to follow a familiar storyline, with a flurry of new technologies and business models giving way to consolidation within the marketplace. Only a fraction of the current platforms and companies will make it and, as Helicos has already demonstrated, those that fail to succeed as sequencers will have plenty of incentive to sue their more successful competitors in an attempt to recoup substantial investments.

While the outlook for next-gen sequencing companies is certainly positive, at least in the short-term the prospects for life science litigators appear to be every bit as rosy as the companies they represent.


1 It appears that the public markets may be opening for biotech more broadly. According to The Wall Street Journal, there were “18 offerings in October, the most in three years.”

2 Not to be overlooked, as Luke Jostins reports from last week’s ASHG meeting, is the role of exome sequencing using next-gen platforms and which is currently estimated at “roughly 1/7th the price of whole genomes.”